10pc hike for CNG stations Commercial, industrial gas rates raised

ISLAMABAD, Jan 1: The government on Tuesday increased natural gas rates for commercial and industrial sectors by an average seven per cent with immediate effect. However, domestic consumers have been exempted from the hike. The rates for CNG stations, transport and cement sectors, fuel for fertiliser (not feedstock) and power generation have been increased for both SNGPL and SSGCL, according to a notification issued by the Oil and Gas Regulatory Authority (Ogra). Ogra had proposed a 6.56 per cent increase in tariff for all categories, including domestic consumers, and sought a reduction by about 70 paisa per unit for CNG stations and cement factories under the jurisdiction of the Sui Northern Gas Pipelines proposal for a hike in gas rates for the domestic consumers, but allowed a 5.6 per cent increase in the rates of commercial consumers, including ice factories, and 10 per cent for CNG stations and cement factories at a uniform rate across the country. The increase was allowed because prices of crude oil and high fuel sulphur oil (HSFO) had registered a constant increase during the June-Nov 2007 period which would result in a rise in well-head prices of gas producers for the period between Jan 1 and June 30, 2008. Pakistan gas rates are linked with international oil prices. The increase in average cost of gas, the government claimed, would cause a shortfall in SNGPLs revenue requirement to the tune of Rs4 billion and Rs2.2 billion in SSGCLs in annual accounts for 2007-08 and hence an increase in rates. The consumer-end gas tariffs are revised after six months under the existing laws on Jan 1 and July 1 every year. The commercial gas rates have been increased by Rs15 per MMBTU to Rs283.05 from Rs268.23, showing an increase of 5.6 per cent. The gas rates for general industry, captive power, power generation companies of Wapda and fuel for fertiliser have increased by Rs14 per unit to Rs251.55 per MMBTU from Rs238.38, showing an increase of 5.9 per cent. Likewise, the rates for CNG stations have gone up by Rs27 (instead of Rs13 proposed by Ogra) per MMBTU to Rs291.36 from the existing Rs264.87, up by over 10 per cent. Cement industrys rates have also been raised by Rs31 per MMBTU to Rs335.67 per unit (instead of Rs320.97 proposed by Ogra) from Rs305.15. Ogra had on Nov 20 sent two separate determinations in case of SSGCL and SNGPL to the federal government for the increase in gas rates as an interim measure to meet their revenue requirements. The authority held public hearings for the matter after allowing interim increase to the gas companies and is yet to come up with its final determination. (By Khaleeq Kiani, Dawn-1, 02/01/2008)

The unsavoury tale of flour in the free market

Among the rising prices of other essentials in the aftermath of Benazir Bhuttos assassination, none is more alarming that the case of flour, where not only have prices skyrocketed, but the market supply has diminished considerably as well because the mills are not functional. The current [official] rate of flour is Rs 28 to Rs 30 per kg, whereas in some places such as Mazdoor Colony, it is being sold at prices as high as Rs 40 per kg. The prices were already high even before this [December 27] incident occurred. Now we are being crushed to pieces, says Altaf Meher, a resident of Regal Chowk. We try our best to bargain with the sellers but they are stubborn and say that they themselves are buying at high rates. Meher echoes the problems being faced by a large number of people in Karachi. Flour at the moment seems to be a luxury, as the mill owners have already stated that they need security to run their mills, which according to the Flour Mills Association chairman, Ansar Javed, has not been provided to them yet. We refuse to run our mills without security, Javed said. There have already been attacks on several mills, and we are not taking any more chances. Even after the mills start functioning, it will take around five to seven days before the prices go down. At present, Javed says, a 100 kg sack of wheat costs Rs 1,650. The normal rates for wholesalers are Rs 20 per kg, which they sell to retailers for Rs 22 per kg. But these days, he adds there is no official price and there cannot be because the mills are not running. The shortage of flour is not only upsetting customers, it is also causing problems for retailers and wholesalers. Wholesaler Association for Commodities chairman, Anees Majeed, says that there is an extreme shortage of flour in the market, and the limited quantity that is being brought in, is being sold at very high prices, while the Retailers and Growers Association president, Fareed Qureshy, believes that the only way flour may reach the markets is when the road situation is improved. It is a risky situation, and although there is some improvement now, we cannot say that everything is 100 percent better, he said. In general, local atta is available at Rs 28 per kg, while chakki atta costs Rs 26 per kg. The problem, however, is that the local government is not being able to fix the rates for flour, because this is simply an issue of free enterprise: supply meeting demand. Mohammad Adil, a resident of Saddar becomes emotional and angry as he shouts out against what he refers to as the inefficiency of the government. If the mill owners need security, why is the government not providing them with security?

Do they not have enough law enforcement personnel that could be given to these mills? Does the government not know what the public is going through without atta at home, he says. Ali Husnain, who lives near Lea Market complains of the constant price increase in Karachi. When the demand is larger than the supply, the flour prices are high. But what happens when we have a bumper crop? Even then the prices are high. There is simply no monitoring and control done by the government in this regard. Matanat Ali, Assistant DO of the Revenue department says that the city government is handicapped at the moment as far as the checking and monitoring of the prices is concerned. We are responsible for monitoring the market but after there have been so many problems we have instead been using our personnel for collecting statistics of the cars and buildings that were burnt during the riots, he said. There is a consumer society that has been formed in the Governor House. Why does that body not monitor the prices? At present, while the scarcity of flour is causing unrest among people, flour prices show no signs of falling either, thus presenting an extremely gloomy scenario for customers. Wheat and flour prices January 3, 2008 1. Official prices i. Wholesalers Rs 20/kg ii. Retailers Rs 22/kg iii. Local Atta consumer price Rs 28/kg iv. Chakki ka atta consumer price Rs 26/kg 2. Actual consumer prices Rs 40/kg and rising (By Xari Jalil, The News-13, 04/01/2008)

Water, food crises loom

ISLAMABAD: Pakistans food security is in extreme danger, as Rabi crops may not get last watering imperative for maturity of crops as the government had forced the Indus River System Authority (Irsa) to release 18,000 cusecs of water from Tarbela Dam for three days for power generation. The move came soon after the assassination of Benazir Bhutto, apparently to avoid any further wrath of masses, who were in shock over the tragedy. The provinces want release of 3,000 cusecs of water per day, but the water regulator has placed the maturity of Rabi crops in the red zone by excessive release of water. Irsa released 18,000 cusecs of water for three days and is now releasing 10,000 cusecs. Irsa released excessive water, about 2 million acre feet (MAF), during the Sept 15 to October 20 period, when the water regulator had no members and water distribution was managed by irrigation secretaries of the four provinces. The loss of 2 million acre feet of water during this period has also aggravated the situation in the country. The inflow in Tarbela dam has also dwindled in the last two days by over 2,000 cusecs per day from 17,000 cusecs to 15,000 cusecs because of less than normal snowfall in the catchment areas of both Tarbela and Mangla dams, which has further worsened When contacted Irsa chief Bashir Ahmad Dhahr said that right now country has 1.7 million acre feet of stored water, much less than the stored water in last year, but better that that of 2004, 2005. He admitted that Irsa released excessive water during three days on December 28-30, but he was quick to add that Irsa will be able to store 60 feet more water in Tarbela and Mangla to ensure the last watering. When asked as to why Irsa was releasing 10,000 cusecs of water from Tarbela against the demand of only 3,000 cusecs per day, he said that release of that much water was necessary to make Ghazi Barotha Hydropower project operational. He recalled that two years back, because of less water release from Tarbela reservoir, the Ghazi Barotha Project had to experience some damages. He said, We are hopeful that country would receive winter rains as forecast by the Met Office from today (January 4) and this will improve the water situation. Now we are banking on weather to wriggle the country out of impending water crisis, he said Bashir Dhahr said that wheat-sowing targets have been met and now the issue is to ensure the last watering for maturity of crops. He said this task would also be met keeping in view the winter rains that hopefully are likely to start from today (Jan 4). He said that Irsa would continue to release 10,000 cusecs of water from Tarbela and 8,000 cusecs from Mangla despite pressure from Pakistan Electric Power Company (Pepco) that wants 15,000 cusecs of water released from Tarbela. However, Irsa would enhance water release up to 30,000 cusecs by January 25 as barrages will be opened and closure of canals would end by that time, and in the meanwhile we will be able to store massive water as the country would start receiving winter rain from today (Jan 4) up to Jan 12, Dhahr said. The country, which is already facing 22 percent water shortage and right now, has all time low stored water in reservoirs that stands at 1.76 million acre feet of water. The said quantum of stored water is not enough for last watering of the Rabi crops in all four provinces, a senior official told The News. We are also 100 percent sure that for early Kharif season, Pakistan will be facing the worst ever water crisis, as Irsa will not be able to mange any water as carryover stock for early Kharif, if the existing scenario is kept in view. In case, Pakistan receives the winter rains as forecast by the Met Office from today (January 4 to 12), the situation will improve, otherwise the country has no option, but to face massive water deficit that would endanger food security. The government, which has miserably failed to enhance power generation capacity during the last 8 years, is now left with no option but to risk even the available food security at the cost of unjustified hydro electricity generation despite the fact that dams are built mainly to cater to irrigational requirements of the county.

We received orders from government to release up to 18,000 cusecs from Tarbela for three days (Dec 28-30) in a bid to bridge electricity deficit so that politically charged masses following the death of Ms Bhutto may not become more aggressive in case of power outages. Now the Pepco is going for 10 to 12 hour load-shedding, but it could not afford such massive load shedding soon after the tragedy. The water regulator is still under pressure to release 10,000 cusecs of water daily against the demand of federating units of only 3,000 cusecs, just to make Ghazi Barotha Hydropower project operational. But on the other hand, the country stored water is fast depleting and may not have water for last watering of Rabi crops. The official said that below average rains will not provide the required solace to Irsa as it is experiencing 22 per cent water shortage and has no sufficient carryover stocks. Therefore we will have to depend more on nature and pray for more rains, he said. (By Khalid Mustafa, The News-1, 04/01/2008)

Just peanuts for the poor

KARACHI, Jan 6: Pakistanis consume as much as 116,000 tons of dried fruit annually, and traders say dried fruits demand increases every year because of their growing use in sweetmeats and various dishes. However, there are millions of people who cannot afford to buy dried fruit because of high prices and their low incomes. Many of them hardly taste these fruit in the season as they first have to meet the demand for essential goods, whose prices are already skyrocketing. Some people feel happy even to have peanuts, but their prices also shoot up when the weather turns chillier. As for dried fruits prices, they hinge on international market prices, production cost in the relevant countries, local production and the movement of goods across the border. The import bill of dried fruit in 2006-2007 surged by 21 per cent in terms of value -- $70 million (115,622 tons) as compared to $58 million (111,000 tons) in 2005-2006. Pakistan gets its dried fruit mainly from Afghanistan and Iran. It also depends on local production in the Northern Areas and border areas along the neighbouring countries. The peak season of dried fruit sale begins on November 15 and ends in February. Retailers, after buying dried fruit in the main wholesale markets just ahead of the winter, make heavy profits by charging high rates when the demand touches its peak from December to January. Prices fluctuate and show a mixed trend, depending on the crop size, arrival through import and the local production. As many people avoid buying in bulk from the wholesale markets, a majority of consumers having no knowledge of the prevailing wholesale prices are compelled to buy dried fruit at the general and super stores and from pushcart vendors, who charge twice as much of the actual price. In Jodia Bazaar and the Marriot Road areas, the hub of all wholesale goods, retailers buy goods in bulk. As a result, the wholesale traders also sell the products to consumers preferring bulk purchases. Many retailers also mix the previous years unsold stocks with new products and the consumers having no knowledge of it purchase them at high prices. There is a slight difference in prices of dried fruit selling at Jodia Bazar (main wholesale market) and Empress Market (semi-wholesale market) in Saddar. The price of pine nuts is Rs720 per kilo at Empress Market, while traders in Jodia Bazar demand Rs700 for it. However, their last years price was Rs1,100-1,200 per kilogram. The main reason for the decline in pine nut prices was the suspension of their export this year. They were exported to several countries last year, a trader said, adding that they were produced in Pakistan. The price of American almonds at Empress Market is Rs450-480 per kilo while they were selling at Rs600 per kilo last year. However, a Jodia Bazar trader said this year their prices hovered between Rs450 and Rs600 per kilo, depending on the quality, whereas they were available at Rs400-500 last year. They are imported from the US and their price in the local markets depends on the price fluctuation in US markets. Walnuts sell at Rs130-140 per kilo at Empress Market and Rs120-130 per kilo in Jodia Bazar. Their price has been the same as it was last year. They arrive here from the Chaman and Quetta areas. A trader said that some importers had brought in American walnuts, but their prices were Rs200 per kilo. The price of cashew nuts in Jodia Bazar is Rs550-560 per kilo, while they are sold at Rs600 per kilo at Empress Market. Last year, they sold at Rs450-500. This commodity finds its way into Pakistan from India, Vietnam, etc, either directly through importers or via Dubai. Dealers at Empress Market demand Rs600 per kilo for pistachios while in Jodia Bazar dealers charge Rs575 for it. Last year they were selling at Rs400-450 per kilo. They mainly arrive from Iran, while some quantities arrive from Quetta, Chaman and Afghanistan. Salted pistachios also arrive from Iran and are selling at Rs400 per kilo. The rate of raisins at Empress Market is Rs120 per kilo and at Jodia Bazar it is Rs140 per kilo. Last year they were sold at Rs90-100 per kilogram. They are also exported. (By Aamir Shafaat Khan, Dawn-13, 07/01/2008)

Forty projects approved

ISLAMABAD, Jan 12: The Central Development Working Party of the Planning Commission on Saturday approved 40 development projects worth Rs69.3 billion. The CDWP meeting was presided over by Planning Commission deputy chairman Dr Mohammad Akram. Speaking at a news conference after the meeting, Planning Commission spokesman Asif Sheikh said that of the 40 projects, 15 pertained to infrastructure amounting to Rs54 billion. Twenty-one projects worth Rs11.6 billion were approved for the social sector, while four projects for other sectors will cost Rs3.8 billion. He said that 32 projects of Rs45 billion would be financed by the federal government. Of the nine projects located in Punjab, two costing Rs9.7 billion will be financed by the provincial government. Likewise, of the four projects in the NWFP, one will be financed by the provincial government. Eight projects were approved for Sindh of which one worth Rs2 billion will be financed equally by the federal and provincial governments. The CDWP also approved the Rs12 billion New Balakot City Development project. It will be financed by the Earthquake Reconstruction and Rehabilitation Authority out of its Rs35 billion budgetary allocations for the year. The meeting cleared a Rs-20 billion project for the enhancement of power distribution. It envisages extension and augmentation of 500 and 220KV transmission lines and improvement of system security, loss reduction and reliability. The spokesman said the country presently had the capacity to produce 17,600MW of electricity. However, he said the country would have to generate up to 7,000MW in the next three years to meet the increasing demand for power. He said that during the next 25 years, the country would need an additional electricity of 162,000MW. The meeting approved two projects of road and water supply worth Rs300 million for Mitari tehsil under the Hyderabad package. It also approved a Rs-483 million project for the upgradation of Karachi Shipyard. Other projects cleared by the CDWP included development of the National Defence University in Islamabad, strengthening of the Pakistan Institute of Engineering and Applied Sciences, strengthening and development of the Mehran University of Engineering and Technology in Jamshoro, development of infrastructure at the Islamic University, strengthening of King Edward Medical University in Lahore and grant for the Lahore University of Management Sciences. The meeting also approved several development projects for the Federal Capital. These included strengthening of the Pakistan Institute of Engineering and Applied Sciences at a cost of Rs485 million and establishment of a public library in Sector I-8/1 at Rs60 million. It approved the establishment of the Institute of Avionics and Aeronautical Engineering at Air University costing Rs288 million, development of the National Defence University at Rs484 million and development of infrastructure at the Islamic University in sector H-10 at Rs481 million. A Federal Government Degree College for Men would be established in Sihala at a cost of Rs149 million. Mr Sheikh said that a project for supply of 100 million gallons of water per day each to Islamabad and Rawalpindi from the Indus had been deferred owing to want of a certificate from the Indus River System Authority about availability of water and apportioning of water share for the federal capital. He explained that the share of Rawalpindi would be from the share of Punjab. He spokesman said that a cardiac surgery facility would also be established at the Pakistan Institute of Medical Sciences at a cost of Rs1.260 million. (By Ihtasham ul Haque, Dawn-1, 13/01/2008)

Hard decisions or IMF bailout?

Amid deteriorating economic indicators and continuing political turmoil, independent economists believe that the government - irrespective of who is running the show is running short of time for taking long pending, tough policy decisions for resource mobilisation. With mounting risks to macro-economic stability and no remedies yet in sight, financial analysts ask: Is the government taking a path that would put Pakistan again in the lap of International Monetary Fund within a couple of years of breaking the proverbial begging bowl or the national economic sovereignty could be salvaged by bold decisions upfront? Those within and outside the government concur that the country has moved into the vicious cycle. The prices are out of hand, while fiscal deficit and energy crisis are emerging as a major risk to the current growth momentum. In the first quarter of the current fiscal year, the fiscal deficit increased to 1.6 per cent of GDP against the targeted one per cent. If the trend continues, this years deficit should not be less than 6.4 per cent, much higher than the target. In the first six months, the Federal Board of Revenue is set to reduce revenue target by Rs35 billion. Coupled with this, another additional burden of Rs100 billion in subsidies on oil and electricity would further raise the overall fiscal deficit. And the current account deficit is rising every year; foreign capital and financial inflows are adding to outflows; and repayments due this year of the $12.5 billion foreign debt that was re-profiled five years ago, will increase. The next six months would be crucial for the macroeconomic management of the economy particularly the policy of subsidising oil, power and food items, the central bank chief Dr Shamshad Akhtar warned the federal government on Tuesday last. Is Musharraf administration strong enough to confront the critical fiscal challenges head on? Is it time to tax real estate and stock market for additional resource mobilisation given the fact that deals worth billions of rupees take place in each sector every day while contributing very little to the real economy? Or the axe has again to fall on general public when the

vast majority of the population is already struggling for survival. About 74 per cent still lives on less than Rs120 per day. Economists understand that policy options are limited and the time, if available at all, is short to remove worsening fiscal imbalances. Prominent economist Dr A. R Kemal says the situation on fiscal deficit is very dangerous. He explains that current fiscal deficit (expected 6.4 per cent of GDP) is worked out on the revised base of 1999-2000. If calculated on the old base, this deficit would be in excess of eight per cent of GDP. There are only two options to contain this deficit: resource mobilisation and cut in expenditure. Otherwise, the fiscal deficit is going to go up. Easier solution for the government is to cut expenditure because it has not mobilised additional resources. Again, the expected cut on expenditure will be in the form of reduction in public sector development programme that would further hamper the economic growth. The only option is to introduce new direct taxes, said an economist working with the government. The avenues left are capital gains tax an area exempted till June 2008 and wealth tax on real estate. And no serious efforts have been made to realise the potential revenue from income-tax on agriculture as this sector is dominated by the influential feudal and military class. These special interests have also so far effectively prevented the development of a proper tax base on real market value rather than fictitious price reported in the sale deeds, says Dr Kemal. In the absence of these options, the resources to meet fiscal deficit can come either through foreign debt, through loans from the general public or banking borrowing. While the foreign aid or loans would mostly be dependant on geo-political situation with a cost to sovereignty, there will be a need to increase interest rates on national savings or Pakistan Investment Bonds that would multiply the domestic debt servicing cost and put pressure on the banking industry. The third source, loan from domestic banks, is more tricky and costly since the banks would have to bid for the money, the government would require and cost may go beyond 15 per cent. In the short run, however, the government can borrow from the central bank that would result in increased money supply and higher inflation. The problem is that the only way to contain money supply is to reduce credit to the private sector. If that is done, the investment is going to be hurt and interest rates would rise further. So the only way of controlling money supply is to contain fiscal deficit, which in fact is the real problem and presents a chicken and egg situation. These were the signs that led us to the IMF in the 1990s when the balance of payment and the fiscal deficit were unsustainable. So there can again be the same situation by end of this fiscal year, says Dr Kemal. The only saving grace is around $15.5 billion reserve which can evaporate anytime, and we would be forced to go back to the IMF, he says. Caretaker minister for finance Dr Salman Shah, however, says the situation today is much different than the 1990s and there is no need to go back to the IMF. He concedes that there are many risks to the economy this year but the country now had huge foreign exchange reserves, a much bigger economy and a lot of inflows and resources to sustain so many shocks. He said the Central Bank projected the economic growth rate at 6.6 per cent but any rate between 6.5 to 8.5 per cent was a good number to have. I am very optimistic that there will be no difficulty because the objective was to achieve the target of four per cent fiscal deficit and there should be no big deal if it is done through fiscal adjustments that may slash development budget as well. He said the government still had six months to make budget adjustments to overcome the real issue of increasing subsidies. The exchange rate was getting more competitive and competitiveness of exports was not an issue despite domestic violence. He was non-committal on taxing the capital market, the land market and the agriculture but agreed that every sector has to come under the tax net with the passage of time. (By Khaleeq Kiani, Dawn-Economic & Business Review, Page-VI, 14/01/2008)

Rs80bn cut in development budget likely

ISLAMABAD, Jan 13: The government is considering reducing development budget by up to Rs80 billion or 15 per cent to partially offset the rising fiscal deficit. Informed sources told Dawn that a number of proposals were being worked out for the required budgetary adjustments by the ministry of finance. It suggests that the government will need to reduce the allocation for the Public Sector Development Programme along with slightly higher fundraising through national savings schemes to bridge the gap between available resources and expenditures. The federal and provincial governments were able to utilise Rs128 billion in the first quarter (July-September) of the current fiscal year. Another Rs100 billion was utilised by project executing agencies till December 31, 2007. The second quarter funds utilisation usually remains higher than the first quarter because of a pick-up in implementation activities after the start-up problems. The sources said that the pace of implementation had slowed down in the recent weeks because of the elections and overall security environment which also resulted in the evacuation of foreign engineers from the project sites. Officials at the finance ministry expect the overall development expenditure will remain more or less at the last year level or at best touch Rs450 billion. Caretaker finance minister Dr Salman Shah said the government had half a year to make fiscal adjustments which may include a reduction in the development budget in the last quarter of the financial year because the government had to meet the overall objective of restricting fiscal deficit at four per cent of GDP. The government had allocated an amount of Rs520 billion for the current years PSDP (2007-08) which was about 25 per cent higher than the previous years Rs415 billion. An official at the Planning Commission said that it was yet to receive proposals for a reduced PSDP, but agreed that a mid-year review of the overall economic situation, including the development programme, was currently in the final stage. He said that there was a likelihood that releases for slow-moving projects or those failing to take off owing to various bottlenecks might be withheld on the basis of mid-year review.

Last year, the federal and provincial governments were able to spend about Rs435 billion or five per cent of GDP. This year, the government has transferred about 25 per cent of total funds to the provincial governments and federal executing agencies at the beginning to help them start the projects. The utilisation of Rs128 billion funds in the first quarter of this year was, therefore, almost double the Rs68 billion utilised during the same period last year. As a result, the release of funds in the first three months of the current year stood at 1.3 per cent of GDP, compared with 0.8 per cent of GDP during the same period last year. (By Khaleeq Kiani, Dawn-1, 14/01/2008)

Cut in development budget

FEARING that a ballooning current account deficit on account of high international crude oil prices could widen the budgetary deficit beyond the targeted four per cent for this fiscal, the government has decided to slash its Rs520bn development programme by up to Rs80bn. The proposed reduction in development spending is almost equal to the amount of subsidy the countrys economic managers expect to bear for absorbing the increase in global crude rates. The proposal has come in response to the State Banks warning that the threat of renewed macroeconomic complications would be heightened if prompt action is not taken to correct the drift in fiscal indicators. Experts had long been stressing that the economy was threatened by an expanding current account deficit, rising inflation, decelerating manufacturing and slowing exports. Though the cut might alarm many, it is likely to impact positively on the overall national economy unless the social sector faces the axe. The cut would cool the economy and slow down demand and GDP growth. This was long overdue because GDP growth at the current average rate of seven per cent without a solid, diverse manufacturing base was not sustainable. A slowdown is better than a heated economy. The government had limited options in terms of responding to the fiscal imbalance posed by the external account deficit and inflationary pressures. It could have spiked interest rates which was inadvisable in view of its harmful effects on the manufacturing sector and potential to tip the economy into recession. The other option was to slash expenditure. The policymakers opted for the latter. But this measure will not produce the desired results unless non-development expenditure is substantially trimmed down as well. While reducing allocations for development, the government has planned for higher fund-raising through loans to bridge the gap between resources and expenditure. That would not be advisable. Government borrowing from the central bank has already gone up to Rs191.3bn exceeding in the first five months (July-Nov) the annual ceiling for the year as well as that for previous years. This has enhanced monetary expansion significantly and fuelled inflationary pressures. If the government does not slash non-development expenditure and continues to borrow, it will offset the expected positive impact of the reduced development budget. Besides, a decrease in the development budget especially if the education and health sectors are affected would send the wrong signal: that the rulers are not prepared to give up personal perks even if these come at a heavy cost to the economy. (Dawn-7, 15/01/2008)

Three projects inaugurated President promises funds for K-IV

KARACHI, Jan 14: President Pervez Musharraf laid the foundation of three major development projects the signal-free Corridor-II, Pakistan Steel Flyover and Bin Qasim Industrial Park in the metropolis on Monday. Speaking as chief guest at the foundation stone unveiling ceremony of the corridor project at Governors House, he described the ceremony somewhat between earth-breaking and inauguration and said that another milestone had been achieved. He hoped with the completion of this project transport problems would be reduced considerably. In his discourse, the president dwelt at length on the problems of Karachi including new water supply project, solid waste management, mass transit, Lyari Expressway, affluent treatment and other issues including wheat flour and recent incidents of violence. Recalling that federal government funded the K-III 100mgd water supply scheme worth Rs7-8 billion, he said that now KIV must come up and assured that the federal government would certainly extend support. He also lauded the efforts of Sindh Governor Dr Ishratul Ibad Khan and City Nazim Syed Mustafa Kamal for the fastpaced development. He had never seen work going on such a fast pace in the country, he remarked. Referring to the beautification projects of Karachi in the shape of Quaid-i-Azam Mazar park, Bagh Ibn-i-Qasim and Askari Park, he noted with delight that never in the past such a large number of projects were accomplished here as were completed during the last five years. Observing that Karachi has a variety of problems, more because all types of ethnic population lived here, Musharraf said that the country needed economic strength to solve these problems. He said that the fiscal deficit was controlled and revenue generation was increased to transform and sustain the economy, which in reciprocal attracted foreign investment. The president cited the example of the Cotton Export Corporation and Rice Export Corporation, which were running into losses, and said that the expenses were cut down and remittances and investments were enhanced during the transformation of economy. Today again, he said, the country was faced with a challenge caused by soaring oil prices which were almost touching 100 dollars per barrel resulting in overburdening of national economy with the provision of annual subsidy of Rs140 billion.

Addressing the employees of Pakistan Steel Mills during a ceremony arranged at Pakistan Steel to unveil the plaques of the already operative flyover on the National Highway at Quaidabad and the planned Bin Qasim Industrial Park, he said the government believed in public-private partnership concept. The Industrial Promotion Boards with the government and private members had been set up to monitor industrial activity, he said, and hoped that the planned industrial park in Karachi would be another achievement under public-private partnership. President Musharraf said the government had offered many incentives to local and foreign investors during the last five years and provided them with standard infrastructure and investment-friendly environment. Hundred per cent equity had been allowed to the investors and foreign investors were free for their remittances, he said adding that the government adopted zero customs policy for imports of machinery and certain raw materials to encourage industrialisation in the country. He said the procedure for acquisition of land for an industry has been simplified against the past practice in which an industrialist had to run from pillar to post for the land. The president appreciated the Pakistan Steel management for providing 930 acres of land and extending all possible support to the National Industrial Parks Development and Management Company to make this project successful. Among others, the ceremony was also attended by Federal Minister for Industries, Production and Special Initiatives Salman Taseer, Federal Information Minister Nisar A. Memon and Federal Defence Minister Saleem Abbas Jillani. (Dawn-19, 15/01/2008)

US to give $43m for Fata capacity-building programme

ISLAMABAD: The United States will provide $43 million to implement a capacity-building programme for improving the economic and social conditions in the Federally Administered Tribal Areas (Fata) of Pakistan. Pakistan has prepared a sustainable development plan in consultation with the US and other donors that will cost Rs 124 billion in nine years to bring a change in the Fata. But the donors as well as the Planning Commission high-ups questioned the lack of capacity for utilising such a huge amount in so remote a region bordering the war-devastated Afghanistan. According to an announcement of the US Embassy, the US Agency for International Development (USAID) has awarded Development Alternatives Inc (DAI) the contract to implement a capacity-building programme. The contract is valued at $43 million over three years with an initial funding of $15 million. The overall Fata programme of the USAID will provide technical assistance and training to private and public organisations for supporting projects that strengthen livelihoods, expand economic opportunities, and improve basic education and healthcare. The USAID programme awarded to DAI will strengthen the capacity of the Pakistan government and non-government institutions in Fata to plan, implement and monitor programmes at the regional, agency and community levels to improve coordination between the security and development organisations, strengthen communications and increase the ability of Fata-based civil society organisations to contribute to development. The USAID and DAI will collaborate in developing and executing specific projects that will attain the objectives and the USAID will monitor the use of funds and progress on each project. The capacity-building programme is part of the US commitment to provide $750 million over five years to assist in the Fata development. Of the total financing requirements of Rs 124 billion, the Pakistan government has committed to provide Rs 60 billion from the Public Sector Development Programme in the coming years. (By Mehtab Haider, The News-2, 16/01/2008)

Problems ahead for the next government

Kaiser Bengali has been extremely critical of the economic performance of the eight years of Musharraf regime, in his writings as well as in his television interviews. Currently working for Collective for Social Science Research, a research company based in Karachi, economist Bengali has also served as the managing director Social Policy Development Centre between 2001-2004. Here he talks with TNS about a range of issues and gives his own economic blueprint which is closely tied up with politics. Excerpts of the interview follow: The News on Sunday: How do you see this relationship between military regimes and economic progress? Kaiser Bengali: There is a myth about development and economic performance of military regimes. In Pakistan, Ayub Khan, Ziaul Haq and Musharraf have all received unprecedented support from IMF and World Bank. In the case of Musharraf, it was the rescheduling and, of course, money that was coming as rental from the United States for using our space. There were four factors which contributed to the high growth during the Zia period, none of which can be located in Zia's economic policy. The oil price shock hit the world in 1973 but it was 1975-77 when the first emigrants from Pakistan began to leave for Saudi Arabia and it was 1978 when the remittance inflow began and it peaked in 1982 onwards. So the price of the oil price shock was borne by the Bhutto regime but the benefits were accrued by the Zia regime. This high rate of remittance inflow gave the govt sufficient fiscal space. Second, there were very large investments made during the Bhutto period that had long gestation periods. The Pakistan Steel Mills construction started in 1974, and it started commercial production in 1982. Similarly there were Heavy Mechanical Complex, Heavy Electrical Complex, Indus Highway, Port Qasim and Ittehad Chemicals (chemical industry's foundation was laid in the 1970s and chemicals are a major input in a large number of consumer industries). So this investment in the 1970s began to bear fruit in the 1980s leading to large chunks of output increases. Third, because of Afghan war Pakistan received enormous amount of foreign funding, almost unlimited.

And fourth, Zia resorted very heavily on borrowing and deficit financing. When he took over the debt-GDP ratio of the country was 24 per cent and in 1988 when Zia left the scene, it was 48 per cent. So if you get manna from heaven your performance will be good. However, the poor performance of Zia regime became apparent in the 1990s and till later. TNS: What happened in the 1990s? KB: In the 1990s the civilian governments had no fiscal space because all the resources they had were mobilised for repaying the debt which Zia had left them. You will recall in 1984, Mahboobul Haq, Zia's finance minister floated whitener bonds with a ten year maturity period. They matured in 1994. If you look at the budget of 1994, debt service rate went very high -- almost 40 per cent in nominal terms. Zia government had collected money and spent it [on defense], so in 1994 Benazir government had to repay that money. So, if you say 1990 were not an era of good economic performance, it was because there were no resources. I once asked somebody very senior in the Nawaz Sharif government as to why the ninth five year plan was not being prepared. His reply was that whenever the economic team met, all they discussed was when was the next instalment due and where would the money come from. He said there was no point in discussing anything else. TNS: In this backdrop how do you look at the economic performance of Musharraf in the last eight years? KB: GDP growth rate is an average of growth in its component sectors. So in the years that GDP growth rate was around 8 per cent, in 2003 for instance, banking sector growth rate was 29 per cent and the automobile sector growth rate was 45 per cent. Now if you have some sectors where growth rate is so high, your average will go up, even if the variance is very high. The banking sector growth rate was high because the government, or the State Bank rather, allowed consumer financing from 2002 onwards. The monetary policy was that you could get a loan for a house, car, fridge, camera, if for nothing else, a vacation or a personal loan. Banks made enormous profits out of consumer credit and profits are a component of GDP. A lot of this credit was going in for buying cars so automobile production went up by 40-45 per cent. So basically it was a one legged growth and that one leg is consumer financing. You remove consumer financing, everything else collapses. You are only managing an economy for your numbers to look good, for headlines. TNS: What is the other leg of the economy? KB: Largely there are two legs of an economy, agriculture and manufacturing. The services sector is the body. If you look at the national accounts, more than 50 per cent of the growth of GDP is coming from services sector. Agriculture is stagnant, and so is manufacturing barring one or two sectors, like automobiles. Today we have an economy with weak legs and a bloated body. It is not sustainable. TNS: What is wrong with consumer financing? KB: What it did was that it increased money supply in the economy. In the first two years, inflation remained low because there was excess manufacturing capacity in the country. So factories which were operating at two shifts began to operate at three shifts and the supply increased. But once that capacity was reached, demand continued to increase because people kept going to restaurants and kept paying out of credit cards. Once supply was constant and demand continued to increase inflation was the result. So today we have runaway inflation, nearly double digit and food inflation which is certainly more than 12 per cent. Another thing that has happened is that a lot of demand has been created for imported products. We're importing one billion dollars worth of mobile phones. We're importing cars, because we only assemble cars here. And with cars come petroleum imports as well. So we have created two problems: inflation that is out of control and a trade imbalance. Our imports have risen sharply while the exports are stagnant. And this is what the coming government is going to inherit. Just as Zia gave a debt mountain to the incoming government, the Musharraf regime is going to give the next government a massive foreign exchange crisis. TNS: What about the outgoing government's privatisation policy? KB: Our services deficit which has always been very small is rising sharply because of our privatisation and foreign investment policy. All the large entities have been privatised to foreign companies. And the investment (FDI) has been in terms of telecommunications, mobile phones and food. All of these companies earn their profits in rupees but remit their profit in dollars. So there is a dollar outflow in terms of profit remittance against which there is no dollar inflow. We've created a liability without creating a countervailing asset. In 1999 total profit remittance outflow, which in monetary language is called reverse remittance, was 97 million dollars a year. Today it is close to a billion dollars and rising. TNS: About PTCL, is there a justification for a profit-making enterprise? KB: There was no real policy or principle involved. This is a neo-liberal govt which believes it is not the business of the government to be in business. What they have done is that they have sold PTCL to a company which is a state enterprise. So de facto their policy was that it is not the business of the Pakistani state to be in business in Pakistan but it can be the business of a foreign state to be in business in Pakistan. TNS: There is a massive power and energy crisis in the country. Where did we go wrong? KB: The last investment that was made in the power sector was in the Ghazi Barotha project, which was an achievement of the political governments of the 1990s. In 1988, the Benazir government saw a power crisis coming and they went ahead with establishing thermal power plants which takes about three years to build. If those power plants plants had not been set up, we would have seen the same situation in 1990s that we have today. There would have been power outages for eight to ten hours. Since 1999, the Musharraf regime has not invested in a single megawatt of power. In 2001, we had surplus power, today we are living with power shortage. When Benazir's government contracted to buy power at 6 cents per hour, there was excessive criticism. Today, for one project they are contracting at 11.5 cents per hour. Today, the world knows that we have a power crisis, it will increase its power knowing that Pakistan has no choice but to buy. So it is mismanagement of the highest order of the economy. All the investment that they talk about is either portfolio investment, which is the stock market, equity markets, or soft investments like telecommunications. These are all investments which do not require these companies to build any brick and mortar and steel structures. So if they have to leave at 24 hours' notice, they don't lose much. What do banks lose, furniture?

TNS: But they have paid huge licensing fees. KB: That is peanuts compared to the kind of profits they have made. They have recovered several times their licensing fees. TNS: So are big dams like Kalabagh the only solution to the energy crisis? KB: Dams don't produce water, they only store water and you don't have water. Even now you cannot store water in Tarbela and Mangla to their full capacity. TNS: So we need better water management then? KB: Yes, we don't need more dams. 40 per cent of the water released by dams don't reach plant roots, which means it is wasted. So if you build another dam and assuming that it is filled to capacity, 40 per cent of that water is also going to be wasted. So 40 per cent of the capital cost of Kalabagh or Bhasha Dam will be wasted. This is not a prudent or wise way of making investments. I think we need to make investments in improving water management by reducing this loss to single digit. TNS: What do you think about the social sector spending and will we be able to meet the MDG targets? KB: I think there is universal acceptance now that we are going to miss the targets. We were spending 0.9 per cent of our GDP on health which has come down to 0.7 per cent. TNS: What are the different issues pertaining to the estrangement between various provinces like National Finance Commission etc. KB: There is a pervasive view among the smaller provinces, particularly Sindh, that there is a resource transfer taking place from Sindh to the other provinces, particularly Punjab. An example they give is of the Super Highway, which was a Sindh government entity. But the National Highway took over the Super Highway along with its fairly large toll income. The feeling in Sindh is that the profits of Super Highway are being used to subsidise the losses incurred on the Motorway. This has been cited as an example of resource transfer. TNS: There were demands about revision of formula regarding distribution of federal receipts among the provinces. Comment. KB: Three provinces want a change but Punjab has resisted the formula. Punjab benefits from the present scheme -distribution on the basis of population. But I think if there was a genuine political government, with no interference from the military, the politicians would have come to an agreement. For instance, if Punjab and Sindh were to get together to discuss water and finances, politicians would have said you concede on water, we do on finances. It is my personal experience that no delegation comes with an inflexible stand that they are not going to compromise on. TNS: So what's the way forward? KB: There is an urgent economic, let alone political, need to do away with the concurrent list from the constitution along with all the ministries. There is a duplication that eats up twice the amount of money. There is a vested interest. When you do away with the federal ministries, all these bureaucrats will lose their federal jobs. Then we need to reduce the defense expenditure by at least a hundred billion rupees. It is possible and it is not going to affect our firepower in any way. Because a significant part of that expenditure does not relate to firepower; it relates to providing perks to the officers. There is no needs for military to maintain and run the farms. TNS: But where is the political will? KB: We have reached a stage where if the political will is not there, the country will implode with the debris falling inside. We are seeing that happening. We have reached a brink. TNS: You're a strong advocate of low GDP growth rates. Comment. KB: For about ten years we need to run an economy where the finance minister and the prime minister have the courage not to get good headlines. We need to invest in infrastructure which has deteriorated to a point that we don't have productive capacity. When you are investing in infrastructure, and by that I also mean cities which are totally chaotic where no foreigner wants to come, and physical and human infrastructure, the results are going to come after a while. So you are not going to get any output and the GDP is going to be low. Ten years later when you have infrastructure in place then you can target double digit growth rates. That growth will be based on real sectors -- on agricultural and manufacturing outputs, not on hot air balloon sectors like mobile phones. By doing so, you will have a massive boost in employment, income generation and poverty reduction. As for inflation it will be controlled by switching expenditures from current heads to development heads -- by abolishing concurrent list ministries and reducing defense expenditure. TNS: In an ideal economic model, what sort of a role do you see for the private and public sectors? KB: Private sector is good in producing those commodities, which are low technology and require small capital investments. We have seen that our private sector is unable to put together large outlays. We have no one in this country of the calibre of Tata or Ambani in India. These are areas where the state will invest. TNS: But then the state tends to overstaff? KB: There is no problem with that. This is where your economic and social values come in. Is the purpose of the state merely to fill the pockets of the profit makers? Or is the state supposed to work for the welfare of the maximum number of people? It's a value judgement. When Shaukat Aziz went out for all out privatisation, he made a value judgement. The welfare of the people of Pakistan didn't matter, what mattered was the corporate profits and he made that decision accordingly. As a state we need to determine what are our values. Are we prepared to have a few people who can enjoy summer holidays in Switzerland and the rest of the people virtually starving? If that is acceptable, then fine. We should follow that policy. TNS: And now to the most immediate issues. How do look at the current food crisis? KB: There was a mala fide intention to begin with. The Shaukat Aziz ministry (Finance) predetermined the growth rate they want to achieve. So when you increase the wheat output you increase the agricultural sector growth rate. When you do that GDP growth rate will go up.

There was something else that was suspect here. The estimate for the wheat crop is made after the rains, but this time they made an announcement of a bumper crop before the winter rains and, based on that announcement, allowed a certain party to export wheat to India, apparently half a million tonnes. After that transaction was complete, the rains came and news began to come in that we're going to have a normal crop. A normal crop means that you import two million tonnes of wheat which is a routine. Because they had earlier announced a bumper crop, they took time to admit that they were wrong. So the LC (Letter of Credit) for import of wheat was also delayed. Once wheat had been exported and we had a normal crop, the wheat market knew there was going to be a shortage. Now stockists everywhere in the world will behave like that that when they know there is a shortage and prices can go up, they withhold their stocks. They're not evil people. This is normal behaviour and this is what a market economy will do if there is a shortage. They made another mistake. Instead of placing an order for 2 million tonnes of wheat, they placed an order for 1.5 million tonnes of wheat first. Then they realised this mistake and placed another order for half a million tonnes of wheat. After their first order, the signal had already gone out in the market that shortage will remain. So they continued to withhold stocks. If they knew that wheat was arriving and prices will fall, they would have released stocks and that would have taken care of the shortage. TNS: Prices of other commodities have doubled alongside? KB: There are two components of economic management; fiscal policy and monetary policy. The State Bank is following a restrictive monetary policy while the finance ministry is following a liberal fiscal policy, one is contradicting the other and neither of them is effective. The government is borrowing heavily from the State Bank for its expenditure. That means the money supply increases. On one hand, the State Bank is trying to restrict money supply by increasing interest rates, and on the other the government is raising the money supply. When money supply increases prices will rise. There is another reason for increasing food prices. Our agricultural yield per acre is constant or declining for most crops because we are not investing in our land, in supporting agriculture. The government's ad hocism is causing problems. When the government suddenly imports tomatoes from India, the market is flooded with imported tomatoes and prices crash. As a result the farmer will not grow tomato next year, shifting the crisis to the next year. For eight year Shaukat Aziz has mismanaged the economy like no other finance minister. Because Shaukat Aziz knew he does not have to go back and ask people for votes, he couldn't care less about what he did to the economy. All he had to show for was the stock market performance which is only hot air. (The News-29, 20/01/2008)

Economic cost of the crisis

VARIOUS estimates have been provided in recent days about the damage to the Pakistani economy caused by the events following the assassination of Benazir Bhutto. According to a recent issue of the newsmagazine, The Economist, By the time the first frenzy was over, 174 banks, 22 trains and 13 electoral offices had been looted or set alight. The government puts the damage at $200m. Other responses were more measured, but also discouraging. On Dec 31, the main Karachi stock market, a high-performing symbol of the strong economic growth of Mr Musharrafs era, opened nearly 4.5 per cent down. The rupee also dived, as capital inflows, on which much of the growth has been based, dried up like a desert stream. The stock market has recovered a bit but shows considerable nervousness. The rupee remains under pressure. In his address to the nation soon after the death of Benazir Bhutto, President Musharraf provided an estimate of the economic loss suffered by the country as a result of the mayhem that followed the murder of the PPP leader. His estimate was Rs200bn, or more than $3.2bn at the plunging exchange rate. The government has launched a programme for compensating those who suffered economic losses in the troubles that followed the Bhutto assassination. But the government needs to go beyond these immediate measures of relief. There is an urgent need to estimate the extent of the loss. This is needed to devise public policy to rectify some of the damage that was done by the riots and looting that followed Benazir Bhuttos death and to counter some of the trends that were set in place. However, it appears to me the damage caused was not the consequence of what The Economist called frenzy. The assets that were targeted were meant to deliberately cause great damage to the economy. Attacks on grid stations, petrol pumps, the banking system and the railway system were designed to disrupt economic activity and cause as much unease among ordinary citizens as possible. Those carrying out these acts of sabotage seemed intent on bringing the country to its knees. There are many ways of estimating the loss caused by the events that immediately followed the killing in Rawalpindi. When figures such as those mentioned above are used they tend to encompass a number of different things. They include damage to the assets that produce streams of incomes. Burning a bank building or torching a railway station belong to this category. They also include a reduction in current incomes. This happens when food and fuel supplies are affected and when people cannot get to the place of work. They include reputational damage that increases what financial markets call country risk. An increase in country risk will discourage foreign capital flows into the country. The sharp plunge in the stock market may have been produced by the outflow of capital. And they include sentiment within the country that may inhibit entrepreneurs to make investments. There cannot be any doubt that Pakistan has suffered all these losses. The effect will not only be on the current rate of economic growth but also on the countrys long-term economic prospects. Let us begin by investigating the reduction in the current income of the people who were directly affected by the disturbances that followed. This happened in several different ways. My rough guess is that about a million days of work was lost. This would translate into a loss in monetary terms of some Rs500m. Probably a similar amount was lost by traders whose businesses were disrupted. Taking the two together implies damage of a billion rupees or about 0.15 per cent of gross domestic product.

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There is also the need to estimate the impact of the destruction of economic assets that will affect the stream of future incomes. My impression is that the figure mentioned by the president refers to the destruction of assets. If this estimate is correct then it would appear that the activities that followed the killing of Benazir Bhutto resulted in the loss of about 0.3 per cent of the economys asset base. This will produce not an equivalent decline in the rate of economic growth but something considerably larger. The assets lost have to be rebuilt; their absence will affect even those that continue to function. The asset destruction could reduce the rate of GDP growth in the current fiscal year by as much as 0.7 per cent and also mean a decline in the long-term growth rate of 0.2 to 0.3 percentage points a year. The next area of concern is foreign capital inflow on which Pakistan relies very heavily to invest in the economy. Since the domestic savings rates remain low, without an adequate inflow of external capital Pakistan cannot conceivably sustain the rates of growth it aspires to. The recent coverage of the situation in the country by the foreign press has seriously eroded the confidence of external investors and foreign capital markets in the countrys future. The Economist put Pakistan on the front page in the issue in which it covered the death of Benazir Bhutto. The cover story appeared under the title of The worlds most dangerous place. A few months ago, following the attack on the convoy that was bringing Ms Bhutto from the airport, the Newsweek had put Pakistan on the cover with a similar title. This kind of reportage does not endear a country to potential investors. This has certainly happened in the case of Pakistan. As is generally recognised, it takes little to reduce confidence but a long time to build it. It is hard to say as to how long Pakistan will have to work before it reappears on the radar screens of foreign investors. Until that happens or until Pakistan can increase its own rate of savings, something that cannot be done quickly the country will see a decline of at least one percentage point in its medium-term rate of growth. Decline in foreign flows and the flight of capital from the country may also reduce the current rate of growth by as much as half a percentage point. Foreign nervousness about the countrys future also hurts exports, an already weak sector in the Pakistani economy. Foreign buyers are reluctant to place orders when they are not sure about the state of security and long-term viability of the country in which the suppliers are located. In the period immediately following 9/11, Pakistan saw many buyers depart from the country. Some of them returned but remained cautious. This is happening once again. This will also affect the rate of growth in the current financial year and may impact the medium term. In sum, I believe that unless urgent action is taken by the government, the rate of GDP increase may decline by as much as 1.5 to two per cent in 2007-08 and the medium-term rate of growth by a full percentage point. This administration demonstrated its ability to deal with economic crises caused by unusual events. It performed admirably after the earthquake that did so much damage a few years ago. What should be the governments response this time around? (By Shahid Javed Burki, Dawn-7, 22/01/2008)

Sindh asked to tighten financial screws after WB, ADB pressure Development budget set to take hit
The Sindh government has expressed concern about the completion of development projects initiated in the province in light of the caretaker Federal Finance Minister Salman Shahs recent orders for a reduction of the budget for the the Annual Development Programme (ADP). Officials told The News that Shah had conveyed to Sindh Chief Secretary Fazal-ur-Rehman that the government wanted to reduce the ADP budget both in the federal and the provincial governments because the country was under tremendous pressure from the World Bank and Asian Development Bank (ADB) to not exceed the original amount allocated for development in the annual budget. Sources said that the federal finance minister had issued these directives during a recent Sindh tour. In the past, Sindhs share in the ADP (from the federal governments budget) was Rs26.1 billion, while Punjabs share was Rs50 billion. Last year, however, Sindh had marked over Rs50 billion for its ADP, while Punjab had marked Rs 150 billion. Authorities pointed out that the budget allocated for the ADP was generated by the provinces themselves, while the federal government provided only the allocated ADP budget. Officials claimed that Sindh wanted to further increase the ADP budget from Rs 52 billion to Rs 56 billion in the next financial years but authorities were asked to halt all projects under the ADP programme until fresh directives were received from the federal government. Sources further said that it was surprising that former prime minister Shaukat Aziz, who was a banker and related to the World Bank as well, claimed during his tenure that the begging bowl had been broken and the country was now free to run its own economy. They said that the new directives issued by the caretaker government were totally against the policies of the previous government and the caretaker finance minister had also declared that the country would have to suffer financially if the WB and ADB conditions were not fulfilled. Officials said that the Sindh government was more concerned about ADP allocations in the federal budget than the ADP allocation in the provincial budget, because the Sindh administration was of the view that projects initiated with the federal government funds would be disturbed. The authorities of the Sindh government are of the view that the province was deprived its due share and development projects because there was no representation in the commission to defend it. Sindhs last member in the Planning Commission was Dr Kazi and, after his retirement three years ago, no member from Sindh was nomination in the commission. (By Tahir Hasan Khan, The News-13, 22/01/2008)

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Is a developmental state possible?

SINCE its inception, Pakistan has frequently undergone immense socio-political and economic crises. The latter, according to the practice of interventionist military orthodoxy, have been managed with military takeovers and various post-martial law (erroneously called democratic) regimes that have been tactfully inducted into office and then overthrown by the powers that be in Islamabad. The current political phase that started in October 1999 and which has been on a bumpy ride since March 2007 is no exception to this pattern, although it provides ample opportunities for challenging the above-mentioned orthodoxy. In the search of such opportunities, a vast array of frameworks capable of analysing the recurrence of home-grown stresses can be employed. However, at least one such framework should attempt to unearth the politico-economic malaise latent in the role of the state earmarked and in the economic growth models which the country is currently pursuing. One such framework identified for this article is the theory of the developmental state. There are two basic reasons why I have chosen this specific developmental state framework. The first reason is that it is time to move away from the Washington Consensus (read confusion) approach which emerges from a more political than economic framework called neo-liberalism as a prescriptive diagnostic tool. This approach calls for rolling back the government and creating a minimalist state. The neo-liberal agenda, which Pakistan has been following since the mid-1980s, needs revision involving an institutionalist political economy approach embodied in the developmental state model. The second reason is that instead of looking at the situation from the perspective of Pakistan as a failed state, one can try to prescribe what political leaders and economic managers should do to take the high road towards a possible developmental state. It is worthwhile to mention that the developmental state model emerged during the 1980s as a unified theoretical construct, explaining the economic and industrial transformation of the East Asian miracle economies. Being the principal architect of the concept, Chalmers Johnson wrote about the distinctive features of the economic development schema deployed in Japan. This theory was later enriched by the seminal works of eminent scholars such Robert Wade, Alice Amsden, Ha-Joon Chang and Peter Evans who provided valuable insights into econo-industrial development elsewhere in East Asia. Generally speaking, the developmental state framework pointed out that the state in East Asia was neither a minimalist state nor a centrally planned politico-economic management one. Four typical characteristics, namely, political stability, the elaborate division of labour between the state and the private sector, investment in education while ensuring equitable distribution of wealth and opportunities, and establishing intervention in price mechanisms were identified. From these four characteristics, one can understand the length and breadth of the road ahead for revising economic growth and governance strategies in Pakistan. The current situation in Pakistan, however, indicates that these four characteristics are hardly existent. Bureaucracy, which forms the lifeline and administrative face of a developmental state, is largely inefficient, ineffective, dishonest, and poorly fed. Inequality both in opportunity and income terms is rising with the state almost unable to guide the markets to adjust prices for social and developmental objectives. The current wheat crisis and a deplorable state of high-value generating industrialisation speak volumes for the state of affairs. Over and above, political stability is invisible like a black cat in a dark room. Interestingly, in Pakistan, since the 1980s, the interventionist econo-industrial developmental role of the state has been demonised by the predominantly neo-liberal economic managers. According to this school of thought, free market is the only answer to the economic- and governance-related ills of Pakistan because of sheer government failure. This propaganda is tangent to the equitable economic development vision rooted in the institutionalist political economy and developmental state model. The developmental state model is about strengthening and capacitating the institutions in line with developmental objectives rather than rolling them back. Can Pakistan follow the developmental state model? The answer lies in Peter Evans words that replication can be the adaptive reverse engineering of transferable lessons found in East Asian economic policies and institutional prerequisites. In order to manage the crisis of the state, while moving away from neo-liberal free-market theory as a diagnosticprescriptive tool, Pakistan may try rediscovering the role of the state that can facilitate industrial and economic transformation. This vision is not about macroeconomic fundamentals only; it is also about much deeper intervention to reduce Pakistans rising financial, structural, regional and social inequality with industrial and economic growth and productivity. Pursuing a developmental state model, the economic managers in Pakistan and the international development establishment need to recognise a basic fact. In the words of Ha-Joon Chang, this is that the capitalist system offers greater institutional diversity than recognised by the neo-liberal orthodoxy believing in the primacy of markets. This primacy of market is no more than a myth because the market, in essence, is the exposition of certain rights and obligations. It performs better if governance is better. The wheat, water and electricity production and distribution crisis indicate that these rights and obligations are being trampled upon ruthlessly in Pakistan. However, along with seeking a developmental economic outlook, political stability not in terms of perpetuating personal rule but in terms of the legitimacy to rule has to be established. Such political stability, a hallmark of a developmental state, cannot be instituted without restoring the independence of those institutions which establish the rule

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of law and generate respect for the constitution. This is the respect for the constitution and system of judicial dispensation which promotes the peoples trust in the autonomy of the state. Respectful behaviour towards the constitution, which is a supreme document giving ideology and structure to a state, tells the citizens that their state is not captured and will never become predatory. Such autonomy anchored in political stability gives the strongest signals to systems of economic production (firms), exchange (markets) and governmental regulation that vested interests will not rule the economy but that the principles of equity and the provision of secure livelihood will. The autonomy of the state also communicates to the neo-liberal prescriptions of privatisation and liberalisation that these prescriptions will be scrutinised in the light of the developmental objectives of the state and not blindly followed. To cut a long story short, the developmental state framework embodies a host of viable prescriptions for the many crises which Pakistan is experiencing. The basic issue is, however, the need to take the framework seriously. While concluding, let us consider for a while that if Botswana, Uganda, Ghana and Mauritius in Africa can show that commitment to institution-building to establish a democratic developmental state is possible then why not Pakistan? Perhaps we need to seriously challenge the interventionist military orthodoxys position that the state can be managed well by frequently suspending the states ideology-structure nexus. This vision needs to be replaced with a nationalistic one that democratic developmental states are established on the principles of political legitimacy, the rule of law, democracy and autonomy, with a commitment to ensuring equity in economic development. Pakistan has the potential so let us try it out. Lawyers, the media and civil society are out there to give it a try. (By Zubair Faisal Abbasi, Dawn-7, 23/01/2008)

Retired generals, officers of other ranks urge Musharraf to step down

RAWALPINDI, Jan 22: A number of retired chiefs of the army, air force and navy and dozens of former commanders and some retired junior commissioned officers on Tuesday called upon President Gen (retd) Pervez Musharraf to step down as head of the state to pave way for complete restoration of democracy in the country. Organised by what is known as the Pakistan Ex-Servicemen Society, an organisation originally set up for the welfare of retired service personnel, the forum held a meeting at a local hotel to allow the participants to vent their views on the current political situation, with specific reference to Gen Musharrafs role. The media was kept away from the meeting and later a four-point resolution issued in the evening, primarily blamed President Musharraf for the prevailing crisis. The resolution stated that Gen Pervez Musharraf retired does not represent the unity and the symbol of the Federation as President, and he should resign from his office of the president, and this is in the supreme national interest and makes it incumbent on him to step down. The resolution also called for setting up, in consultation with political leaders, of impartial, credible and unblemished teams of governments both at the centre and in the provinces, which should enjoy the confidence of the nation to hold elections. An impartial, effective, independent and credible Election Commission be appointed with the approval of all major political parties. The meeting appreciated the reported orders of the Chief of the Army Staff, Gen Ashfaq Parvez Kayani, to all serving officers to abstain from taking any part in political activities and promoting any politicians or political parties and to confine themselves to their professional duties. Spearheaded by Lt-Gen (retd) Faiz Ali Chishti, once a key member of Gen Zia-ul-Haqs martial law regime, the exservicemen society has lately been quite active against Gen Musharraf. Tuesdays gathering was its biggest show so far. It was attended by those who have been known critics of Gen Musharraf mainly because of his support for the US-led war against terror or for his liberal reforms, and also by moderate ex-servicemen who have been opposed to both the former military rulers as well as Gen Musharraf. The participants included people like former army chief Gen (retd) Mirza Aslam Beg, former ISI chief Lt-Gen (retd) Hamid Gul and Lt-Gen Chishti. There also were known moderates like two former air marshals, Asghar Khan and Nur Khan, and Air Chief Marshal (retd) Pervez Mehdi. According to a list issued by the organisers, the participants included Admiral (retd) Karamat Rehman Niazi, Admiral (retd) Iftikhar Ahmad Sirohey, Admiral (retd) Mohammad Sharif, Admiral (retd) Saeed M. Khan, Admiral (retd) Hasan Asif, Admiral (retd) Obaid Sadiq and Lt-Gen (retd) Ali Kuli Khan. The list also included names of Vice Admiral (retd) Mohammad Fazil Janjua, Vice Admiral (retd) Jawaid Iqbal, Rear Admiral (retd) Javed Iftikhar, Lt-Gen (retd) Jamshed Gulzar, Lt-Gen (retd) K. K. Afridi, Lt-Gen (retd) Talat Masood, Lt.Gen (retd) Kamal Matin, Lt-Gen (retd) Asad Durrani, Lt-Gen (retd) Zakir Ali Zaidi, Lt-Gen (retd) Aslam Shah, Lt-Gen (retd) Farrukh, Lt-Gen (retd) Qadir Baloch, Lt-Gen (retd) Hamid Niaz, Lt-Gen (retd) Javed Ashraf Qazi, Lt-Gen (retd) Ayaz Ahmed, Major-Gen (retd) Saeed-ud-Din Qazi, Major-Gen (retd) Shafiq Ahmed, Major-Gen (retd) S. M. K. Askari, MajorGen (retd) Islamullah, Major-Gen (retd) Zia-ul-Haq, Major-Gen (retd) Agha Manzoor, Major-Gen (retd) A. A. Zubairi, Major-Gen (retd) Shabbir H. Shah, Major-Gen (retd) Utra, Major-Gen (retd) H. U. K. Niazi; Major-Gen (retd) Arshid; Major-Gen (retd) Afzal Samad, Brig (retd) Tipu Sultan, Brig (retd) Amir Gulistan Janjua, Brig (retd) Nusrat Jahan Saleem and Col (retd) S. K. Tressler. However, one of the participants told Dawn that the list was flawed as some of the people named as participants were not there. Perhaps the most surprising name in the list was that of former ISI chief Lt-Gen (retd) Javed Ashraf Qazi, who had been key aide of Gen Musharraf and a minister in his government . He was definitely not there, said the participant. And after checking with a few other people who had attended the meeting, he said neither Lt-Gen (retd) Farrukh was there, nor was Lt-Gen (retd) Qadir Baloch.

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Another participant also confirmed that three people were not there, and though some of the known critics of President Musharraf were there, he said it was possible that a few other names mentioned in the list also did not attend the meeting. Lt-Gen (retd) Chishti was not available for comment on the anomalies in the list of the participants. Copy of the resolution delivered to media after the meeting says the extra-ordinary meeting was held on the specific request of members of the society who have been watching the turning events of the recent past with great concern and anguish and felt that they could not remain only bystanders but would like to stand and be counted with all patriots and motivated sections of the society imbued with the spirit of securing the future of the country. It claimed that over 100 ex-servicemen from all over Pakistan and Azad Kashmir comprising all ranks of the three services actively participated in the deliberations of the extra-ordinary meeting of their Society to analyse the prevailing conditions in the country with a view to determining as to what requires to be done by the ex-servicemen. (Dawn-3, 23/01/2008)

The mega follies

POLITICS is all about perception. If people believe that a policy is detrimental to their interests, not even a deluge of spin, arranged news conferences, full-page advertisements and assurances by its advocates is going to change that perception. A majority of people in Balochistan view mega projects with extreme suspicion and certainly not without reason. The gaping divide between proclaimed intentions and reality completely undermines the already zero credibility of the governments assurances in Balochistan regarding the people and its vast resources. Gwadar, located on the southwestern coast of Balochistan, was granted to a Muscat sultan by the Khan of Kalat in 1783 and transferred to the mother province for 3m in 1958. At present, some 13 million barrels of oil pass by the port daily. Its strategic importance and economic potential has made it a favourite of many contending interests. Interestingly, Gwadar port is a classic example of all that is wrong with mega project policies in that godforsaken province and makes it a useful guide to what not to do. Inaugurated last year, it is supposed to handle transit trade with landlocked Central Asia, Afghanistan and western China. The Port of Singapore Authority has been given an unbelievable 40-year tax holiday to operate Gwadar but to date not a single ship has berthed there because of tariff settlement. More interested in other jackpots, they have neglected the essentials of marketing. The people of Balochistan in all forums have expressed resentment against the building of cantonments and naval bases. There are already four major cantonments and 59 mini-cantonments along with approximately 600 checkpoints in the province, as well as six air force and three navy bases. Yet the government, in utter disregard for the wishes of the people, relentlessly pursues this policy. We find a deliberate disregard for public sentiment in the case of Gwadar as well. The port at Gwadar is the latest after Pasni and Ormara. Its 14.5-metre channel allows not only ships of up to 50,000 deadweight tonnage (DWT) to berth there but also supersized aircraft carriers. Many people believe, rightly or wrongly, that this port is to become a naval base for the superpower that is eyeing Gulf oil. Such bases deprive the people of natural harbours and physically hinder fishing, severely affecting livelihood while the coast guards also make their lives miserable. Contrary to normal procedure, the Rs1.05bn earmarked for the purchase of 6,500 acres for the new Gwadar airport were released to the Military Estate Officer (MEO) in Quetta instead of the Civil Aviation Authority (CAA). Any land acquired by the Military Land and Cantonments (MLC) makes it the property of the Pakistan Army and this fact alone thoroughly exposes the claim that Gwadar is an exclusively commercial project. The area of land acquired is by itself of importance because New Yorks JFK airport, one of the largest in the world, covers only 4,930 acres. There the total number of flights was 34,361 in November 2006 alone and the number of passengers 3,484,448. It is also twice the size of Londons Heathrow (2,965 acres) where a plane lands or takes off every 46 seconds at peak hours and which handled 128 million passengers in 2005. It goes without saying that the volume of air traffic at Gwadar will be a tiny fraction of the numbers cited above. This oversized place is obviously required for objectives other than those publicised. When Gwadar was earmarked for a mega port project, it prompted a mad rush for real estate and the land mafia made billions in the process. They not only deprived locals of their land but more ominously also created a situation where the demography started changing rapidly, a fact which rankles with most Baloch people. In October 2006, Justice Javed Iqbal and Justice Raja Fayyaz Ahmed of the Supreme Court decreed, The allotment of land in Gwadar has been made in violation of the policies formulated by the government itself. The discretionary power has been exercised in an arbitrary and capricious manner which has been cited as a clear example of abuse of authority and misuse of power (emphasis added). Nobody knows how the settled land owned by the state has been transferred to the private sector, that too on peanut prices which depicts lack of transparency and mismanagement. They ordered the cancellation of residential and industrial plots allotted in Gwadar. The SC Quetta Bench observed that the Balochistan government is not competent to set land quotas for politicians, ministers, elected representatives, high civil officials and the provincial judiciary without passing legislation on the subject. They also observed that every allotment, sale and disposed of land appears to have been made in a dubious and suspicious manner (again emphasis added). The violations must have been extraordinarily blatant to have evoked such a reprimand. For a moment consider how an alienated people must already be feeling because of the numerous depredations against their rights and resources. It is doubtful if these directives have even remotely been followed up. Bypassing laws and rules and making a mockery of them have been raised to an art form in the land of the pure.

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The government doesnt seem to tire of touting the opportunities that mega projects create. It erroneously believes that menial jobs alone will satisfy the aspirations of the people who are demanding control over their own destiny. The Baloch are demanding their inherent rights and not an opportunity to be servants; all governments have failed to comprehend and redress this justified demand. When these injustices are opposed, people are labelled as anti-development and misguided and that only adds insult to injury. Gwadar is not the only problem. The injustices, real and perceived, suffered by the Baloch are many and varied, and immediate redress is required if the already alienated and deprived people are not to be further estranged. Though Balochistan has suffered the most, other smaller provinces too have seen their fair share of discrimination because the policymakers of this country have been indifferent, inefficient, arrogant and compassionless. The great reformer Sheikh Saadi wisely advised that: Na dahad hooshmand roshan rai/Ba faromaya kar hai khateer/Booriya baaf agar che bafinda aast/Na barandish ba karga-i-hareer (The wise entrust not incompetents/With tasks of momentous nature/Sack-weavers though weavers too/Are never asked to weave silken vesture). The affairs of state and governance are too vital to be left in the hands of those who have so far been running the show to disastrous effect. It is time that civil society accepts the challenge because only the conscientious can be expected to defend and care for the rights of those who have long been trampled upon. (By Mir Mohammad Ali Talpur, Dawn-6, 31/01/2008)

FEBRUARY
Discount rate raised SBP acts to curb inflation
KARACHI, Jan 31: The State Bank has tightened the monetary policy by increasing the discount rate by 50 basis points, making the money costlier for borrowers. The State Bank said the measure was needed to reinforce its fight against rising inflation. The central banks governor, Dr Shamshad Akhtar announced on Thursday the new monetary policy which will be revised after six months at the beginning of the next fiscal. The new discount rate will be 10.5 per cent effective from Feb 1. The governor said the increase in the discount rate would not have any impact on the economic growth outlook which would remain around 6.5 per cent to 7.2 per cent for the current fiscal. The SBPs move was against the global trend of reducing the interest rate. The US Fed Reserves has cut the interest rate by 1.25 per cent in just two days to bring down the rate to 3 per cent. The governor said Pakistan escaped the recent economic turmoil emerging from the US and engulfing the developed European economies. The SBP also increased the Cash Reserve Ratio (CRR) by 100 basis points to 8 per cent which means the banks will have to keep more money as reserve with the State Bank. The governor said the decision was taken to siphon off excess liquidity from the system which was mainly because of higher inflows of foreign exchange through remittances. The double action of the monetary policy, increase in the discount rate and the CRR, would affect the cost of borrowing and it would ultimately limit the supply of money in the market and reduce inflation. The governor said that in the wake of rising main inflation (CPI- Consumer Price Index) and core inflation, it was challenging to manage the monetary policy. She said it was the SBPs success to bring down the core inflation to 3 per cent till May 2007; however, it then started rising to reach 7.2 per cent in December 2007. When core inflation rises the prices of all items, excluding food items and energy, increase and mainly impact the cost of construction, land prices, and other sectors making the common mans life more difficult. The governor accused the government of breaching the borrowing target as its heavy borrowing was also responsible for rise in inflation during the last six months. The higher borrowing from the SBP shows that the government is spending more than what it earns through taxes and other revenues. The impact of the political uncertainty and pressure of government borrowings on the financial system, private sector credit managed to grow by 10.4 per cent during July 1 to Jan 19, 2008 compared to 10.2 per cent over the same period last year, Dr Shamshad said. The State Bank also announced a relief package for enterprises who suffered losses in the violence which gripped Karachi after the assassination of Benazir Bhutto on Dec 27. The SBP has developed a relief package for such enterprises in revival of their activities, which includes: moratorium on payment of principal and mark-up in respect of loans availed by the affected entities under Export Finance Scheme and relaxation in the shipment period.

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The SBP permitted banks and DFIs (Development Financial Institutions) to provide financing for reconstruction and rebuilding of factory premises by the affected borrowers under the recently announced Long-Term Financing Facility (LTFF); and relaxation in respect of realisation of export proceeds by the affected entities on case-to-case basis. However, the relief under the package will be subject to the findings of a commission set up by the federal government. (By Shahid Iqbal, Dawn-1, 01/02/2008)

No place like home... or is there?

With more and more women moving from rural townships to urban cities in search of employment, one of the main difficulties faced by such women is the lack of safe accommodation. To meet the needs of such working women, a hostel facility provided by the Business and Professional Women Federation has not only proved to be a successful project, but has led the inmates to believe that in a city like Karachi, which remains the centre of political activity (and turmoil), it is a safer place than home. The hostel, established in Clifton in 1985, has brought women from different professions and cities together who needed the facilities to enable them to work in a competitive environment. For a woman working in a city far from her hometown, safe accommodation is her first priority and with the increasing number of working women in different sectors, this was definitely the need of the hour, explains the founder of the institution Dr Salima Ahmed, who has remained a civil servant since 1949. The organisation started as a pressure group in 1954 to bring about reforms that could facilitate women in education and employment, after which the hostel was set up for working women. The hostel currently houses 41 inmates from various cities including Mirpurkhas, Larkana, Thatta, Hyderabad and a few from Karachi as well. The facility is mostly for women from the Interior Sindh and other districts and only a small percentage is given to the women in Karachi, informs Ahmed. A similar hostel has also been set up in other provinces. My parents did have a hard time accepting that I will be living by myself at the hostel. It is difficult initially, but you learn to get used to it. And I honestly feel very secure here and have no complaints whatsoever, says a content employee at a local airline and a student of Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST) Fariyal, who is trying to balance her studies along with her job, away from her family in Lahore. A lot of people question us about the security at the hostel but weve got the essentials covered so it is pretty comfortable and peaceful, says another content inmate Dr Rajkumari, whose family is settled in Nawabshah as she is employed at the Ziauddin Hospital in Karachi. Rajkumari has been staying at the hostel for the past one year at an annual rent of Rs4,000. The hostel is equipped with an internet facility as well. Its pretty much like their home and they are free to move about within the premises. They make friends here, learn about each others culture and tradition and try different recipes in the kitchen too so there is no restriction as such, informs the superintendent of the hostel Tajunnisa Haris, who is more of a friend to the inmates. According to the terms and conditions of the hostel, an inmate is not allowed to stay in the hostel for more than a period of three years. In special cases, however, we give an extension for a few more years or renew the agreement, says Haris. She also said that the inmates are not allowed to stay outside the premises beyond 10.00 p.m. and are issued a gate pass, without which they are not allowed to enter or leave the premises. We strictly adhere to our rules which is why, thankfully, no incident has ever been reported from our premises. Even our visiting hours are quite strict. The option of staying at this hostel gives me the independence besides being able to help my family financially, says another inmate Mahnoor. On being questioned how secure she feels in the city that has been under constant attack for the past few months, she adds: Since this is in a safe locality of the city with extra security measures for the inmates, I dont think I could have been more secure. I have no fears whatsoever. (By Aroosa Masroor, The News-19, 01/02/2008)

Retired generals refuse to apologies, but want Musharraf to go

ISLAMABAD: Several hundred retired armed forces men on Thursday urged their colleague, General (retd) Pervez Musharraf, to hand over power to the deposed Chief Justice Iftikhar Muhammad Chaudhry and join their ranks but most of their leaders refused to apologise for their past roles against democracy. Led by some high-profile generals, air marshals and admirals, these ex-servicemen also demanded that retired Justice Bhagwandas be appointed as the Chief Election Commissioner and the detained nuclear scientist, Dr AQ Khan, be either released or tried in a court. Except for retired Lt-Gen Hamid Gul, none of the leaders showed moral courage by making an admission of guilt or apologising to the nation for their past. They did not even feel any embarrassment on their roles when asked by newsmen at a press conference. The former DG of ISI, Lt-Gen (retd) Hamid Gul, not only admitted the wrongdoings he had committed as a spy chief, he also submitted an apology to the nation and said he was ready for any punishment, even to be hanged. I am ready for a trial or even hanging, Gul told the gathering of ex-servicemen in open door proceedings. His words, however, failed to move the other architects and supporters of martial law who were sitting on the stage. They included retired Lt-Gen Faiz Ali Chishti, Gen Mirza Aslam Beg, Air Marshal Asghar Khan, Lt-Gen Majid Malik and Lt-Gen Asad Durrani. They showed no remorse for their past conduct. Air Marshal Asghar Khan, who awas presiding over the meeting, was annoyed when he was asked about his past role and whether he was ready to apologise. These were individual acts of different individuals, he responded.

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He did not respond when a journalist questioned their moral authority to preach others when they did not feel embarrassed on the wrongdoings of their past. The convener of Thursdays meeting, Brig (retd) Mehmood, who had said only a day earlier that he would offer an apology on behalf of all the ex-servicemen, remained seated on the stage with his head down, as if trying to avoid the media and had no courage to act on his words. Although, the retired servicemen expressed solidarity with lawyers and journalists community, vowing to participate in their rallies, they gave no timeframe for launching a movement against Musharraf on their own. They instead said nothing had been decided as yet. They even conceded that they might not do anything concrete in future. Asghar Khan said many of them had their near and dear ones in the government, a major hurdle in their way to call the spade a spade. Asghar Khans own brother, Farooq Rehmatullah, is the DG Civil Aviation Authority (CAA). A demand raised by a retired navy commodore, Shahid Nawaz, also went unheeded. He had asked for en masse resignations of all ex-servicemen presently working in government departments. If this strategy is not feasible, then outof-job ex-servicemen should surrender all medals, awards and pension books to protest against Musharrafs stay in power, he demanded, but this demand also went unheard by the retired generals. The Thursdays meeting virtually turned into a comedy programme as it was marred by indiscipline largely by exservicemen, who would pick up quarrel with journalists when questions regarding their own accountability were put to the Chair Asghar Khan. However, they did at least one job by hooting down a proposal that Lt-Gen (retd) Abdul Majeed Malik should be included in the committee that was to make a list of demands of Thursdays meeting during the lunch break. Air Marshal Asghar Khan, who was chairing the meeting, told a press briefing that ex-servicemen demanded stepping down of President Musharraf and that power should be handed over to the deposed Chief Justice Iftikhar Muhammad Chaudhry to hold elections under a neutral caretaker set-up. Khan also demanded the re-constitution of the Election Commission of Pakistan with Justice Bhagwandas as its chief. Khan said the ex-servicemen would extend full support to the protest rallies staged by journalists and lawyers. The meeting demanded that disgraced hero, Dr AQ Khan, should be either released or tried in a court of law, instead of being kept under illegal detention. Khan, however, remained uncomfortable while facing critical journalists with his colleagues sitting in the hall, yelling planted question whenever a query about their accountability was put to him. In most cases, he said: We have not decided yet. He refused to take questions on self-accountability and was pressed time and again that he himself was among the strong supporters of General Zias martial law and the person sitting next to him, Lt-Gen (retd) Faiz Ali Chishti, was Commander 10 Corps when Zia had taken over and later collaborated with him in all his acts. Questioners also mentioned Gen (retd) Beg under whose stint as Army chief the Mehran Bank scandal took place and the then president had nominated his successor three months before Begs retirement as a pre-emptive measure keeping in view his political ambitions. But neither Asghar Khan showed the grace to admit any wrongdoing nor did Chishti and Beg. Speaking on his own behalf and the two others, Khan said: Whatever happened in the past has happened. There were individuals involved, not all ex-servicemen. Lt-Gen. (retd) Abdul Majid Malik, who spoke earlier, said many blunders were committed in the past but regretted that only the blunders committed by the Army had been exploited. Malik left the venue before the press conference when the majority of those present said no to the proposal of nominating him as a committee member for furnishing the list of demands. (By Umar Cheema, The News-1, 01/02/2008)

Economics and politics

PAKISTAN must be one of the strangest countries in the world. With elections to be held in a matter of days, the entire electioneering process seems to be devoid of any politics. There is certainly a great deal of posturing and rhetoric, threats and promises. Yet, the absence of any substantive issue in the electioneering process reflects sadly on the state of democracy and politics in Pakistan. There is no doubt that the elections are being held in our very own age of terrorism, with constant and real danger and threat to the lives of politicians and citizens. Nevertheless, the opportunity for the contesting parties to effectively mobilise citizens and voters, and to politicise issues, continues to be wasted. The deteriorating condition of the economy is one area in which the electoral process could have been transformed into a political, even a democratic one, but the opportunity has gone wanting and will be back to haunt whichever party forms the government after Feb 18. In some ways, we are back to 1988. While concerns about security and the law and order situation are very real and, in many ways, affect all Pakistanis, there is nothing more real than the rising cost of living signified by the rise of the price of atta and roti. With food inflation reaching close to double digits and the prices of all very basic necessities rising at a pace not seen for over a decade, there is growing consensus that Pakistans economy is headed for a marked downturn, and the days of shining Pakistan, with around seven per cent growth in GDP, are over. In order to link the economic with the political, it is worth highlighting the weaknesses in the economy, and to reveal where and how parties contesting elections, could have made political interventions.

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The first downward revision for fiscal year 2007-08 by the State Bank of Pakistan in the expected growth rate in the economy was a warning that the political events of 2007 had begun to take their toll on economic sentiment and Pakistans image, affecting investment, local and the much hyped foreign investment. Pakistans main economic indicators for the current fiscal year are already way off target, and far worse is expected to follow. For example, the GDP growth rate has been scaled down from the over-optimistic 7.5 per cent to closer to 6.5 per cent, although I am quite sure that it will be closer to six per cent by the end of June. Inflation, already nearing eight per cent, is way above the original target set for the year, and with the inevitable rise in petroleum prices, will be higher by the end of the fiscal year. Similarly, the fiscal deficit target, the targets for exports and investment as well as tax revenue along with the current account deficit, are all far worse than originally anticipated. These sets of figures are related only to the first few months of fiscal year 2007-08, and do not include the impact of the events following the assassination of Benazir Bhutto. Already, economists are talking about a fall in GDP by two percentage points in the short-term, with a medium-term decline from the trend rate of around one to 1.5 percentage points. Despite the fact that more than 40 per cent of Pakistanis have mobile phones and the roads are clogged with new cars and motorcycles in all the cities of the country, one can safely conclude that the sheen is gone from whatever was shining in Pakistan. Worse is to follow. In a fairytale, make-believe world, the previous government of Shaukat Aziz, thought that it would be re-elected in partnership with some other so-called enlightened moderates, and would ensure the continuity of retired General Musharrafs eight-year rule. Precisely because they were playing politics, the Musharraf-Shaukat Aziz government failed to take critical and timely economic measures, living in a world clouded by an artificial, very temporary, boom. While the so-called economic miracle following the windfall after 9/11 resulted largely in real estate and stock prices rising, because substantial measures were not taken to ensure long-term growth and stability in the economy, the downturn has come about sooner than anticipated. The severe current winter power shortages and the shortfall in gas are just two of the many indicators which suggest a lack of foresight in planning and development and, most of all, suggest that worse is still to come. However, the biggest political and economic mistake that the previous government, as well as the incumbent caretaker government, made was not to gradually adjust domestic petroleum prices in line with the astronomical rises in its global price. What is surprising also is that this process of the decline in the economy which began some months ago was not anticipated by politicians or their group of economic advisors, for had they wanted, they could have used the deteriorating economic condition to their political and electoral advantage. Perhaps what is most surprising is that even today when the cost of living is probably at its highest in the last decade, or at least that is what people feel, political parties have not been able to capitalise on this issue. With some impromptu demonstrations taking place over the lack of availability of flour or the absence of power and gas, political actors, many of them contesting elections within three weeks, are conspicuous by their absence. Elections and politics seem to be divorced from the real lives of the people. Why should one elect a candidate when he or she is not concerned with the real life conditions of those from whom they seek votes? A political transition will take place in a few weeks. The government of the retired general and the present caretaker setup will hand over some administrative charge, though perhaps not enough power, to a new government shortly. They will also hand over an economy which is coming undone and is now, along with the state, also on the track of failure. No matter how well-meaning and enlightened the next government will be, it will have to take a number of very unpleasant decisions and will be faced with hard choices. It will have to raise petrol prices, perhaps cut development expenditure, allow the rupee to depreciate further, all resulting in higher inflation, a worsening current account deficit and lower investment. Poverty, on the decline since 2001, will also begin to re-emerge once again. These are all very political, as much as they are economic, issues. In some ways, 2008 is similar to 1988. A military regime passed on government to a democratically elected popular party. The economy in the 1980s had seen a boom, but when the new government took over, not only was the cupboard bare, a huge debt burden had also been inherited. Importantly, the economic collapse of the 1990s was blamed on civilian, democratic governments. The two main political parties who suffered as a consequence in the 1990s, ought to have learnt their lessons well. The only way to deal with terrorism, militarisation and an economy showing signs of a potentially serious crisis is for the main parties to join together and form a consensus government. Not only will this be the best form of politics, it will also strengthen the process of democratisation in the country, pushing back the remnants of authoritarianism, both religious and military. (By S. Akbar Zaidi, 02/02/2008)

SHC dismisses contempt pleas against ex-CM

The Sindh High Courts (SHC) reconstituted five-member bench cleared former Sindh chief minister, Dr Arbab Ghulam Rahim, of two contempt proceedings, on the grounds that no contempt of court proceedings have been made out against the respondent. Rahim was accused of delivering contemptuous statements in the media about the suo moto proceedings over the May 12 mayhem, and was also held responsible for graffiti and banners against the then-chief justice of the SHC. On October 8 last year, the SHC had taken notice of Rahims reported statements about the graffiti and banners around the SHC and City Court premises, and had issued a show cause notice as to why contempt proceedings should not be initiated against him.

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The SHC registrar had sent a report to the then-pusine judge, Justice Sarmad Jalal Osmany, and said that apart from graffiti, banners were also placed outside the SHC and City Court premises on October 1. These banners were inscribed with allegations against the then-SHC chief justice. It stated that on October 3, the chief ministers statement was published in various sections of the press, in which he described the banners and wall-chalking against the chief justice as the opinion of the public. The registrar had sought appropriate an order in this regard. Subsequently, the report was converted into a criminal miscellaneous application, with the then-chief minister as the respondent, because the court observed that his remarks were prima facie and amounted to contempt of the court. A five-member full bench comprising Justice Sarmad Jalal Osmany, Justice Anwar Zaheer Jamali, Justice Mushir Alam, Justice Mohammad Moosa K Laghari and Justice Zia Pervez was constituted to hear the application. Rahim has stated, however, that the remarks were off-the-cuff and many newspapers did not carry them at all while reporting the press conference. The respondent said that he had the highest respect for the chief justice and other judges of the court and regretted the manner in which his remarks were reported in newspapers. He said that a clarification was also issued to several newspapers in this regard and he prayed to the court that the notice issued against him be withdrawn. The earlier five-member bench was, however, dissatisfied with the statements of the respondent and directed journalists who had attended Rahims October 2 press conference, to file their personal affidavits. The matter was again heard by a reconstituted five-member bench comprising Chief Justice Mohammad Afzal Soomro, Justice Munib Ahmed Khan, Justice Mrs. Qaiser Iqbal, Justice Nadeem Azhar Siddiqui and Justice Dr Rana Mohammad Shamim after the issuance of the November 3 PCO. The court, after hearing the case, observed in its order that the reports in a few newspapers were out of context and Rahims remarks had been reported incorrectly. The court also observed that the respondent had not made any allegations against the then-SHC CJ and non-reporting of such remarks was itself sufficient to establish that the report in question was not proper and it could not be relied upon to maintain contempt proceedings against the respondent. The other contempt plea was being heard by the pre-PCO seven-member bench that was also hearing the petitions pertaining to the May 12 incidents. Karachi Bar Association (KBA) President Ifitkhar Javed Qazi had accused the former chief minister of delivering a contemptuous statement to a foreign radio channel on the suo moto proceedings initiated by the SHC regarding the May 12 incidents. Rahim had denied the contempt of court allegations however, and said that the press reports of his statement were published out of context and distorted. His counsel Waseem Sajjad said that the respondent respected the judiciary and the application should be dismissed because no contempt of court case was made out. The court, after pursuing the transcript of radio channel and newspaper reports, observed that the reporting of the former CMs interview was not proper and every newspaper had reported the same news in different words and in its own style. The court observed that most of the statements attributed to the ex-CM were not delivered by the respondent in his interview and every newspaper had reported the interview in question in its own wording, ignoring the exact words of the interview, thus creating doubts in respect of authenticity of the respondents version. The court dismissed the application with the observation that no case of contempt has been made out, as the applicant did not point out words or sentence which constitute the contempt proceedings. (The News-13, 02/02/2008)

SBP policy will retard GDP growth: Dr Shah

ISLAMABAD: Federal Finance Minister Dr Salman Shah has taken exception to the new policy of the State Bank to further tighten the monetary policy, fearing it would hurt the GDP growth. The minister reacted unexpectedly in an exclusive talk with The News and registered his dissenting note about the monetary policy that Governor State Bank Dr Shamshad Akhtar had announced on Thursday. Dr Shah said further tightening of the monetary policy would not serve the purpose of containing inflation that had multiplied financial miseries but it would also hurt growth. We are going against the tide as in the whole world, there is a trend of reducing the interest rate, but here the central bank raised the discount rate, although by not too much, but even then it would retard the economic activities. He feared that the business community would now hesitate in getting loans for their businesses, keeping in view the increase in the discount rate from 10 to 10.5 per cent. Dr Shah exhorted the commercial banks to continue lending on the earlier rates as they had too much room keeping in view their profits. The banks have the capacity to grant their loans, as they could do within their spreads. He said that the banks also needed to increase the interest rates on deposits of the clients. Dr Shah said that increase in the interest rates would have a negative impact on industry. He said that the central bank should have gone with the earlier monetary policy as within the next two or three months, the inflation issues could be handled. As far as inflation is concerned, in the basket of CPI (consumer price index), the central bank and the government could not defuse it as 70 per cent commodities of the CPI basket cannot be controlled. The prices of POL products, palm oil and food items are also beyond their control because Pakistan imports POL and palm oil. As far as food items such as wheat, rice and others are concerned, he said that the US and Western countries were extending huge subsidy to farmers, even then the prices of food commodities were on the rise in the international market against the prices in Pakistan wherein no huge subsidy was being extended.

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Dr Shah said this time, Pakistan received bumper wheat crop, but the highly subsidised wheat in the world registered massive increase in the international market prices, therefore, the people who dealt in wheat in the country went for exporting and massive smuggling to earn profits. He said in Pakistan at the very outset of the wheat season, the price of wheat was $175 per tonne whereas the price of highly subsidised wheat in the international market was at one time $400 per tonne, which has now swelled to $500 per tonne. About the price of palm oil, Dr Shah said that it had also surged from $400 per tonne to $900 per tonne. He said that the impact of the prices of oil, palm oil and food items in international market was beyond the government and the central banks control. Therefore, the State Bank should continue with the earlier monetary policy for the remaining months of the current fiscal 2007-08. To a question about increasing oil and electricity prices in the country, he said the government planned to pass the increases on to the end consumers slowly by June 30 to avoid inflationary pressure. However, Dr Shah said that the incumbent regime was determined to achieve the fiscal deficit of 4 per cent by the end of the current financial year. He said in case no increase in oil prices was passed on to end consumers by June 30, the country would receive a huge financial jerk of Rs 130 billion. Dr Shah, to a question, vowed to clear all the Price Differential Claims of the oil marketing companies by June 30 and said that in the new fiscal year, the government would not carry any liability of oil marketing companies. Mentioning the financial liabilities of the Wapda that government owed to pay, Dr Shah said that all the financial liabilities of the utility had been paid. He disclosed that in future, Wapda would not float any bond to generate capital, rather the distribution companies, generation companies and transmission companies would now individually come up with their bonds to generate capital for their respective projects. He said that some of the power distribution and generation companies would soon come up with their respective Sukuk bonds, each worth Rs 4 to 5 billion to arrange financing for their projects. (By Khalid Mustafa, The News-1, 03/02/2008)

Growth of housing loans sliding

After a brief period of robust growth, senior bankers say, the progress and expansion of the countrys nascent primary mortgage finance market is being retarded by a number of factors ranging from the lack of documentation of the national economy to the higher price of the bank credit and land to the recent murky political scene. The pace at which the mortgage market has been growing in the recent years is feared to decelerate during the current fiscal as well as over the next few years unless impediments holding back its growth are removed and issues facing the banks and intending borrowers addressed. The primary mortgage finance market got its first real push in 2004 when the government announced a range of fiscal incentives to the housing sector as part of its policy to encourage and increase consumer spending in general and give an impetus to the construction industry in particular. The incentives were also aimed at attracting commercial banks into financing the housing sector, which, in the past, had solely remained the job of the state-owned House Building Finance Corporation (HBFC). The incentive package, say the bankers looking after the housing finance divisions of their respective banks, for the first time liberalised the credit regime for housing finance, rationalised stamp duties, registration fee and property taxes, and ensured that recovery procedures in case of default by the mortgagors are implemented. The package raised tax credit on borrowing cost of housing loans to Rs500,000 or 40 per cent of the income of the mortgagor, increased the limit of property income for withholding tax to Rs200,000, reduced the rate of withholding tax on property income to five per cent, allowed deduction of profit or interest on financing of property for the purpose of income tax, and withdrew or slashed Central Excise Duty (CED) on construction materials like wires and cables and cement (CED on cement was cut by 25 per cent) with a view to bringing down the construction cost. The banks exposure to housing finance was also increased to 10 per cent of their net advances and the maximum size of a mortgage loan was raised to Rs7.5 million with a debt equity ratio of 80:20 for a period extended up to 20 years. The response of the banks to these incentives was quite substantial. The banks flushed with liquidity as a result of the reduced demand for credit from the government and the increased inflow of the workers remittances in the aftermath of the September 11, 2001 events. The interest rates had dropped down to their historic lows. The reduced credit cost did squeeze the banks margins, but at the same time afforded the bankers the opportunity to make higher profits through consumer lending, especially in the housing and automobile sectors, than through project/corporate lending. Low interest rates encouraged a lot of people to obtain housing finance and construct their own house. The low rates ensured that loan repayment cost the borrowers less than they were paying as their monthly house rentals, says an executive, who asked not to be identified, working for a private bank in Lahore. Housing finance increased by 24 per cent in 2004 on the back of the new fiscal incentives and 56 per cent in 2005 to slip back to about 28 per cent in 2007. The growth rate, the bankers say, has declined because of the rising interest rates average housing finance price has risen to 13-14 per cent from 7-8 per cent in less than three years. Compared to other regional economies, Pakistans primary mortgage market remains extremely small both as ratio of the national GDP and in absolute terms. This is despite the fact that the size of the mortgage market in the country has grown considerably during the last four to five years and the commercial banks exposure in this segment has risen to around Rs65-70 billion (this is exclusive of the HBFCs exposure of Rs25-30 billion) or one per cent the GDP. This is extremely low if compared to India where the housing finance is above three per cent and China where it forms over 15 per cent of the GDP. If we look at the United States, the mortgage financing forms 70 per cent or even more of its domestic wealth, said the banker.

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The coverage of the housing finance is also limited to a maximum of 16 cities across the country, and that too by just one bank. The rest of the banks are offering mortgage products only in six to eight cities. I can assure you no bank offers this facility in rural areas where 70 per cent of the total population lives, the banker says. The bankers say the government wants to push the housing finance to three per cent of the GDP by 2010 as suggested by the World Bank, so that this segment of consumer lending acquires critical mass and the national housing deficit of six to seven million units is narrowed. But the odds against the expansion of the market are so huge that this target is unlikely to be attained over next several years unless the government responds to the banks proposals and addresses fundamental issues facing them in widening their mortgage operations. The bankers say the major structural impediments in the way of the mortgage markets expansion include the failure of the provincial governments to computerise their land revenue records and ensure clean titles, absence of uniformity in the land/property documentation procedures and weak enforcement of the foreclosure laws. The bankers are also very reluctant in advancing housing loans because most of the intending borrowers individuals or developers, are not documented properly and are seldom in possession of their complete financial record and credit history. In order to evade taxes, most buyers do not document their actual incomes and when they come to us for financing we cannot help them because their declared income does not match their financing requirements, says another banker. There also exists a strong bias among the potential borrowers against instalment purchase. Many people who want early home ownership dont apply for housing loans because of cumbersome documentation involved. The customers are also not fully informed by the banks about their mortgage products. The customers, for example, applying for housing finance are usually not aware of the price of the credit or hidden costs. They also rarely know what kind of documents they need for obtaining financing for a built property or new construction. Pakistans mortgage market remains substantially lower than even the regional economies both as percentage of their respective GDPs as well as in absolute terms if the size of those economies is taken into account, the banker says. Housing finance is considered an important mechanism to lift construction activity and boost some 40 allied industries for boosting industrial activity in any economy. If the government wishes to expand housing finance , it has to take both short-term and long-term measures. In the short-term the government must take steps to reduce interest rates on housing finance to seven to eight person and freeze it for 10 years so that the middle classes, who are actually in need of early home ownership, can borrow and build or buy housing units for them. Second, the government must free its land in various parts of the country and provide it to the builders/developers under the supervision of commercial banks for constructing housing units. The provision of the state land at cheaper rates or free of cost will help the developers discount the prices of the built units and make it affordable for the middle classes, the banker says. The long-term measures will include property reforms, uniform and quick implementation of recovery laws and procedures, and documentation of the economy and individuals. Unless the government takes these measures, it should forget pushing the size of the mortgage finance to the targeted three per cent of the GDP. That would also mean that fewer people will have a roof their own than can be provided over the next several years, the banker says. (By Nasir Jamal, Dawn-Economic & Business Review, Page-1, 04/02/2008)

Monetary policy: a response to fiscal expansion?

State Bank Governor Dr Shamshad Akhtar did not mince words while holding fiscal mismanagement during the first half of current fiscal year responsible for the widening fiscal and external account imbalances, making it imperative to further tighten the monetary policy for the next six months. She disclosed that the commercial banks and the central bank financed almost 60 per cent of budget deficit from July 07 to January 29, 08 making the job of liquidity management quite challenging. In the policy announced on February 1, the SBP raised the discount rate by 50 basis points to 10.5 per cent that may push the lending rates of commercial banks to 13 per cent plus. The SBP also enhanced cash reserve ratio (CRR) by 100 basis points for deposits of one-year term to eight per cent. Deposits of more than a year have been spared of CRR to give incentive to banks to offer better rates of return to their depositors. The risk to inflation outweighs the risk to growth, the Governor said, justifying her policy. The Governor elaborated that the developments in first half of FY 08 substantially deviated from the monetary framework, says a SBP press release on the Governors more than an hour-long speech on Thursday last. It warns complications for monetary management during the course of the year (07-08) mainly because of the slippages on fiscal deficit targets. Industry and trade leaders came out immediately with their harsh reactions on monetary policy, warning of a further slow down of businesses and closure of enterprises. Monetary policy is a major cause of slow growth in industrial sector and widening of economic inequalities in last few years, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Mr Tanvir A Sheikh said in a statement on Friday. We are inviting State Bank of Pakistan Governor for a meeting with businessmen next week, Sheikh Amjad Rasheed, chairman of the FPCCI Banking and Credit Committee informed Dawn from Nowshera over telephone. He said the tight monetary policy has squeezed business activities beyond tolerance limits. Further monetary tightening will be killing for business, he warned. Textile export factories are closing down and further tightening of monetary policy is bound to prove the proverbial last straw on camels back Shabbir Ahmad, a leader of value added textile products exporters association said. In their anger and fury, the industry and trade leaders overlook the government over-spending which seems to be showing no respite. The Governor disclosed that the government borrowed over Rs237 billion so far. Last year in the

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same period, it borrowed only one-third of this amount. The Governor was sceptical if the government would be in a position to retire Rs63.2 billion loans as projected for 07-08 credit plan. Where is the law that prohibits government to contain budget deficit to four per cent, asked a trader who is confident that State Bank of Pakistan can invoke this law and put a brake on unlimited government borrowing. Bankers however defend the monetary policy. A top banker said that the monetary policy is the most appropriate and logical response to the current situation. It is true that inflation is on the rise during the current fiscal year he conceded but argued, Imagine what would have been the impact of a loose monetary policy on inflation. His assessment is that had there been no tight monetary policy, the inflationary pressures would have been three times more than at present. The banker repeated SBP Governors argument that real interest rate is still very low. Our real interest rate is hardly 4-5 per cent if you adjust the banks mark-up with inflation rate is one standard argument offered by all commercial and central bankers in support of present policies. Financial cost is just a small part of the total production cost is another argument of the bankers. The financial cost was only three per cent of sale proceeds about five years ago, Shabbir Ahmad retorted and said at present the financial cost is eight per cent of sale proceeds and is hitting the endurance limits. The governments reliance on banking system for borrowing has led to 19.2 per cent monetary expansion in first half of this fiscal year. Dr Shamshad Akhtars advice to the government is to rein in fiscal slippages in next half of thel year. She also wants the government to mutually agree with State Bank to reduce its stock of papers from Rs624.6 billion to Rs305 billion, an average of last five years. Her advice was for holding jumbo auctions of long-term PIBs, more issuance of sharia-compliance instruments and to generate more inflows into National Savings Scheme. While industry and trade leaders were not in a position to offer any comment on this advice of the SBP Governor, a private banker confided that a plan is being prepared to shift burden of treasury bills and short-term papers to long- term instruments. No further details of this proposal were available but there are indications of consultations and meetings among the bankers on these issues. The private sector has not been crowded out as business people are trying to convey, a banker said. Private sector credit grew by 10.4 per cent during July 07 to January 19 as against 10.2 per cent growth of the same period last year. Till January 5 this year, the exporters were given Rs139.6 billion as against Rs31.6 billion last year. Under the Long-Term Financing Facility for export-oriented industries, a sum of Rs8 billion has been allocated for utilisation up to June next. The borrowers have been given option to borrow for three different terms. A three- year loan will carry eight per cent interest, five -year loan nine per cent and 10 -year loan 10 per cent. How can we think of setting up new factories when our existing plants are being closed because of financial and infrastructure problems, Adil Mahmood, a leader of All Pakistan Textile Association (APTA) said. He wants loans on concession rates for upgrading old plants that will also help in saving on electric and gas consumption. Financial concessions to textile is said to have caused inflation. Akbar Sheikh, a senior APTMA leader in Lahore attributes this monetary overhang to State Banks wrong money supply policy. How can textile industry be held responsible for this when a slight change in money supply can eliminate this possibility, he asserted. Another textile industrialist recalled that it was high lending that turned the industry sick in the 1990s. (By Sabihuddin Ghausi, Dawn-Economic & Business Review, Page-1, 04/02/2008)

FBR struggles to meet Rs 40 bn revenue deficit

ISLAMABAD: Tax authorities have launched a parameter-based field audit of selected returns in order to apprehend potential tax dodgers for meeting the yawning revenue deficit of Rs 40 billion during the current fiscal year, The News has learnt. The Federal Bureau of Revenue (FBR) is already facing a huge revenue shortfall of Rs 40 billion on direct taxes side due to changes made in the advance tax laws and the political deadlock triggered in the aftermath of removal of 50 judges and the violence following the assassination of Benazir Bhutto. During the election year, it will be quite hard for the tax authorities even to achieve Rs one trillion mark on its board by June 30, 2008 let alone the budgetary target of Rs 1.025 trillion. After a gap of five years, during which the tax managers pursued a policy of facilitating taxpayers, the tax authorities are now forced to launch the parameter-based audit of selected returns to bridge the yawning revenue shortfall of Rs 40 billion on the direct taxes side in the current financial year. Member (Direct Taxes) Usman Khalid Mirza confirmed to The News in an exclusive talk that the tax authorities had launched field as well as desk-based audit of selected returns in order to apprehend under-filers. He said the FBR pursued the policy of facilitating taxpayers during the last five years and now enforcement would be ensured to achieve the desired results. He said the audit of the selected returns would be done on the basis of certain parameters, without elaborating. The National Audit Plan is being finalised and it will help the tax authorities to move ahead with full vigour, he added.However, sources said the FBR lacked the capacity to hold audit of four or five per cent of the total received returns of over two million. When the member direct taxes was asked about the exact percentage of holding audit, he said all returns were accepted under the Universal Self-Assessment Scheme (USAS) and the audit of only selected returns would be conducted. However, he did not specify the exact percentage in this regard. Sources said the change in policy of facilitation appeared in this fiscal due to the possibility of huge revenue shortfall and the authorities concerned were striving to minimise this gap. There will be definitely a revenue shortfall in the current fiscal year and the FBR has evolved a strategy to minimise this shortfall, said one of the top tax officials.

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The official said that the tax authorities knew about the revenue shortfall at the start of the current fiscal year but they could not fully anticipate such a huge revenue shortfall in the first seven months. The FBR faced a severe blow when it received the lowest taxes along with returns during the current fiscal year.The tax authorities have collected Rs 2.3 billion revenue along with over 12,000 received returns from giant corporate sector companies till January 31, 2008 against Rs 24 billion in the same period of the previous financial year, registering a massive shortfall of Rs 22.7 billion on this account. On an average, Pakistans corporate sector files 14,000 returns per annum. This sector has made huge profits in the last five years but is paying peanuts to the national kitty in shape of due taxes. The FBR has received total returns of up to 2.05 million during the current fiscal year out of the total 160 million population. The countrys bigger companies are pleading that the FBR had collected due taxes in advance during the last fiscal year in order to show improved collection and no fault lies with them. (By Mehtab Haider, The News-1, 04/02/2008)

Only 3pc businesses, industry paid taxes this year

ISLAMABAD: Out of the 45,000 industrial and commercial units registered in Pakistan, only 1,352 major units contributed 94.1 per cent of the total tax collection this year, says the Federal Board of Revenue. "This is most alarming situation for the economy that slumps in the tide of rising terror that disrupts the growth and even the operation of trade and industry, leading to downswing in tax collection by 23 per cent in June-January period of 200708 (current fiscal year)," said a senior official. This slump has forced the FBR to down-fix the tax collection target for the year 2007-08 by Rs 150 billion, say FBR sources. They revealed to The News that there was 18 per cent improvement in tax last year over the previous year. This year the improvement would be only 0.4 per cent, not even covering the inflation that sky-rocketed by more than 9 per cent, as per the official figures. Last year, the collection stood at Rs 841.4 billion, and if the FBR collects Rs 850 billion this year, the net improvement would be that of Rs 8.6 billion, never so low in the history of tax collection in Pakistan. Even larger sales of cigarettes, natural gas, cement, beverages, POL products and services (the major revenue spinners for collection of federal excise duty) did not help maintain the collection at the previous pace of the last year. The Tax Collectors Conference that was held here Tuesday-Wednesday, "noted with satisfaction that a healthy growth has been achieved in sales tax collection in all major sectors, except electricity, sugar and cement sectors," the FBR officially concedes. "It may be noted that the FBR has already initiated an exercise to know the reasons for less growth in sales tax collection from sugar and cement sectors." In the NWFP, the Customs Duty collection went down by 22 per cent, but there the officials responsible withheld the businessmen's rebate and refunds for suppressing the fact that the slump was even greater. Abdullah Yusuf observed that despite considerable improvement in the systems and procedures, the menace of corruption in the tax department had not been fully wiped out. This is not tolerable and strict action will be taken if any official was found involved in corruption, the chairman FBR warned. Commenting on the pending sales tax refund claims, the chairman directed the collectors to clear the backlog by paying all genuine refund claims, says FBR. The post-Benazir murder situation was only a pretext for the authorities to associate the slump to political upheaval whereas, the actual brunt taken by the tax-covered economy was due to inflationary trend that sent the market depressing and the revenues reeling downward. All this is happening when the FBR says: It may be noted that over 11,000 corporate returns in income tax and about 6,500 sales tax returns have already been filed electronically. This improvement in method and the apparatus to monitor helps little, as "even most of the 1,354 units that paid 95 per cent of the tax so far deposited have been stealing public money but the tax machinery is unable to detect and help the treasury improve its deposits for using them in the public interest," said a Finance Ministry official. The chairman, last year during a budgetary exercise, had revealed that "of these 45,000 registered firms, only 12,000 had filed income tax returns and of the 12,000 companies, only 4,000 had shown profits, the others were showing losses while the rest were filing nil returns." He also revealed that there were 1.6 million total return filers and increasing the tax base was becoming a challenge tougher by the day, as record-scanning could not become a culture at the FBR and its attached offices throughout the country. (By Ikram Hoti, The News-3, 04/02/2008)

Brother claims Afridi did not have political affiliations

Samad Afridi, who gunned down by unknown assailants on Friday was the cousin of cricket player Shahid Afridi, said Abdul Basit, his brother, while talking to The News. Basit said that his brother did not belong to any political party and did not have any affiliation with the Pakhtoon Student Federation {PSF). Afridi was the grandson of the Pir of Buttan Sharif, and moved to Karachi along with his family in 1986. Second among his seven siblings, Afridi attained his law degree from SM Law College.

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He did his graduation from Jinnah College, Karachi, and was a well-known social worker among the students irrespective of any political affiliation, said his brother adding that they belonged to a religious family and his father is a Gaddi Nasheen. Essentially a spiritual family, Basit said that we have no enmity with anyone, and unlike Pakhtoon traditions we dont believe in revenge. We have left everything up to God, as he [Afridi] was martyred and its our firm belief that martyrs never die. Unidentified men opened fire on 33-year-old Samad Afridi as he left Jinnah College in a rickshaw near the Matric Board Office on Friday evening (February 1). Afridi was a resident of Federal B Area, Block 11. According to the police, he received eight bullets, while the Awami National Party (ANP) leader Amin Khattak told The News that Afridi received 18 bullets. A large number of political activists and student leaders attended Afridis soyem held on Sunday afternoon. Basit said that it is obvious that Afridi was popular among his students and was friends with people irrespective of colour or cast which why so many people attended the soyem. Unfortunately, his death incited violence in the adjacent locality as rumours were abound that a Pakhtoon Student Fderation (PSF) leader was shot dead, although he had no affiliation with the party. Basit appealed to the people of the city to not give an ethnic colour to the incident. Prior to the incident, Afridi was at the Matric Board to get hold of mark sheets for the students of NWFP, who according to his brother were going from pillar to post to get their mark sheets. Afridis college friends rushed him and the injured rickshaw driver to the Abbasi Shaheed Hospital where rioting broke out. They started chanting slogans and terrorising the hospital staff, including doctors. Khattak said that Afridis murder is a targeted killing and an attempt to create tension before the elections. The recent bomb blast at Quaidabad was also part of the plan to destabilise the city, he said, adding that continuous acts of terrorism in the city proved that certain elements want to create disturbance in the city before elections. (By Shamim Bano, The News-20, 05/02/2008)

Lack of day care facilities impedes womens careers

KARACHI, Feb 5: Finding proper childcare during the workday has become one of the major issues that forces many working women to give up their careers, even though the number of women in the job market is increasing and a lot of careers are opening up for them. A majority of women abandon their careers when they have children owing to a lack of family and workplace support. With less than five day care centres in the city and the rise of the nuclear family, the situation has attained serious proportions. Amina, a mother of two, who is employed at a key post in a private firm and has been working for more than 20 years, talked about how difficult it was for her to balance both her family and work when she had children. I used to go home every two hours from work and then return after tending to my children since my in-laws refused to take care of them, she said. Her two children were entirely her responsibility and since she was not willing to give up her job, looking after both aspects of her life was a Herculean task. I would often bring them to work and let them play near me until they reached school-going age, she said. Her husband stayed out of the equation while she had to deal with her in-laws. While Amina managed to continue working, Marium, a journalist, opted for a day care centre for a year and eventually quit her job. I used to drop my son at the day care centre in the morning and pick him up in the evening, she said. However, after having two more sons, she left the profession and stayed home for almost 18 years. Women from lower-income groups, such as Beenish, a housemaid, find life all the more taxing. She works round the clock in both her own home and in others, while her five young children are her responsibility. Her husband, a helper at a general store in the area, does little to ease her burden. He comes home quite late. I have nothing to complain about, though I would certainly appreciate it if he could help me in taking care of our children rather than just idling with his friends during his free time, she told Dawn. Beenish argued that there is a general concept in society that women have to take care of the children while the men are the breadwinners. Men have liberty to go out and socialise while women are burdened with so many tasks that at the end of the day, they barely have time for themselves, she pointed out. Interestingly enough, however, working women are not the only ones dependent on day care centres. Visiting one of the centres, this reporter spotted a housewife who leaves her child, almost one and a half years old, at the place. There are no children at home for my son to play with, so we drop him here for two to three hours, she said. She added that her child not only plays at the centre but also learns the alphabet and other things. Day care hazards Psychiatrist Dr Ali Wasif, however, warned against this practice. Women generally send children who are hyperactive or uncontrollable to day care centres in order to have peace of mind for a while, which is totally unfair to the child, he said. He believes that it is the parents choice to have children, so they should take care of them too. When it comes to working women, he said unfortunately, though the day care centres are a compromise on the childs development, when it comes to working women it is somewhat justifiable due to the socio-economic set-up prevalent here. But Dr Wasif was highly critical of the day care centres set up in various areas of the city.

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They wrap the child up in a sheet in order to make the infant feel secure and whenever the child cries, they give him/her a feeder or a pacifier, which quietens the child, he said. He argued that the majority of day care centres do not pay much attention to hygiene and give products to children without sterilising them. Under such circumstances, he suggested, it would be better if organisations were to come up with day care within offices; and if that was not possible, then the mothers should either rely on the family to take care of the child or find someone capable and reliable enough in the area who could manage the job. Talking about the effects on the child after spending its formative years in day care with no professional to help, he said that the child either becomes withdrawn or overly aggressive. The infant becomes restless and insecurity about the parents not being with them (separation anxiety) seeps into their personality, which stays and becomes a hurdle in their academic life later on. Laying down the law Though the government raves about its policy for empowering women, hardly any steps have been taken to assure that proper childcare facilities are established to facilitate working women. Surprisingly enough, the country does have a law for day care requirements but it applies only to women employed in factories. Called the Factories Act, it is applicable to all places registered as factories. Karamat Ali of the Pakistan Institute of Labour Education and Research (Piler) explained that under this law, Section 33Q-2 states that if there are more than 50 female workers employed in a factory, a suitable room should be set up for the children of these women who are under the age of six. However, Mr Ali maintained that this room is not referred to as a day care but a room for children, and according to the law, the provincial government is supposed to appoint an officer for its supervision. But I have never come across such facilities for women working in factories. These facilities may exist at the head offices of certain multinational companies, but not for labourers, he added. However, he did express the belief that it was time the problem was addressed since the commercial sector is offering a lot of jobs to women and there is a need for a law for that sector as well. He also pointed out that the majority of workers of both genders are hired by contractors and not the factories themselves, so the employers absolve themselves of their responsibility by saying that the contractors are supposed to take care of the workers issues and not the factory itself. Requesting anonymity, an official of the American Business Council of Pakistan, an organisation of US businesses investing in the country, revealed that there is no company or factory whatsoever that offers day care facilitates for the benefit of its female employees. There have been one or two instances where workers challenged the employers in court over this issue. But you know how the system works, he said. It is believed that even the sub-contracted employees (hired through any employment agency) of the company are entitled to the same rights as others, therefore the absence of day care centres is beyond comprehension, he added. Women legislators role The last provincial and national governments had the highest numbers of female legislators ever seen in Pakistan, yet neither was the law regarding day care centres taken up, nor were new measures taken to make sure it was implemented. Gul-i-Farkhanda, a National Assembly member during the previous government, was asked why this issue was never raised in the assembly. For one and a half years the opposition preferred to thump benches than join us for legislation. Secondly, I agree that this time the assemblies had many female members but it will take time to introduce things and to run the system smoothly, she told Dawn. Problems are not solved overnight; it takes years. For 56 years, the parliament was a largely male domain and never before was so much work done on womens issues than during the last six years, she claimed. However, she believes it will take at least 10 more years for the results to materialise. (By Meera Jamal, Dawn-15, 06/02/2008)

Musharrafs commission criticises his own key reforms

ISLAMABAD: The National Commission on Government Reforms (NCGR) has found serious flaws in the devolution plan and the police reforms, the two key governance initiatives of President Pervez Musharraf. The commission is chaired by former State Bank Governor Dr Ishrat Hussain but the steering committee of the commission is headed by President Musharraf himself. The NCGR has revealed that as an outcome of these new systems, revenue records in several districts of the country have been tampered with while police and district governments have become highly politicised. In its report, the commission said that the devolution plan has not only "created a void" in different areas of civil administration including law and order but also rendered the Nazims politically biased. Regarding the police reforms, the NCGR observed that amendments made after 2003 in the Police Order 2002 resulted into anomalies and internal inconsistencies because of which "the uncertainties and dislocations in law enforcement have become much stark". It added that the police force was neither trusted by the non-influential and common citizen nor had any checks against its arbitrary and discretionary powers. President Musharraf, who had introduced the devolution plan and police reforms during his military regime, had dubbed these initiatives as means for "silent revolution" in the country. On a number of occasions, Musharraf took great pride in these systems, which however had received a lot of criticism from the opposition and independent media for being highly politicised and biased.

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Interestingly, now it is the Presidents own reform body, the NCGR, which reflects on the shortcomings of the Musharraf's pet projects. In its proposed framework for civil service reforms, the commission said the 2001 system of the devolution to the local government was more wide-ranging than the previous attempts by Ayub and Zia governments. The most significant change was that under the new system, the posts of deputy commissioners and commissioners were abolished and replaced by elected Nazims as heads of the district administration with great power and autonomy. The commission, though, admitted that the new system has begun to bring about positive change insofar as the priorities and choices for development projects are now determined. It pointed out that the devolution plan has "created a void in the areas of law and order, disaster and natural calamities management, revenue administration to name a few". It added, "The public at large yearn for a one-stop politically neutral but legally empowered representative of the government at the district or Tehsil level who can listen to their grievances and get them relief and justice. In case of violation of their fundamental rights or police excesses, they could approach an individual who symbolised the writ of the state." But, the report observed, the Nazim, who is an elected representative, has his strong political likes and dislikes and therefore is not perceived as neutral symbol of the state power or authority. "At times, his opponents feel, rightly or wrongly, that they will not get justice and fair play as long as the Nazim is in power." The report acknowledged that because of this, the already existing polarisation and divisiveness among the communities living together on the basis of Biradris, sects and ethnicity had been further compounded by the division caused by political affiliations. It added that police force is neither trusted by the non-influential and common citizens nor has any checks against its arbitrary and discretionary powers. "Examples range from collusion between the Nazim and Police on the one hand to open confrontation between the two. In very few instances, a proper balance is struck," the report said, adding that the MPs and ministers elected from those districts are also unhappy as they believe they have lost out on influence and authority in their own constituencies due to the dominant role assigned to the Nazims vis-a-vis the police. "Under these conflicting pressures the role of district police officers and the SHOs has become even more contentious." The commission lamented that the Police Order 2002 had not yet been fully implemented and the transition from the old order to the new had not been managed carefully. "Some of the amendments introduced at the behest of the provincial governments after 2003 have introduced anomalies and internal inconsistencies. The uncertainties and dislocations in law enforcement have therefore become much stark." Dr Ishrat-led commission added: "The whole value chain of administration of justice prevention, surveillance and intelligence, detection, reporting and registration, investigation, prosecution, adjudication, prison and rehabilitation needs to be considered as a continuum and requires strengthening." In case of the breakdown of law and order, the report said, there is a lot of ambiguity, lack of clarity and operation difficulty in identifying the locus of responsibility for action. The district Nazims, the report added, have generally been found to be reluctant or hesitant to take tough actions against encroachers, illegal possession and other violations of law as they feel they will have to face consequences of their action at the time of election. This inherent conflict of interest between the need to take timely and tough actions at the time of breakdown in law and order and the instinct of elected Nazims to survive politically and avoid incurring the wrath of some of their constituents is a serious unresolved issue. In such situation, the report said remote control decision will always remain fraught with high risks of errors in human judgment arising from lack of a complete understanding of local environment and the interplay between the various players. The report also revealed that in several districts, revenue records have been tampered with as a result of collusion between the Nazim and local revenue staff. Referring to the separation of judiciary from executive, the commission said although this was a welcome step in the right direction, practical experience had demonstrated that the matters of price controls, removal of encroachment of municipal laws, etc could be satisfactorily resolved only when the powers were conferred upon the executive officers by the high court or by legislation such as the Finance Act. (By Ansar Abbasi, The News-2, 06/02/2008)

Plan to withdraw army officers from civil departments

ISLAMABAD, Feb 7: Chief of the Army Staff Gen Ashfaq Parvez Kayani has said the army will have no role in the electoral process except maintaining law and order. Presiding over the 106th Corps Commanders Conference here on Thursday, he emphasised that holding free and fair elections was the sole responsibility of the Election Commission. The army will meet only its constitutional obligations and help the civil administration maintain law and order, as and when required, he said. According to an official press release, he approved a policy about de-induction of serving officers seconded to civil departments. The number of serving officers, whose services are essentially required by the government in these departments, will be at bare minimum and others will be reverted soon. The participants were given a comprehensive briefing on security environment. Gen Kayani dilated on the evolving geo-political dynamics and stressed the need to synergize the effort of the nation and the army to ensure peace and stability. He said the army would live up to expectations of the nation. Gen Kayani praised the sacrifices and spirit of all officers, junior commissioned officers and jawans in the ongoing operations. He also appreciated the leadership of officers in particular, who were leading from the front as per the true tradition of Pakistan Army.

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Having declared the Year 2008 as the Year of the Soldier, he approved a package of Rs10 billion for improving the quality of life of soldiers and young officers. (Dawn-1, 08/02/2008)

Frequent fires a plot to derail economy, says Kamal

City Nazim Mustafa Kamal expressed concern on Thursday over the frequent fires erupting mainly in the industrial areas of Karachi. He said that the situation was suspicious and that enemies of the city and anti-development elements might be involved in setting factories on fire. The city nazim claimed that the conspiracy being hatched by enemies of this city has been uncovered and the public have understood that enemies of the State have made them special targets and were trying their best to paralyze the country by suspending industrial and commercial activities in Karachi. Body formed to probe into fire mishaps: Sindh governor Dr Ishratul Ebad Khan on Thursday took serious notice of increasing incidents of fire in Karachi and formed a guidance committee under the supervision of NED Universitys vicechancellor to probe into these incidents. Meanwhile, Sindh Chief Minister, Justice (retd) Abdul Qadir Halepota, on Thursday, taking notice of the growing incidents of fire in Karachi, especially in the industrial areas, constituted a committee to hold probe into these incidents. The committee was tasked to ascertain causes of the fire and suggest measures to avoid their occurrence. The governor asked for taking steps on war footing basis besides chalking out a future course of action. (The News-13, 08/02/2008)

Choices before the people

THE Feb 18 elections are uniquely significant in the sense that they are a referendum on the direction Pakistan, its economy in particular, will take. A review of the history of the countrys economic development process places this crossroads situation in perspective. Pakistans modern economic development process commenced with independence in 1947 and there have been two distinct phases, 1947-1977 and 1977-to date. During the first phase, 1947-1977, Pakistan was a development state; namely, socioeconomic development was a primary objective of state policy. Since 1977, Pakistan has become a security state; namely, national security is the primary objective of the state. The state of development in Pakistan in 1947 can be gauged from the fact that the country started out with less than a dozen medium-sized factories. From the outset, therefore, policymakers were seized with the objective of promoting development. Considerable political capital was invested in development planning the Colombo Plan, the First FiveYear Plan, etc. By the end of the 1950s, government offices and residential housing had been put up in the capital cities, agricultural and industrial output had risen and many basic consumer products were being manufactured in the country. The 1960s saw the development effort move into higher gear, with the formation of the Planning Commission under the chairmanship of the president and the launch of the ambitious Second Five-Year Plan. The decade of the 1960s saw a significant expansion of economic infrastructure. The construction of large dams commenced, new canals were dug, and millions of acres of land brought under cultivation. The industrial structure graduated from producing basic consumer goods to the manufacture of intermediate inputs for the agricultural and manufacturing sectors. The 1970s represented a big push towards the development of large-scale infrastructure and capital goods industries as the basis for accelerated future growth. With the state taking over from the private sector in leading the development process, millions of acres of additional land were brought under cultivation, new ports and highways were constructed, and several large industrial complexes were built. The steel mills, Port Qasim, the Indus Highway, Heavy Mechanical Complex, Heavy Electrical Complex, chemical plants, etc., constituted huge additions to the countrys economic infrastructure and output capacity. Over the three-decade period encompassing the development state phase the period up to 1977 per capita income rose 10-fold, food production was up three-fold, fibre production was up four-fold, manufacturing output increased 40-fold, electricity output increased 35-fold, telephone connections per 10,000 persons rose 10-fold, the primary enrolment rate rose five-fold, population per doctor declined 200-fold, and population per nurse declined 24-fold. Of course, the high growth rates are a function of the low base; however, the state effort in contributing to the absolute increases in output capacity and output and in taking the economy forward was critical. The commitment of the state to socioeconomic development up to the end of the 1970s can be discerned from the fact that the rate of growth of budgetary allocations to development expenditure increased at an annual average of 21 per cent during 1972-77. This growth rate was nearly five times the GDP growth rate; indicating that the surpluses generated by the economy were reinvested in rebuilding and expansion of the economic base. The year 1977 saw Pakistan shift from a development to a security state paradigm. The growth momentum continued into the 1980s, largely on account of the output generated by the large-scale, long-gestation capital projects initiated in the 1970s and which began to contribute to commercial production in the 1980s. This shift can be discerned from the fact that the rate of growth of budgetary allocations to development expenditure declined from an annual average of 21 per cent during 1972-77 to 2.7 per cent during 1977-88. This growth rate was

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about half the GDP growth rate during the period. At the same time, the rate of growth of budgetary allocations to defence expenditure increased from less than two per cent during 1972-77 to nine per cent during 1977-88. Notably, the rate of growth of defence expenditure was over two-thirds higher than the rate of growth of GDP during the decade. It appears that the surpluses generated by the economy were invested in the building and expansion of the military apparatus. The security state was clearly in place. During the 1990s, public investments in economic infrastructure continued to be low, as the servicing of the debts incurred in the 1980s did not provide governments with the necessary fiscal space to allocate resources for development expenditure in order to rehabilitate or build infrastructure. A notable exception, though, was the power-generation programme, which served the country well up to 2005. Post-1999, fiscal space, public investment and GDP growth rates continued to be low until the financial bailout provided in the aftermath of the events of Sept 2001 in the US. From 2003 onwards, growth rates accelerated. However, the growth has been credit-financed and consumer-driven. The element of investment in economic infrastructure or manufacturing capacity has remained low. Growth has been led by the services sectors, particularly financial sectors, rather than by commodity-producing sectors. This is indicated by the fact that, despite high growth rates in the last four years, the tax-GDP and export-GDP ratios have remained stagnant. It appears that the strategy has provided Pakistan with growth, but little in terms of development. A highlight of economic activity in recent years has been the surge in luxury real estate projects initiated by the militarys commercial entities in collaboration with foreign investors. This is perhaps indicative of the need and the desire of the security state to generate autonomous financing sources in order, partly, to free itself from the inbuilt accountability constraints of public funding. The economy of the country at large continues to suffer from neglect. A glaring illustration of this neglect is the fact that the government overlooked the need to provide for expansion of the power-generation capacity for over a decade. The seriously deteriorating state of economic infrastructure can be inferred from the fact that a railway bridge near Hyderabad collapsed, suspending rail traffic between Karachi and the rest of the country for almost a month. More recently, two berths at Karachi port caved in into the sea. And even more recently, a newly built bridge in Karachi collapsed weeks after its inauguration.The former two incidents point towards the number of years the bridge and the berths must have been rusting to actually collapse and are indicative of the extent to which economic infrastructure has degenerated. The latter event denotes the extent to which the institutional infrastructure has decayed. The state of affairs prevailing today cannot be said to be surprising. It is now three decades since the development state ceased to exist. The people of Pakistan have a choice to make: sink into the status of a satellite economy of regional economic powers or stand shoulder to shoulder with the economic powers of the region. If the choice is the former, Pakistan can continue with the present situation. If the choice is the latter, it would be imperative to dismantle the security state and to restore the development state. There is a need to create a policy combination of the 1960s and the 1970s to rebuild the economic base and to resume the journey on the path of development. There will be politically difficult decisions; without which, however, the country cannot expect to rise from the low-level equilibrium it appears to have been caught in. (By Kaiser Bengali, Dawn-7, 09/02/2008)

Flour at Rs9 per kg, sugar at Rs15 Bachat card scheme launched
ISLAMABAD, Feb 8: Presi-dent Pervez Musharraf launched on Friday the Bachat Card scheme aimed at providing essential food items at reduced rates to 6.8 million low-income households. The president and the caretaker Prime Minister Mohammedmian Soomro distributed the cards among a group of deserving people at the launching ceremony. We will absorb an amount of Rs3 billion monthly Rs 36 billion annually on the subsidy, the president said, adding that five items would be made available at prices around 42 per cent less than in the market and 25 per cent less than at the Utility Stores. The president said efforts were being made to counter the inflationary trend by raising salaries of government employees and the minimum wages. He said the salaries would be further increased this year. The president said utility store bachat card would provide relief on five basic items, flour, ghee and oil, sugar, rice and dal channa, through 4,500 Utility Stores outlets. Under the scheme, people with the cards will get flour at Rs9 per kg and sugar at Rs15 per kg. He said the number of stores would be increased to 6,000 by March 31, and mobile utility stores would cover the areas with no stores. Initially, the scheme will be launched in Islamabad and it will be expanded to other parts of the country to cover 2 million poor families registered with the Bait-ul-Mal. Later 2.4 million households registered with the Ministry of Zakat and another 1.8 million poor families would be covered in the third phase of the scheme. The president directed the Utility Stores Corporation to expand its network to the remote areas. He said the scheme would later include pensioners, senior citizens with low-income, widows, unemployed people with education and government employees of BPS 1 to 5. President Musharraf was informed about a joint venture of the Utility Stores Corporation and a private firm to supply clean drinking water at Rs 3 per litre against market rate of Rs 22 per litre. Bachat Card holders will get five litres of water free with their purchase. (Dawn-3, 09/02/2008)

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Corruption, unskilled manpower major challenges to economy: WB

ISLAMABAD: The World Bank has identified corruption, lack of capacity, unskilled manpower, low payment to contractors and consultants as major stumbling blocks in the way of infrastructure development further leading to more than double the cost on development projects as well as undue delay in implementation of these projects. This was revealed in a study on "Pakistan Infrastructure Implementation Capacity" (PIICA) launched on Friday. The study report launched by the World Bank points out that major international firms in construction work are not interested to invest in Pakistan and joint ventures only meant to use their name for obtaining pre-qualification in accordance with the standards laid down by the donors. These international companies charged a certain percentage from their local partners without investing their money or technology on the joint ventures. Deputy Chairman Planning Commission Dr Akram Sheikh, who chaired the launch, said that there was a need to discuss with donors the issues related to foreign firms, which are minting money without investing anything in Pakistan. To a query, Member Infrastructure of Planning Commission, Dr Asad Ali Shah, said that Pakistan's infrastructure required over $300 billion for the next 15 years. Deputy Chairman Dr Akram Sheikh added that Pakistan required $100 billion to ensure maintenance of the existing infrastructure. The WB's senior transport specialist and lead author of the report has asked the government to come up with a national policy and ensure the establishment of institutional mechanism at the federal, provincial and local levels for improving infrastructure. Pakistan cannot afford to wait for another 20 years, he said. The WB's report suggests that Pakistan should strengthen its capacity to undertake major infrastructure projects needed to boost economic growth and wipe out poverty. According to the study, the country suffers from a dearth of infrastructure in the water, irrigation, power, and transport sectors. Pakistan is one of the most water stressed countries in the world, and water resources are depleting rapidly. With its water infrastructure in poor condition, the report argues that Pakistan has to invest around Rs 60 billion ($1 billion) per year in reservoirs and related infrastructure over the next five years. In the energy sector, the country will face severe power shortages of around 6,000 megawatts by 2010. Similarly, inefficiencies in the transport sector cost the economy between 4-5 percent of GDP each year. To overcome these constraints, the government is increasing its annual infrastructure investment by three times from an average of Rs 150 billion ($2.5 billion) to Rs 440 billion ($7.3 billion). However, the report points out that mega projects in the past have experienced frequent delays and cost overruns, illustrating a lack of capacity in the industry to plan, program, and execute large projects. Lack of adequate irrigation, power, and transport infrastructure hinders growth and is affecting all sectors of the economy, said Yusupha Crookes, the World Bank Country Director for Pakistan. It is, therefore, critical to address the core challenges such as scarcity of skilled workers and inefficient business processes. Faring poorly on this count cannot enable the government to fulfill its ambitious infrastructure plan to move forward. In the current environment, the report concludes, the construction industry does not have the capacity to deliver the government's planned infrastructure programme. Its analysis found that contractors keep getting work even though they lack the capacity to perform. The business environment has delivery constraints, planned projects often take longer to complete, and even longer to achieve a financial close. Issues such as poor project planning, insufficient programming, and weak implementation are common. Shortage of adequately skilled workers is particularly affecting the ability of the construction industry to deliver mega infrastructure. Over half the workers produced each year in civil, electrical, and mechanical engineering fields find employment overseas. The report calls for a development strategy to build up the existing human resources pool and upgrading the skill sets through urgent measures to enhance training capacity and to reverse the brain drain. A long-term industry overhaul and immediate innovative approaches for mega infrastructure delivery are needed, said Amer Durrani, Senior Transport Specialist and lead author of the report. A construction industry development organisation should be set up to anchor the development effort and provide an institutional mechanism for reform. In addition, a national construction industry development policy should be prepared and implemented for all stakeholders with immediate actions on procurement with ensured transparency and improved cost estimation. The report further suggests that in order to overcome the current constraints, a structural reform of the current disintegrated process for implementing large infrastructure is required. It recommends undertaking a revised integrated approach to implement large public infrastructure along with medium to long-term reforms to address the more fundamental constraints. (By Mehtab Haider, The News-4, 09/02/2008)

President launches Bachat Scheme for low-income group

ISLAMABAD: President Pervez Musharraf on Friday launched the Bachat Card Scheme aimed at providing essential food items at affordable rates to 6.8 million low-income households. It is the obligation of the State to help those who do not have enough means and we will ensure that everyone is able to get food at affordable rates, the president said at the launch of the scheme at a Utility Store at Karachi Company. The president, along with Prime Minister Muhammadmian Soomro distributed the cards among the deserving people.

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We will absorb an amount of Rs3 billion monthly - Rs36 billion annually on the subsidy, the president said and added that the five items will be made available at around 42 per cent lesser rates than the market - 25 per cent less than the prices at the USC. The president said efforts were being made to counter the global inflationary trends by increasing salaries of government employees and raising the minimum wages. He said the salaries will be further enhanced this year. He said maximum members of a family need to take up jobs to increase their income. The president said: Utility Store Bachat Card will provide relief on five basic food commodities, including wheat flour (Atta), ghee and oil, sugar, rice and Dal Chana, through 4,500 Utility Stores outlets. Under the scheme the people having the cards will get flour at Rs9 per kilo and sugar at Rs15 per kilo. He said the number of stores will increase to 6,000 by March 31, and those areas not having the stores will be covered by Mobile Utility Stores. The president was informed that after completion of all the three phases, the target of 6.8 million families would be achieved for those who cannot afford to buy essential food items. Initially, this scheme will be launched in Islamabad and subsequently expanded to other parts of country covering two million poor families registered with the Bait-ul-Maal. Later 2.4 million households registered with Ministry of Zakat and another 1.8 million poor families would be covered in the third phase of the scheme. The president directed the USC to expand its network to the remote parts of the country swiftly so that the problems of the people are eased. He said the ambit of the scheme will later include pensioners, senior citizens with low income, widows, unemployed illiterates and government employees of BPS 1 to 5. President Musharraf was also apprised of a joint venture of the USC with a private firm for supply of clean drinking water at a rate of Rs3 per litre against Rs22 per litre in the market. Those with the Bachat Card will get five litres of water free with their purchase. He also directed the concerned departments to coordinate and work closely to add new deserving families to the existing database having meagre income level. Caretaker Prime Minister Muhammadmian Soomro said with increased coverage the system will further improve and more people will be added to the database. Caretaker Minister for Industries Salman Taseer said the project was made a success in a short span of time and will go a long way in helping the people in getting basic food items at affordable rates. (The News-1, 09/02/2008)

Trade deficit hits $10.3bn in 7 months

ISLAMABAD: Pakistans economy during July-January 2007-08 has racked up a huge $10.32 billion trade deficit with imports at $20.48 billion and exports at only $10.15 billion. Running this endless huge string of annual trade deficits by importing more goods and services than it manages to export each year, send a worrisome signal. The Federal Bureau of Statistics (FBS) trade figures released on Saturday reveal that during these seven months, imports were more than double that of exports, which is not a good indication for the economy. In percentage terms, the trade deficit grew by 35.15 per cent during the period under review against the same period of the last fiscal year ($7.64 billion). During July-January of this fiscal, the country exported goods worth $10.15 billion as against $9.58 billion of the last fiscal, showing a sluggish growth of 5.95 per cent while, imports grew my 18.9 per cent to $20.48 billon against $17.22 billion recorded in the corresponding period of the last fiscal. In January 2008, trade deficit in absolute terms stood at $2.05 billion as Pakistan purchased goods worth $3.52 billion while sold goods of $1.47 billion in international market. In January 2007, Pakistan exported goods amounting to $1.17 billion as against the imports of $2.32 billion. Though during the month under review, exports grew by 25.6 per cent, however, imports grew beyond 51 per cent over the same month of the last year.During the January 2008, exports grew by 10.7 per cent to $1.47 billion as against $1.33 billion recorded in December 2007. On the other hand, imports grew by 50.18 per cent to $3.52 billion against $2.35 billion imports of December 2007. (By Israr Khan, The News-15, 10/02/2008)

Non-productive foreign loans

Pakistan has obtained a total of $16 billion in loans from the Asian Development Bank for 127 projects since 1985, adding substantially to total foreign debt that together with external liabilities, now stands close to $42 billion. While the socio-political impact of foreign debts may be hard to quantify, the loans have largely been non-productive. The economic and social benefits of such loans have been much less than designed or targeted, according to the ADBs own assessment. In five, out of eight ADB-funded sector loans, the performances over 22 years (1985-2006) have either been unsuccessful or partly successful. Even in areas where the ADB found its operations as successful, the countrys own problems are more serious than ever before. For example, ADB has found its performance in energy, transport and communication and law and economic management sectors as successful, but for the nation, the challenges in these areas are enormous today. Delays in project execution, change in direction and objectives during the course of implementation (due to faulty project designing by both the bank and the government) , resulted in cost over-runs and non-achievement of targets, for which loans with heavy repayment costs were obtained from lenders.

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The evaluation of ADBs country assistance programme has recently been done by its operation evaluation department. It is first such assessment of ADBs 22 years (1985-2006) of operations in Pakistan. In areas that have a direct impact on social standards of the people, like health, nutrition, social protection, water supply, sanitation and waste management, the outcome has been described as unsuccessful. Likewise, the outcomes in agriculture and natural resources, education and finance have been rated as partly successful. Delayed project implementation and extensions to loan closing dates are a perennial problem in Pakistan operations, it said. During this period, 85 per cent of closed loans required an extension, although this improved to 67 per cent for 2001-2006, it added. Pakistan projects have a similar level of success as those in Bangladesh and Nepal but lower than those of Bhutan, India and Maldives. By decade, the success rate of projects in Pakistan has been remarkably static, with no evidence of improving performance. This should be cause of concern, said the bank. The analysis of project success by sector shows major differences in performance for Pakistan projects. Projects in the water supply, sanitation and waste management sector performed the worst, with only 20 per cent overall success rate, albeit on small numbers, and a 50 per cent success rate for projects approved in 1990s. The bank said that significant governance issues in the water and sanitation sector clearly remain unaddressed. It is most notably corruption that affects performance. The opportunity for rent-seeking activities in the distribution of an essential good such as water is high, it noted The next worst performing sectors were education with a 29 per cent success rate and 50 per cent success rate for projects approved in the 1990s. Pakistans education sector is marred by corruption, strong gender and regional inequalities and insufficient budget allocations, leading to social imbalances and poor delivery of services in the public sector. The ADB reports that, Pakistans education indicators are poor, even within the context of South Asia. Gender and regional inequalities are strong. Unless the performance trajectory changes markedly, Pakistan probably will not achieve the education MDGs (millennium development goals), said the report. Finance sector projects with a 30 per cent overall success rate, influenced poorly performing projects with development finance institutions in the 1970s and 1980s and a 50 per cent success rate for later projects. Health, nutrition and social protection projects had a 40 per cent success rate, improving to 50 per cent for 1990s. Although many of the balance projects not rated successful were assessed as partly successful (i.e. desired results were not fully or efficiently achieved, or not sustained), this performance is dismal, it said. Agriculture sector, the largest group with 33 projects had an overall success rate of 55 per cent with no noticeable improvement in the trend. Multi-sector projects had a 56 per cent success rate overall. However, the multi-sector success rate dived from 75 per cent for projects approved in 1980s to only 25 per cent for those approved in the 1990s, influenced by the poor performance of projects supporting the Social Action Programme (of the Pakistan Peoples Party). The report said Pakistans social and poverty indicators were below those of other countries with similar per capita incomes and have improved more slowly than others with similar growth rates owing mainly to only a 20 per cent overall success rate in areas like water supply, sanitation and waste management. Compared with Bangladesh, India and Sri Lanka, Pakistans school enrolment is lower, adult illiteracy is higher, and infant and child mortality rates are higher. Pakistans achievement of its Millennium Development Goals (MDG) appears to be fraught with enormous challenges as well. Its average annual economic growth rate of 4.1 per cent over the last 14 years (1993-2006) has contributed to the protracted realisation of the MDG on poverty reduction. Although poverty incidence fell from 29.3 per cent in 1994 to 23.9 per cent in 2005, the proportion of Pakistans population still living in poverty was 32.1 per cent in 2005 significantly above the target of 13 per cent set to be achieved by 2015. Infant mortality rate is 73 per 1,000 live births, child mortality is 100 per 1,000 live births and maternal mortality is 400 per 100,000 live births. The proportion of population areas at risk for malaria using effective prevention and treatment is 30 per cent, while the proportion of tuberculosis detected and managed through the direct observed treatment short course is 27 per cent. The proportion of the population with access to piped water is 66 per cent, while the proportion with access to sanitation is 54 per cent. The Asian Bank said that the bottom-up (outcome) assessment of health sector operations was unsuccessful while topdown (physical implementation) assessment is partly successful, although on the lower-end of the scale. The overall sector rating combining bottom-up and top-down assessment is unsuccessful. That means that construction of buildings and capacity improvement may have been on the positive side, the service outcomes may not have improved due to corruption, absentee staff, missing equipment and medical supplies. The ADB said that projects in urban areas often failed to turn a high rate, though usually much delayed, of output delivery sometimes of doubtful quality into positive development outcomes. An important factor is the financial and management weakness of the urban authorities concerned. Institutional strengthening components usually failed to deliver the intended results, or were only partially implemented. (By Khaleeq Kiani, Dawn-Economic & Business Review, Page-1, 11/02/2008)

Budget documents show two ex-CMs were living it up

Two former Sindh chief ministers, both belonging to the PML Q - Dr Arbab Ghulam Rahim and Ali Muhammad Maher spent huge amounts of public funds during their tenures. These expenses were made on unnecessary luxuries and by allocating discretionary and secret grants as gifts and entertainment, alleged sources while quoting official budgetary documents. Ali Muhammad Maher served two years, while Arbab Ghulam Rahim served three years as the Sindh chief minister (CM). Combined, both the former CMs spent Rs 600,067,200 (over 600 million rupees) compared to the Rs300,087,200 budget allocated to them by the government for expenditures from 2003 to 2008, sources added.

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Officials claimed that both Maher and Rahim, while contesting elections, had been advised many times to curtail the excessive expenditures or else auditors would raise objections which would amount to serious controversies. However, both the CMs ignored the advice and kept up their extravagant spending. Budget documents showed that millions of rupees were spent on luxuries, purchase of vehicles, gifts and entertainment as well as fuel and furniture under discretionary grants. The documents showed that a Rs42,739,600 budget was allocated for the Chief Minister House in 2003-04; Rs50,480,600 in 2004-05; Rs78,440,000 in 2005-06; Rs129,896,900 in 2006-07 and Rs140,484,400 in 2007-08. However, the budget documents proved that the money spent in the end was double the allotted amount. Maher had spent Rs86,372,700 out of the Rs42,739,600 budget for 2003-04 and Rs121,183,900 out of the next allocated budget of Rs 50,480,600. Rahim, who replaced Maher, spent Rs155,896,900 out of Rs78,440,000 allocation for 2005-06; Rs175,484,400 out of Rs129,230,000 budget for 2006-07; and Rs61,192,300 in the remaining period of 2007-08 out of the allocated budget of Rs140,792,800. The budget documents showed that these two chief ministers spent Rs43,178,282 extra from secret funds and discretionary grants while the same amount was already allocated in the actual budget. According to sources, Arbab Rahim forced the Finance Department to purchase an aircraft for his travelling for which Rs600 million was allocated in the provincial budget. Besides, he purchased nine 1300cc cars, a van, a fully-loaded station wagon out of the budget, while Rs1.2 million was spent for a bullet-proof Mercedes and Rs12 million on fuel. The documents showed that heavy contingents were deployed for the security of the CMs, while more than Rs75 million were spent for the purchase and installation of security equipment for the Chief Minister House. The budget documents showed that Rs3,300,000 were spent for the same purpose in 2003-04 and Rs3,330,000 in 2005-06 and both these expenditures were made out of the budget. These CMs also spent Rs 45,266,862 out of the budget for gifts and entertainment, while millions of rupees were spent on purchasing furniture and other equipment. Besides, telephone expenses of the CM Secretariat amounted to more than Rs75 million and the amount was paid out of the budget. Another major expenditure by these two CMs was the repair of vehicles - Rs45 million was spent on account of transport and travel. Sources pointed out that two previous CMs - Syed Muzaffar Shah and PPPs Syed Abdullah Shah - faced corruption charges and anti-corruption inquiries, forcing them to live in exile after their tenures. While Muzaffar Shah was allowed to come back on the assurances of Pir Pagara in 2002, Abdullah Shah was allowed to return only a few days before his death. The charges against them are still pending in NAB and the Anti-corruption Courts. (By Tahir Hasan Khan, The News-13, 11/02/2008)

15.3m names may still be missing from electoral rolls

ISLAMABAD, Feb 13: The names of more than 15.3 million voters may still be missing from the updated electoral rolls. And more than 7.5 million names on the list may be listed more than once, according to a study carried out by a coalition of 30 civil society organisations. The study released by the Free and Fair Election Network (Fafen) here on Wednesday said that on an average the names of 17.65 per cent of the estimated 87.5 million citizens of voting age might be missing from the electoral rolls. And 9.3 per cent of them might be listed more than once, amounting to more than 1.26 million CNIC numbers (1.55 per cent of the total voters). The Election Commission of Pakistan (ECP) has posted the final electoral rolls (FER) on the internet. The commissions database enables any person to check whether or not his or her name is listed on the FER and therefore registered to vote during the elections in 2008. According to the ECP, only voters listed on the FER and carrying their NIC or CNIC cards with them to the polling stations will be allowed to vote. Secretary-General of Fafen Sarwar Bari and Coordinator Mudassar Rizvi said the coalitions current study was based on data collated by it during its earlier investigation of the draft electoral roll. From June 13 to 18, 2007, Fafen conducted a statistically valid audit of the 2007 draft electoral rolls, which showed that the list, although incomplete, was generally accurate; the names on the draft roll were listed correctly and represented real eligible voters. Fafens June 2007 study included a People-to-List audit that involved contacting eligible voters at their homes and checking their names on the draft electoral roll. Almost 27 per cent of the households were found to be missing from the draft electoral rolls. In the February 2008 follow-up study, the CNIC numbers of 6,721 eligible voters from the People-to-List audit were checked with the ECP internet database. More than 17 per cent of the eligible voters names were found to be missing from the FER. It is possible that some of the missing names are included in the FER Supplemental List, which includes the names added by the ECP from the 2002 voters list. These names might be listed only with their NIC numbers or without any identification number at all. Nevertheless, Fafens follow-up study of the voters list indicates that there are still many eligible voters who have been left out of the FER. Fafens follow-up study checked both the CNIC numbers and names of voters from its June 2007 People-to-List audit. The results show that the FER 2008 includes at least 9.3 per cent duplicate records (with 4.17 per cent of the names or

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CNIC numbers listed at least more than once). Out of a total of 82 million records on the final voters list, as many as 7.5 million are estimated to be duplicates. The percentage of duplicate CNIC records (same CNIC number issued to more than one person) on the ECP database was found by Fafens follow-up study to be 1.55 per cent, or as many as 1.26 million records out of a total of 81 million on the FER. Sarwar Bari said the ECP should clarify whether voters should have an NIC or CNIC to vote on February 18. If so, all eligible voters added since 2002 without an NIC or CNIC would still be disenfranchised. In that case, the Supplemental List process of September-October 2007 was both a waste of time and resources and not in keeping with the spirit of the 2007 Supreme Court ruling about the voters list, which required the ECP to ensure that a maximum number of eligible voters could participate in the election. He said the ECP should give clear instructions to all presiding officers in advance to ensure that the required identity document of every voter was compared carefully with the information in the FER. Polling officials should follow a uniform, observable procedure in the polling stations to avoid disenfranchising some registered voters or allowing unregistered people to vote based on partisan considerations or because of inappropriate influence from candidates or others. He said the integrity of the 2007 draft electoral roll should be maintained, with the supplemental names from the 2002 list kept separate. After the general election, a voters list reform initiative should be undertaken based on the accurate, though incomplete, 2007 draft list. The 2008 FER should not be used after the general election 2008 for any purpose. He said Fafen had long-term observers working in almost 264 of the 272 National Assembly constituencies for the general election. The only exceptions were eight unsafe areas of Fata. He said Fafen would deploy about 20,000 short-term election observers on the election day, or approximately 75 observers in each of about 260 National Assembly constituencies (at least three constituency elections would be delayed because of Benazir Bhuttos death and the death of another candidate). Stationary observers will be posted in a statistical random selection of 8,000 polling stations around the country. Mobile observers will visit briefly as many as 40,000 (out of a total of 65,000) polling stations. Observers will wear Fafen caps or chadors. One observer in each pair will monitor a mens polling booth; the other will monitor a womens polling booth. Their observations of each stage of the election day will be documented in a set of multi-coloured checklists, which will be sent back to the Fafen secretariat at the end of the day. Fafens officials said that its innovative voter education campaign focusing on general, womens, and youth voter education has reached as many as 2,500 union councils. The Fafen voter education personnel are emphasising new aspects of the electoral process (such as transparent ballot boxes), broader civic education themes, and the ECP code of conduct. The NGOs working with Fafen are organising the first nationwide Meet the Candidates public forums for National Assembly candidates. All candidates running for a National Assembly seat are invited to answer voters questions in their respective constituencies. (By Iftikhar A. Khan, Dawn-4, 14/02/2008)

Food out of reach

PAKISTAN, just like the rest of the world, is facing the most severe food price inflation in its history. The January food prices soared to above 18 per cent the highest ever monthly increase from over 14 per cent in October. Higher food price inflation meant that the poor, vulnerable and low-income groups, who make up almost two-thirds of the population, had to either cut their non-food expense to make room for spiking food budgets or consumed lesser calories than required. For the government it meant a huge setback in its fight against poverty. Global food inflation was the consequence of surging commodity prices as food and energy economies converged owing to the increasing use of grains for ethanol fuel production. In Pakistan, food prices were pushed in recent months by a mix of domestic supply side constraints, market abuse and global commodity price pressures. The price of flour, our staple food, more than doubled from May due to acute wheat shortages while edible oil has jumped by around 100 per cent in one year on the back of the escalating global palm oil market. On top of that, millions of people found their medical expenses go up last month. They had less to eat and even lesser stamina to fight disease. The policymakers miserably failed to curb food prices no matter what they did. A tight monetary policy didnt help much. Domestic oil prices remained unchanged since January 2007, despite a 76 per cent increase in the global crude market, forcing the government to borrow heavily to finance its budget and defeating the purpose of the tight monetary stance adopted by the central bank to contain core inflation. Just below 20 per cent expansion in money supply, including substantial fiscal expansion, until last month had generated additional demand pressures and pushed up food and nonfood prices. The situation demands that the economic managers re-think their strategy to fight food inflation. In the short run, they should take measures to prevent sudden jumps in prices due to artificial or real shortages, subsidise, as in the case of wheat, imported food like raw materials for edible oils, and abolish or scale down taxes on such essential items. In the long run, it must remove supply side constraints to check artificial shortages and support agriculture to boost food output. At the same time, the poor to low-income people should be shielded from the harsh effects of rising food prices now, by expanding the network of utility stores and making the ration card scheme that has been launched recently effective. (Dawn-7, 14/02/2008)

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Tea, ghee, cooking oil prices raised

KARACHI, Feb 14: The consumers have received a pre-election setback as leading producers of ghee, cooking oil and branded tea pushed up rates on Thursday. One of the leading ghee and cooking oil producers had earlier announced an increase in the rate of one kg pouch of ghee to Rs134 from Rs123, followed by an increase in the price of oil to Rs136 from Rs125 per kg in January. This is the eighth increase in the price made by the leading company since September 2006. In January, all producers of branded ghee and cooking oil had increased the rate of its brands by Rs9-11 per kg, respectively. An official in the Dalda Foods said the price of five-kg ghee tin had been increased to Rs670 from Rs615 while five litres edible oil tin price had been jacked up to Rs680 from Rs625 in January this year. In September 2006, the five-kg ghee tin was available at Rs395. It has been noticed that Dalda takes a lead in increasing prices while others follow the suit. Former chairman of Pakistan Vanaspati Manufacturers Association (PVMA), Amjad Rasheed, said that palm olien rate was now being quoted at Rs3,800 per maund (37.23 kgs) while soyabean oil price had surged to Rs4,400 per maund. In mid-January, palm olien and soyabean oil rates were quoted at Rs3,560 and Rs4,000 per maund, respectively. Palm olein rate in world market is now quoted at $1,190 per ton (C&F Karachi) as compared to $1,160 in mid-January. Soyabean oil price is now quoted at $1,375 per ton as compared to $1,217. The C&F price of imported RBD palm olein was $465 in July 2006. He said palm olien rates had declined for two to three days only, but these have again started climbing. Besides, the losing value of Pakistan rupee against the dollar is also making imports costlier. He said that there might be a shortage of ghee and cooking oil in May or April as importers are placing low future orders for palm olien imports. He added the officials of the Federal Food Committee (FFC) would meet the PVMA and solvent extractors on Feb 20 to discuss the crisis in the edible oil industry. In tea, the makers of Lipton Yellow Label have enhanced the rate of 100, 200, 400, 500 and 1,000 gram packs to Rs35, Rs70, Rs145, Rs155 and Rs299 from Rs32, Rs64, Rs130, Rs150 and Rs270, respectively. The Lipton Yellow Label tea bag (100 bags) is now priced at Rs159 from Rs145 while Supreme 250 gram pack now sells at Rs72 as compared to Rs65. The price of Tapal tea bag (50 bags) packet has surged to Rs80 from Rs75 while 100 bag pack price now comes to Rs159 as compared to Rs145. Branded tea packers, who are also members of the Pakistan Tea Association (PTA), had earlier alarmed about an increase in the prices following rising Kenyan tea prices after post-presidential election violence, low crop output of Kenyan tea and high demand of tea in European countries. (By Aamir Shafaat Khan, Dawn-9, 15/02/2008)

ADB to lend $800 million for Karachi projects

KARACHI: The Asian Development Bank (ADB) will provide loans of up to US$ 800 million for development projects in Karachi to turn it into a modern city. This was stated Thursday during a Karachi Mega City Project (KMCP) Steering Committee meeting held with Sindh Caretaker Minister for Finance and Information Dewan Muhammad Yousif in chair. Project Director Shoaib Ahmed Siddiqui said that the ADB would give this loan to develop the city; a modern water supply and sewerage system would be set up, an urban transport system introduced, the katchi abadies improved and houses for low-income people would be built. The provincial working development party, after approving the PC-1 for the project, has sent it to Islamabad for endorsement from the central working development party, he said The meeting was also informed about the staff review committee, loan negotiation, board circulation and board conduct. Project Coordinator Roshan Sheikh said that a citizens committee board meeting was held earlier under the chairmanship of the Sindh governor, but was then stopped. It was decided that KWSB officials would be invited to the next steering committee meeting, and the city nazim and DCO would be invited to give their suggestions over information technology in another meeting. (DailyTimes-B1, 15/02/2008)

Women should be involved in decision-making

Civil society activists and women politicians have called for going beyond token representation of women in politics and institutions and advocated for creating sufficient space for women in the decision-making process. They expressed these views at a dialogue, titled: Space for women participation in polls, jointly organized by Free and Fair Election Network (Fafen), Centre for Peace and Civil Society (CPCS) and Cavish Development Foundation (CDF) here on Friday.

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Jami Chandio of the CPCS said that the purpose of elections and democracy would not be served until women were given equal participation in political affairs. He said that political parties had often given token representation to women but in decision-making they were largely ignored. He suggested that women should be given guarantee of equal participation under the partys constitution. SZABIST research fellow Nusrat Lashari said that Benazir Bhutto had set precedent for womens participation in politics. She, however, feared that her assassination might lead to further limitations for women in the political process. Seemi Malik of PML-N said that male leaders of political parties had not formulated the policies that ultimately benefit women members. Former legislator Nasrin Chandio said that discriminatory attitude towards women was discouraging them morally and socially from taking part in almost every field of society. Humaira Khaleeq, a writer, said that women were being presented in cosmetic way in politics, literature and art. Salma Murad of PML-Q suggested that women politicians belonging to all political parties should strive jointly for attaining their rights irrespective of their affiliations. Humaira Alwani of PPP-P said that she belonged to apolitical family but she joined politics after being inspired by Benazir Bhutto. (The News-13, 16/02/2008)

PPP, PML-N get major chunk of seats

ISLAMABAD: As a result of the anti-Musharraf trend in the general elections, the Pakistan Peoples Party and the Pakistan Muslim League-Nawaz emerged as leading political parties and are perfectly placed to form governments at the Centre and in the Punjab as a coalition. In Sindh, the PPP secured 65 out of 130 seats, enough to form a government on its own. The PPP led the tally by bagging 86 of the National Assembly seats announced so far, followed by Nawazs Pakistan Muslim League with 65 NA seats. The pro-opposition trend was so strong and clear that it left the former ruling party the Pakistan Muslim League-Q far behind. It secured only 38 National Assembly seats. In the provincial assemblies it managed to get 66 seats in the Punjab, 9 in Sindh, 17 in Balochistan and 6 in the NWFP. Apart from the PPP, the PML-Q is the only party which bagged seats in all the provincial assemblies. The PPP showed excellent display in the elections by bagging 86 seats in the National Assembly. It secured 78 seats in the Punjab assembly, 65 in Sindh, 7 in Balochistan and 17 in the NWFP. With results of some national and provincial assemblies still awaited, the PML-Q top gun Ch Shujaat Hussain and some 22 former federal ministers got a stunning defeat in the PPP and PML-N wave which swept them away. The Pakistan Muslim League-N was victorious on 65 National Assembly seats and is the leading party in the Punjab Assembly bagging 101 seats. It also secured 5 seats in the NWFP Assembly but failed to win any seats in Sindh and Balochistan assemblies. In an anti-religio-political trend, the Awami National Party (ANP) bagged 19 National and 31 NWFP Assembly seats and is well placed to form government in NWFP with the support of the PPP and PML-N if they strike a deal to form government at the centre as well. Intense lobbying and contacts are being made by major political parties with N-League leader Nawaz Sharif and his aides to meet PPP leader Asif Zardari in Islamabad today (Wednesday). I think the meeting between the two will take place today and we will never disappoint the nation, PPPs central committee leader Rehman Malik told The News. He said: The riddle, if any, would be resolved through talks. The MQM contended with 19 National and 38 Sindh Assembly seats and its leaders rendered themselves ready to talk with any party in the interest of the country. A heavy chunk of independent candidates (27 in all) returned victorious to the National Assembly, 35 to the Punjab Assembly, one in Sindh, 10 in Balochistan and 18 in NWFP assemblies. The MMA led by Maulana Fazlur Rehman after parting ways with Qazi Hussain Ahmeds Jamaat-e-Islami was reduced to only 3 seats in the National Assembly. It bagged 9 seats in the NWFP, 6 in Balochistan and 2 in the Punjab assemblies. This tally shows an extremely poor performance on the part of the MMA, which remained a very powerful outfit in the past by forming government in the NWFP and a coalition government in Balochistan. PML-Functional bagged 4 National, 3 Punjab, and 7 Balochistan assembly seats. BNP(A) managed to secure one National and 5 Balochistan assembly seats. PPP-Sherpao won one NA seat as its leader Aftab Ahmed Khan Sherpao (former interior minister) returned victorious. His party also won 5 NWFP Assembly seats. The National Peoples Party (NPP) bagged 2 National and 3 Sindh assembly seats. Several political stalwarts were defeated in elections including President Pakistan Muslim League-Q Chaudhry Hussain, Speaker National Assembly Chaudhry Amir Hussain, Secretary General Pakistan Peoples Party Jahangir Badar, chief of PPP-Shaheed Bhutto Ghinwa Bhutto, Hamid Nasir Chattha, former chief minister Sindh Aftab Shaban Mirani, former chief minister Punjab Ch Pervaiz Elahi (on two seats), MMA leader Maulana Fazlur Rahman from Dera Ismail Khan, Maulana Abdul Ghafoor Haideri, Fakhar Imam, Begum Abida Hussain and Sughra Imam. The other prominent politicians that have suffered setbacks in the elections include Rao Sikandar Iqbal, Naurez Shakoor, Ejazul Haq, Shaikh Rashid, Liaquat Ali Jatoi, Ovais Leghari, Ishaq Khakwani, Sikandar Hayat Bosan, Ghulam Sarwar Khan, Khalid Ahmed Lund, Khurshid Mehmud Kasuri, Humayun Akhtar Khan, Chaudhry Shahbaz Hussain, Dr Sher Afgan, Wasi Zafar and Yar Muhammad Rind.

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The political leaders that have returned successfully include Makhdoom Amin Fahim, Ch Nisar Ali Khan (on two seats) Makhdoom Javed Hashmi (3 seats), Asfandyar Wali, Aftab Ahmed Sherpao, Jam Muhammad Yousuf, Manzoor Wattoo, Shah Mehmood Qureshi, Yousuf Raza Gillani, Sardar Asif Ahmed Ali, Chaudhry Pervaiz Elahi, Khwaja Saad Rafique, Faisal Saleh Hayat, Dr Farooq Sattar, Raja Pervez Ashraf, Shahid Khaqan Abbasi, Lt Gen (R) Abdul Qadir Baloch and former Chief Minister Sindh Sardar Ali Muhammad Mahar. Amid a shocking defeat of the PML-Q, the PML-N did extremely well in Lahore, Rawalpindi, Islamabad and many other cities. Similar was the case with the PPP which overwhelmingly won in southern Punjab and interior Sindh. In Rawalpindi and Islamabad, the PML-N bagged 8 out of 9 seats with one going to PPP leader Raja Ashraf. In Lahore, the PML-N bagged 11 out of 13 National Assembly seats and people like Humayun Akhtar were defeated with huge margins. NA party position by province (Unofficial results) Party PPPP PML-N PML-Q Ind. MQM ANP PML-F MMA NPP PPP-S NWFP 8 2 4 1 0 8 0 2 0 1 FATA 0 0 0 6 0 0 0 0 0 0 ICT 0 2 0 0 0 0 0 0 0 0 Punjab 45 60 26 13 0 0 1 0 0 0 145 Sindh 29 1 5 1 19 0 3 0 2 0 60 Balochistan 4 0 2 2 0 0 0 1 0 0 9 Total 86 65 37 23 19 8 4 3 2 1 248

Total: 26 6 2 (By Skakil Shaikh, The News-1, 20/02/2008)

Vegetables beyond the reach of common man

KARACHI, Feb 24: Irrespective of the merits and demerits of the shifting of Sabzi Mandi (the wholesale vegetable market) from University Road to the Super Highway in 2001, the ultimate sufferers are consumers as retailers demand exorbitant prices in view of increase in transportation cost and other overheads. A retailer, who asked not to be named, said that retailers had to maintain a minimum difference of Rs6 to Rs8 per kilo from the original wholesale price. This includes Rs3 as labour and transportation cost from Sabzi Mandi to different areas of the city. Besides, they have to keep Rs2 to Rs3 per kg as expenses in shape of labour working at the retail shop, wastages, shops rent, sorting and labour food. In addition, retailers have the right to keep a profit of Rs2 to Rs3 per kg. Because of increase in transportation cost and other overheads, retailers sell vegetables keeping these expenditures aside and making maximum profits. For instance, onion is being sold at Rs5 per kilo at the wholesale market but retailers in the city are charging Rs10 to Rs12 per kg. It means that if a retailer is getting a profit of Rs2 per kg he has already managed to absorb other expenditures in the selling price. This practice adopted by retailers has been in vogue since the shifting of the wholesale market outside the city. In the absence of any retail price checking, retailers enjoy free hand in taking out most from the consumers pocket. Price regulators appear least bothered and whenever there is a demand and supply gap owing to delay in arrivals from farms, low production or higher import value, retailers cross all barriers to charge double of the actual rate fixed in the wholesale market. A retailer said that vegetable dealers had been paying Rs300 to Rs500 as transportation cost from Sabzi Mandi to various areas depending on the weight, distance and increase in petroleum prices since 2001. He said they used to pay Rs100 to Rs200 per trip from the University Road Market to other city areas ahead of 2001. He said it was the right decision of the government to move the wholesale trade to the Super Highway as old market used to cause heavy traffic jams and congestions, environmental pollution and even accidents. He did not agree that retailers had been enjoying a field day on the pretext of the shifting of the wholesale market. Customers are very tricky these days. They search the rates in two to three shops and prefer to buy at a shop which has the lowest rates, he said, adding that there was a lot of competition among the vegetable dealers. The real benefit of shifting Sabzi Mandi is being enjoyed by pushcart vegetable owners, who charge Rs2 to Rs5 more than regular retailers trading in various markets. The shifting of Sabzi Mandi has also created a big disparity in retail prices as vegetable dealers based in posh areas ask for Rs2 to Rs3 per kg more because they have to pay a higher haulage cost than the dealers doing business in the middle income group areas. For example, if the wholesale price of onion ranges between Rs5 and Rs6 per kilo, it is retailed at the rate of Rs10 per kg in the areas such as Nazimabad, F.B. Area, North Nazimabad and Karimabad. But in posh areas such as Defence and Clifton, retailers charge over Rs12 per kg. There were hardly such big variations in prices when the Sabzi Mandi was not shifted to the citys outskirts. The Falahi Anjuman Wholesale Vegetable Market Chairman, Haji Shahjehan, told Dawn that the shifting of the wholesale market to the Super Highway had deprived the regular buyers, who used to purchase fruits and vegetables on the way to their homes from offices on daily and weekly basis.

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At the new marketplace, he said, there were hardly five per cent regular buyers as they avoided travelling 20-kilometre distance to purchase fruits and vegetables at the wholesale rate. Because of higher transportation cost, majority of people found it less feasible to visit the new Sabzi Mandi. Resultantly, mostly of the buyers were retailers and shopkeepers of vegetables, he added. He described the governments move to shift the vegetable market to the citys outskirts a wrong decision from consumers point of view. He claimed that 4,500 wholesale dealers had been asked to quit the old Sabzi Mandi at gunpoint. (By Aamir Shafaat Khan, Dawn-13, 25/02/2008)

Important stakeholders in the dark about Karachi expansion plan

As part of its long term plans, the City District Government Karachi (CDGK) is planning to expand the city nearly three times its present size through acquiring tracts of land of the Jamshoro, Thatta and Lasbela districts. This is being done under the CDGKs strategic plan for the next 13 years, documents received by The News have shown. However, most of the representatives from the areas where this land expansion is expected to take place, are unaware of this plan. It may be recalled that the Karachi Strategic Development Plan 2020 (KSDP 2020) under the Tameer-e-Karachi Program has been developed by the Master Plan Group of Offices of the CDGK. Under the estimates given, Karachis population has increased to over 16 million (2006 estimates) and is expected to reach 27 million by 2020. The coverage of the KSDP 2020 extends over the whole City District of Karachi, comprising 18 administrative towns, six cantonments, and the federal and Sindh government land holding agencies. The towns are territorially further sub-divided into 178 Union Councils. It may be mentioned that the area lying north of the Hub Dam, being part of the Kirthar National Park, has been excluded from the plan area. According to the strategic paper obtained by The News, the total land area of the Karachi district is approximately 3,600 square kilometres, of which about 1,300 square kilometres are occupied by built-up areas with 15 internal towns. Then there are parts of the surrounding districts. These include Thatta and Jamshoro districts of Sindh to the east, and Lasbela in Balochistan to the West. The coastline in the district is about 135 kilometres long, extending along the Gharo Creek westward beyond Cape Monze to an estuary of the Hub River. This is a large land mass that is now being looked at for possible development and urbanisation. However, this is being done without taking all the stakeholders into confidence. What is interesting is that the chief minister of Sindh was not consulted about the plan, but, according to the document, presentations of the plan were made to the president, prime minister, Sindh governor, corps commander, Sindh chief secretary, city Nazim and town Nazims. In addition, presentations were made to the Coordination Committee on Large Cities, headed by the deputy chairman, Planning Commission, as well as development partners from international donor agencies and organisations such as the World Bank and the Asian Development Bank. However, the important stake holders have been ignored. One town Nazim The News contacted denied any presentation having been made to him despite the fact that his town comes under the expansion plan. I dont have such information, said Jan Alam Jamote, Nazim, Bin Qasim Town, they might have given the presentation to 14 towns only, he said. Naib-Nazim Yousuf Shah said he had no information either. The paper further reads, The plan in hand will be further extended to 2030 (Under the Federal Governments Vision 2030) to cover the citys region that includes part of the surrounding districts of Thatta, Jamshoro and Lasbela. Not taking the stakeholders into confident has made the strategy behind the plan questionable. Easier said than done. When contacted, Malik Asad Sikandar, District Nazim. Jamshoro, opposed any plan of acquiring land from his district, saying that, Karachi and Jamshoro are separate districts. He said that he was not informed of any such project by the CDGK and if the matter was brought at the government level they would oppose it. How will we give our boundary to them? he asked. Similarly, the district government of Thatta district, another boundary district, was also not contacted. Mohammad Usman Panhwar, District Coordination Officer (DCO), Thatta, told The News that they had no information about the proposal of the Karachi City District Government. We have not been communicated this, officially or otherwise, he said. He said that Gharo Creek, which has been mentioned in the plan by the CDGK, was a part of the Thatta district government. Opposition bench members at the City Council, the legislative forum for the elected representatives of the city, has alleged that the ruling party was not allowing an open debate in the council on this issue. Saeed Ghani, opposition leader in the City Council, said that the CDGK did not allow a proper debate on the floor. The EDO came in the council and just read a few points from a paper, which was not a complete document, either, he said. The opposition members were told that if they want to see the documents related to the strategic plan, they could see them in the council office. How can 250 members read one copy? asked one member. Ghani said that, later, the CDGK provided some copies to around 15 to 20 select members in the house and, got the plan approved without any debate. Ghani recalled that they were assured that their suggestions would be incorporated in the plan till its completion. If you are given a plan for 2020 and keep including additional material and amending the plan, then what kind of a plan it is? he asked. So far, there are no answers. (By Shahid Shah, The News-13, 27/02/2008)

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Milk continues to be sold at inflated rates

In spite of a court order being issued early last year and the city government stressing that milk prices should not exceed Rs32/kg, the current milk prices are much higher than the above-mentioned figure. In several small markets of Nazimabad, for instance, milk is being sold anywhere between Rs34/kg to Rs35/kg. In other parts including Shah Faisal Colony, Orangi Town and Gulshan-e-Iqbal, the prices have exceeded beyond the given price but nothing has been done in this regard. Moreover, some areas in Malir Town are selling milk at a price of 37rupees per litre. The City District Government Karachi (CDGK) has already announced that the milk prices for the wholesale market should be Rs30/kg, while the retail rates should be Rs32/kg, pointing out that two rupees is enough profit for the milk retailers. Whether or not these rates are being implemented is another story. While the retailers refuse to charge less, they also give what seems to be a valid reason. How can we follow the CDGK price when we are buying milk at such a high rate? said a milk retailer from Lea Market. We buy milk for over Rs30/kg. Sometimes we pay over four rupees to the wholesaler. Then we have our own costs to cover too, he added Malik Azmat, another milk retailer from the same market said that the retailers costs include paying for items such as rubber bands and plastic bags for packaging, rent and electricity and the employees salaries as well. It is convenient to blame the retailers because the consumers always see them in the market. The actual problem is more than what meets the eye, he explained. While the retailers blame the wholesalers for this problem, the wholesalers, in turn, blame the dairy farmers. We are only the middle men, we can not be blamed for the entire price hike in the market, said a wholesaler. The dairy farmers are the ones who are selling us milk at such a high price, he added. In fact, reports reveal that the milk comes from the Landhi and Korangi cattle colonies. Even so, the farmers refuse to take responsibility. We have tried to reach a conclusion with the Sindh government and the CDGK, but to no avail, said Haji Rasheed, a dairy farmer. The problem is that since buffaloes are water animals, we have to spend a lot on water to bathe them, as well as to keep them. Besides, the fodder rates have recently been raised. When we increase the prices, we dont do it because we want excessive profits. It is just that our demands are not met at these rates. The government ought to give us a concession or lower rates, said Rasheed. (By Xari Jalil, The News-19, 28/02/2008)

MARCH
The poverty of opportunity
POVERTY reduction is increasingly being recognised in Pakistan as one of the most important tools to gauge the performance of the government particularly with respect to its socio-economic policies. This is indeed a welcome departure from the traditional approach, the primary emphasis of which was on increasing the GDP with little emphasis on the distributional aspects particularly that related to the impact of growth on poverty reduction. It is now being increasingly recognised that economic growth is of little use if it does not elevate the status of the majority of people who are trapped in the vicious circle of poverty. The measurement of poverty and its comparison over time has therefore been of central concern, to the policy makers, international donors, civil society and the general public. The present government has claimed that poverty as measured by the percentage of the population below the national poverty line has been reduced from 34 percent in 2001 to 23 per cent in 2005. The credibility of this estimate however is marred by the widespread controversy surrounding the methodology that is used to compute this rate. Dr Akmal Hussain (Dawn, Feb 20, 2008) drew our attention to methodological flaws in the recent measurement of poverty by the government. The controversy surrounding the measurement of poverty is further strengthened by the general perception of the public who fail to relate this official claim to their own standard of living that is deteriorating day by day under the escalating prices of basic necessities. In view of the methodological flaws and constraints in the accurate measurement of poverty, there is a dire need to supplement the standard measure of poverty that is based on income and consumption with a wider concept of poverty that includes in addition to income, some other vital aspects of human deprivation. This is important for at least three reasons. First, household data on income and consumption is much more susceptible to measurement error associated with under reporting of income and consumption. Second, frequent changes in survey design and methodology to compute poverty rates restricts its comparability over time. Third and most importantly, there is a need to understand the concept of poverty in a much wider perspective. It is important to realise that income is an important but only one dimension of poverty. In reality, poverty is a multidimensional concept that goes beyond the deprivation of income and consumption and includes several other forms of deprivation that people face on a day to day basis such as the denial of quality education; better nutrition and health services; security against crime and violence; satisfying leisure hours; and political and cultural freedoms to mention a few.

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Of course, this is not to deny that with a sufficiently high income a person is able to improve some of his non-income attributes. But income cannot buy everything and therefore poverty ought to be viewed in a multidimensional manner. In broader terms, poverty is the denial of opportunities: the opportunity to earn a decent living, the opportunity to have access to good quality education, and the opportunity to have access to basic health care and so on. It is important to note that it is the inequality in opportunity that is deemed more unfair than the inequality in income. This is because some inequality in income is tolerated as it reflects differences in natural abilities and personal efforts. Inequality in opportunities, on the other hand, is much less tolerable as it denies the basic human right of the people to exercise their potential. In order to address some of the shortcomings of the unidimensional approach of measuring poverty that is based on income alone, Mahbub ul Haq suggested a new measure which is much more comprehensive, called the poverty of opportunity index (POPI) in the Report on Human Development in South Asia 1998. This is a composite measure that includes in addition to income poverty some other non-income but tangible indicators of human deprivation such as the lack of access to education and health. In terms of education, POPI includes the percentage of primary school age children who are out of school and the percentage of adult illiterates. In terms of health, the index uses percentage of people not expected to survive to the age of forty; the percentage of people who are deprived of access to safe water and the percentage of malnourished children under the age of five. The Mahbub ul Haq Human Development Centre computed this index for a total of 46 developing countries and reported the estimates in its 2006 Report Poverty in South Asia: Challenges and Responses. In the case of Pakistan, the estimate of the poverty of opportunity index turns out to be 34 per cent which is much higher than World Bank estimate of percentage of population below $1 a day (17 per cent) as well as the government figure that is based on national poverty line (23 per cent). This discrepancy between income poverty and the poverty of opportunity index turns out to be much higher in the case of Pakistan than other developing countries. In India for instance, the estimates of POPI and those based on $1 a day are quite close: 31.3 and 34.7 per cent respectively. This indicates that in Pakistan, either the estimate of income poverty is not accurate or an incredibly higher number of people are denied opportunities than are denied income alone. In both cases, there is an underlying message for the government. While the government celebrates rising economic growth and claims significant reduction in poverty, it is important not to lose sight of the rising deprivation in the area of health and education. The recent Education for All Report indicates that Pakistan has the dubious distinction of containing one of the highest numbers of out-of-school children in the world. In the area of health, maternal mortality rate has increased from 200 in 1995 to 320 per 100,000 in 2005. The percentage of births attended by skilled health personnel in Pakistan remain one of the lowest in the world (23 per cent), even lower than that in Sub Saharan Africa (46 per cent). It is time that the government, instead of presenting selective indicators of well being the computation of many of which are based on flawed and controversial methodologies takes stock of the comprehensive picture of wellbeing of the people and reviews its policies accordingly. Since a new government will soon be taking charge, it is worthwhile to evaluate the policies of the previous government and make an objective assessment of where they went wrong. One thing is clear and the recent election results have made it much clearer: no matter how dumb and uneducated our masses are, it is almost impossible to fool them with selective presentation of facts that do not relate to the ground realities and to the lives of the ordinary people. (By Dr. Sadia M. Malik, Dawn-7, 03/03/2008)

IMF wants new govt to tax agriculture

ISLAMABAD, March 4: The International Monetary Fund (IMF) wants the new government to bring agriculture and services sectors into the tax net and reduce exemptions in order to tide over financial difficulties. The fiscal effort should rely primarily on strengthening revenue mobilisation substantially to reduce deficit, while allowing for increased spending on infrastructure, human capital and poverty alleviation, says the latest IMF report obtained by Dawn. It said that even with the envisaged reduction in the current account deficit over the medium-term, Pakistan would continue to depend heavily on large capital inflows. Therefore, a high degree of flexibility in economic policy-making would be required to respond quickly to external shocks. In particular, given the need to continue strengthening the foreign exchange reserves position, the authorities should adhere to their plan to rely primarily on active demand policies in response to external financing shortfalls. The report shares the authorities view that the effective exchange rate is broadly in line with fundamentals. Going forward, fiscal adjustment, accompanied by higher levels of investment and a vigorous implementation of structural reforms to increase the economys productivity, constitute the main avenues to improve external competitiveness. The recent removal of the remaining exchange restriction in the form of a 50 per cent limit on advanced payments for some imports was welcomed by the IMF. In addition to strengthening tax revenues, the report said, priority should be given to other structural reforms of critical importance to increase savings and investment. Pressing ahead vigorously with the reform of the energy sectors regulatory and tariff framework will contribute to increasing productivity, strengthening public sector savings and enhancing the prospects for privatisation of power companies. There is also a need to complete the ongoing reform of the National Savings Schemes to facilitate their integration with local financial markets; adopt a system of regular margin financing in line with major stock exchanges; and move forward with current plans to shift away from the use of short-term government financing instruments into long-term securities, in order to improve debt management and encourage development of the local bond market. (By Ihtasham ul Haque, Dawn-16, 05/03/2008)

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Total cost of MPA salaries = Rs 10m a month

KARACHI: With the next provincial assembly elected for the next five years, MPAs are looking to earn a combined total of around Rs 10 million monthly in salaries, allowances and benefits. According to the official figures issued by the assembly secretariat, each MPA will be eligible for a Rs 45,000 monthly salary, including allowances. The figures revealed that each member is given Rs 15,000 per month as salary, Rs 5,000 for office maintenance, Rs 5,000 for telephone allowance, Rs 3,000 for sumptuary allowance, Rs 10,000 as house rent and Rs 3,000 for gas and electricity charges. The members look to earn more when the assembly is in session as each MPA is given more than Rs 3,000 per day during a session. According to available official records, the government gives Rs 1,500 per day, Rs 550 as daily allowance and Rs 400 as conveyance allowance. Every member is entitled to a traveling allowance, either an amount equal to a train fare plus half the fare of A.C. class, the fare of a business class plane ticket or Rs 3 per kilometer of a road journey. According to official figures, the MPAs will also be entitled to Rs 40,000 in traveling vouchers per year, or Rs 30,000 in a cash allowance in lieu of traveling vouchers. The members will also be eligible for a telephone facility at their residences at the governments expense. The government pays Rs 4,000 per month for an assembly members telephone whether it is a private connection or installed at government expense. The MPAs can also avail free medical facilities during their five-year term. According to the provision, the government will provide a medical facility to a member, his/her spouse, minor children and unmarried daughter residing with and dependent on the member. The provincial assembly had approved an approximate 15 percent increase in salaries of the provincial assembly members in June 2005. (By Razzak Abro, DailyTimes-B1, 05/03/2008)

What a waste of taxpayers money, Nazim Sahib, What a waste

Muhammad Hussain, who works in a bank on I.I. Chundrigar Road, also known as Pakistans Wall Street and Fleet Street combined, says possibly this is one of the most frustrating roads to travel on in the city. Its not just busy, it is chaotic. The reason is not the rush of people and cars but the mismanagement and corruption, he comments. And thousands of people like him who work on this street would agree. Despite spending billions in taxpayer money and collections from the banking sector, the City Government has been unable to deliver a better road after months of construction and development work. Sewers are still overflowing, the road is broken in places, mafias have encroached on the footpaths and the CDGK seems helpless in trying to make this better. Despite the tall claims by the City Nazim, Mustafa Kamal, to give Karachi a world class business road, the city has ended up with one of the worst planned and executed roads in recent years. The beautification of is a failure despite the fact that the State Bank of Pakistan (SBP) has also pumped in millions of rupees provided by the stakeholders of the district. A City District Government Karachi (CDGK), who chose to remain anonymous, alleged that it is the responsibility of the CDGK to build foot paths on the road along with constructing storm water drain. Contrary to expectations, the road was completed after an inordinate delay, causing hardships to the citizens and businessmen. Moreover, the officer added that the CDGK has so far done nothing as far as the beautification of this road is concerned. The job of the beautification committee was to give the road and its surroundings the appearance of a business district as seen in many commercial capitals across the globe. There was talk of inviting tenders from international food chains, and planting trees and opening roadside cafes. The aim of the project was to attract more investment and business players to the city and to show them that they could set themselves up in the city, which had state-of-the-art facilities on offer. However, all these plans still remain under discussion at the CDGK meetings while people who use the road suffer endlessly. Moreover, at such an important artery of the city, there is no public transport service available owing to the fact that public vehicles have been banned from plying on the road because of security reasons. On the other hand, the temporary free shuttle service proposed by the CDGK was initially functional but is nowhere to be seen these days. Additionally, even though Mustafa Kamal, the City Nazim, visited the road several times, still the work has been delayed. Moreover, neither the officials form SBP nor the representatives of CDGK are available for comment on the beautification project. The delay in the project was also caused by the development works being carried out by the Karachi Water and Sewerage Board (KWSB) and the Pakistan Telecommunication Limited (PTCL). Furthermore, sources alleged that the entire design of the beautification and cost structure has to be changed because of the high-rise buildings and motels planned on the road. Plazas that have been forced on the road in violation of building laws will also now put pressure on the road. In all this, the CDGK remains silent and unaccountable for the billions it seems to have squandered. (The News-20, 06/03/2008)

$320m ADB fund for small loans in rural areas

ISLAMABAD, March 6: The Asian Development Bank (ADB) will provide $320 million to commercial banks, microfinance banks, leasing companies and Pakistan Post Office to help them offer small loans for poverty alleviation, mainly in rural areas. Sources told Dawn on Thursday that the ADB had decided to promote commercialisation by extending funds to private banks, leasing companies and other institutions for providing microfinance to needy people. The decision to offer more funds was taken after conclusion of the programmes first phase. The programme takes a broad view of the financial sector with the focus on accelerating outreach with sustainability and emphasis on remote and rural areas and development of supporting infrastructure in terms of credit bureaus, networks and land registration facilities.

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It includes building financial service providers capacity to absorb new technologies and innovation in service delivery to address the issues of mobility of women, increased literacy and product diversification over the next three years. The sources said the main objective was to build an inclusive financial sector in which majority of the poor would have access to affordable financial services. Global efforts are under way to secure government commitments in order to ensure that its fiscal, macroeconomic, regulatory and supervisory policies supported availability of small loans to deserving people. Microfinance institutions around the world have provided loans to nearly 100 million clients. The bank believes that the governments Microfinance Sector Development Programme has been successful in terms of catalysing the environment for microfinance in the country. It has attracted global spotlight and investment. Six Pakistani microfinance banks have been licensed under the framework and several more, including some industry leaders, have expressed interest to invest. The Khushhali Bank continues to lead in terms of growth and is the largest microfinance institution in the country and 16th in the world in terms of clients reported on the Microfinance Information Exchange with nearly 300,000 active clients in a relatively short time frame. (Dawn-16, 07/03/2008)

Buffett worlds richest man, Bill Gates third

NEW YORK, March 6: Warren Buffett, the famed US investor who heads Berkshire Hathaway Inc, replaced his friend and Microsoft Corp founder Bill Gates as the richest man in the world, Forbes magazine said on Wednesday. The magazine estimated Buffetts worth at $62 billion in its annual ranking of the worlds wealthiest people. Mexican telecoms tycoon Carlos Slim came in second with an estimated worth of $60 billion, pushing Gates to third place after 13 years of holding the No. 1 spot. The magazine estimated Gates worth at $58 billion. Buffetts rise to No. 1 was particularly noteworthy, Forbes said, as it came at a time of great financial turmoil and as Buffett has begun to siphon off part of his fortune to charity. Even though he is giving away a piece of his fortune each year, the stock of Berkshire Hathaway, the source of Warren Buffets wealth, has been rising very rapidly, Chief Executive of Forbes Magazines Steve Forbes said, noting Buffetts fortune climbed $10 billion in the last calendar year. Buffett in June 2006 announced plans to give 85 per cent of his fortune away, granting it to the Bill & Melinda Gates Foundation and four family charities. Bill Gates serves on the board of directors of Berkshire Hathaway and is a long-time bridge buddy of Buffetts. Gates has also given a substantial amount of his fortune to the foundation. Buffett, often called the Sage of Omaha, has been lauded among investors for his preference for investing in larger companies with easy-to-understand businesses, large or dominant market shares, consistent earnings, and strong management. In the early 1960s, Buffett started to invest in Berkshire, then a struggling textile maker, and took it over in 1965. Since then, he has transformed it into a holding company for more than 50 companies, ranging from Benjamin Moore paint and Dairy Queen ice cream to Fruit of the Loom underwear and Ginsu knives. Gates has held the No. 1 spot since 1995, when he unseated Yoshiaki Tsutsumi, a Japanese real estate tycoon. Tsutsumi fell off the billionaires list last year after receiving a suspended prison sentence for falsifying financial statements and insider trading in 2005. Slim, a former stock market trader, is known for buying up struggling, cheap firms and turning them into profitable cash cows. He built his fortune by privatising former Mexican state telephone monopoly Telmex America, Movil, a Telmex spinoff, is now Slims flagship business and Latin Americas biggest mobile phone company. The collective net worth of the worlds 1,125 billionaires soared to $4.4 trillion, the magazine said. The list of billionaires has almost doubled in the past four years, Forbes said. There were 469 US billionaires, worth a combined $1.6 trillion, while the 656 billionaires who live outside the United States are worth $2.8 trillion. Russia came in second place as home to 87 billionaires and Moscow is now the worlds billionaire centre, the magazine said. The Russian capital is now home to more billionaires than New York City. India, China and Turkey also saw large gains in numbers of billionaires. The worlds youngest billionaire is 23-year-old Mark Zuckerberg, founder of social networking Web site Facebook. The magazine estimated his worth at $1.5 billion and said he is the youngest self-made billionaire to ever appear in the Forbes billionaire rankings. Recent turmoil in the financial markets has taken its toll on the list. James Cayne, Chairman of investment bank Bear Stearns Cos; William Pulte, who founded US home builder Pulte Homes Inc; and Howard Schultz, founder of coffee chain Starbucks all fell off the billionaires list amid declines in their companies stock prices.

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The decline in the dollar, a trend that Buffett himself has been betting on since 2002, provided a boost to billionaires outside the United States, particularly because the Forbes list is tabulated in US dollars. The full list of billionaires is available at http://www.forbes.com/billionaires. (Dawn-1, 07/03/2008)

Whither economic justice?

The essence of Islamic concept of economic justice is to take and give what is genuinely due, nothing more, nothing less. Economic injustice is the rationale for prohibition of interest in Islam. The related Quranic verse you shall not wrong, nor shall you be wronged is crucial as it captures the essence of economic justice. This article is focused on the treatment of depositors by banks in general and Islamic banks in particular and how far this meets the requirements of Islamic economic justice. I Stating the obvious, the banks have been exploiting depositors and the exploitation has intensified in recent years. Banks have been extremely niggardly in increasing the return on deposits in proportion to the returns they get. The weighted average of return on bank advances has improved from 6.49 in June 04 to 11.27 per cent at the end of December 07, but the weighted average of return to depositors has gone up from 1.31 to 4.13 per cent As a result, the banking spread has widened from 5.23 to 7.14 per cent. The ratio of the spread to the return on deposits works out to 173 per cent. This has enabled banks to make huge profits and their after-tax profit has gone up from Rs24.7 billion to Rs84.2 billion. The amount of mark-up\return\interest earned by banks increased from Rs116.7 billion in CY 03 to Rs307.1 billion in CY 06, but their expenses on these accounts rose from Rs42.1 billion to Rs133.6 billion, the difference more than doubled from Rs74.6 billion to Rs173.5 billion. The banking spread for Islamic banks is not available but they seem to be no different from conventional banks as may be obvious from the Table:

Islamic banks return to depositors (CY 2006)

Bank Meezan Bank Albaraka Islamic Bank Dubai Islamic Bank Bank Islami Total Markup/Ret./Intst.Earned 2,704.3 1,111.7 156.5 100.0 4,072.5 (Rs.Million) Markup/Ret./Intst.Expenses 1,464.2 824.1 30.3 18.7 2,337.3

The return on deposits, small in nominal terms, has been negative in real terms because of increasing inflation. The return has also been subject to 10 per cent withholding tax regardless of the fact whether the person qualified for income tax or not. The minimum income for income tax is Rs150 thousand and rate of tax in the first bracket is five per cent. The depositors subject to income tax are able to club the return with their other income and get relief of five per cent in the initial tax rate bracket, but the depositors not rich enough to be in that class have to bear the full brunt of the tax. This makes a mockery of equity. As a further measure to deny return to small depositors, banks lay down the condition of minimum balance to earn return, which is quite high in relation to the average annual per capita income. For instance, it is Rs20 thousand in case of NBP and that represents 38.2 per cent, or 4.4 months per capita income. This leaves the small depositors in the cold. Banks have also fixed minimum balance to be maintained and in case of shortfall, there is the minimum monthly service charge of Rs50 which eats away very small deposits in no time. No wonder, despite economic growth and increase in population, particularly in urban areas, the number of deposit accounts has fallen from 31 million in June 1999 to 25 million in December 07. The main reduction has been in personal bank deposits (they include non-corporate business) and they are now down to 16 million accounting for only 10.1 per cent of the population. The ratio of volume of balance in these accounts to GDP (FC) in FY07 was 17.3 per cent. Being the guardian of financial institutions, the central bank is looking after the interest of depositors who are not organised to have an effective lobby to protect their interest. The SBP Governor has been publicly urging banks to improve the return to depositors. Unfortunately, the State Bank has been a party to the exploitation and wittingly or unwittingly, it plays an active role. For the then interest-free banking, it laid down the formula for distribution of income between the banks and depositors. In terms of BCD Circular No.34 dated 26th November, 1984, for non-interest income, banks were allowed to charge, on the balance arrived at by deducting from the income proportionate administrative cost and provision for bad\doubtful noninterest based assets 10 per cent as management fee. The weightage for PLS deposits ranged from 0.65 percent for special deposits withdrawable at 7 to 29 days notice to 1.3 per cent for term deposits for in excess of six months. In sharp contrast, banks equity could be given a weightage not exceeding five, as determined by the bank concerned. There can be no justification for the management fee on top of administrative cost and weightage of as much as five to the banks equity at the discretion of the bank concerned. This is a blatant favour to banks and gross injustice to depositors. The State Bank also indirectly works against the interest of depositors. Instead of serving as the lender of the last resort, which means temporarily easing the liquidity problem of banks on a limited scale, it has been serving as a source of

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capital on a massive scale. The developmental role of the SBP for supporting financial institutions is a relic of the late forties and early fifties of the last century when there was dearth of private capital. This is no longer justified as private capital is available in abundance. The other reason is the central bank lending to government to meet the fiscal deficit. In the process, the State Bank has been creating primary reserves thus adding to excess liquidity making banks complacent and indifferent to deposit mobilisation As of end-December 07, the banks claim on financial institutions and government (net) accounted for as much as 55.7 per cent of reserve money.In fairness to depositors, the State Bank should immediately scrap the weightage given to banks equity for distribution of the income and make it proportionate. There is no justification for the management fee. The bank should also give up its developmental role and confine itself to its traditional function of lender of the last resort. The central bank financing of the fiscal deficit should be given up totally. Let the financial institutions and government go to the market, which has enough capacity to more than meet these requirements. It would only make financing a bit more costly but that should be no concern of the central bank. Let government, instead of tinkering with cost of borrowing to contain the burden of domestic debt, do something about the volume of borrowing through proper financial management and live within its means. There is a plethora of literature on Islamic banking but it is mainly confined to the asset aside of banks and any discussion of their liability side is conspicuous by its absence and depositors suffer from this neglect. PLS accounts are just a misnomer as they are not based on any kind of profit and loss, whether of banks or their borrowers. What needs to be sorted out is the status of banks vis-a-vis depositors. Is this relationship that of a (a) trustee, (b) agent, (c) borrower, or (d) partner? Only the return to depositors properly related to these categories can assure justice to the depositor. (By Dr. Abdul Karim, Dawn-Economic & Business Review, Page-IV, 10/03/2008)

Trade deficit soars to $12.43bn in 8 months

ISLAMABAD, March 10: Pakistans trade deficit ballooned to $12.433 billion in the first eight months of the current fiscal year, up by 39.05 per cent over $8.942 billion recorded last year, mainly due to surging crude oil and food prices. The gap widened as the import of edible items, particularly wheat witnessed highest-ever increase. At the same time, the import bill of luxury items mobile phones, gold and cars also increased the deficit during the period. Official figures released on Monday by the Federal Bureau of Statistics (FBS) showed that the import bill increased by 21.95 per cent to $24.141 billion in July-February 2007-08, against $19.796 billion last year. It witnessed an alarming increase of 42 per cent in February 2008 when it stood at $3.659 billion against $2.572 billion in the same month last year. Exports grew by 7.86 per cent to $11.707 billion in July-Feb 2007-08 against $10.854 billion last year. The export growth recorded the highest-ever increase of 22.25 per cent in February 2008. This growth was unprecedented because the average growth over the past two years has been six per cent per month. With the rising import bill, economists believe, the trade deficit this year could cross $15 billion, the highest-ever increase recorded in the countrys history. Last year, the deficit for the whole year was $13 billion. Analysts said the export growth in February would mitigate to some extent the stress on foreign exchange reserves. However, it is necessary to maintain the same growth in the next four months (March-June). I am encouraged that despite many problems faced by the business community, exports have recorded an impressive growth, Commerce Secretary Syed Asif Shah told Dawn on Monday. He said this growth was the reflection of the consistency in the export-led polices of the government over the past couple of years and manifestation of the hard work and commitment of the business community. The government had projected an ambitious export target of $19.2 billion in the trade policy last year. The target was projected by former prime minister Shaukat Aziz in cabinet meeting on the assurance from the former textile minister Mushtaq Cheema that textile exports would fetch an additional $1 billion. However, contrary to the assurance the textile and clothing exports are on the decline despite huge subsidies doled out to the sector. For achieving the target, export proceeds should be in the vicinity of $7.493 billion over the next four months (March-June). There is, however, no indication that the commerce ministry would even be close to the projected target. As the food inflation recorded the highest-ever increase, the government was compelled to slap a ban on export of certain food commodities to avert domestic shortages. On the other hand, although the government has not set any import target in the trade policy, there are estimates that it may reach around $35 billion by the end of June. Last year, the import bill had exceeded $30 billion. (By Mubarak Zeb Khan, Dawn-1, 11/03/2008)

Inflated bills, outstanding dues

Top bosses of the privatised Karachi Electric Supply Corporation (KESC) have been invited by the federal water and power ministry on Tuesday to discuss issues that the Karachi utility has with the Pakistan Electric Power Company (PEPCO) on payment of bills for the electricity supplied by Wapda system. But there are doubts that the meeting would be held at all as the process of government change-over has begun and the National Assembly meets today. There is a big question mark on the status of the caretaker minister Tariq Hamid. Payment and recoveries of all utilities have political dimensions for which the caretakers have no mandate, argued an official who is convinced that the matter would come up for detailed discussion next month when the elected federal and

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Sindh governments are set in place and competent bureaucrats, experts and elected representatives are assigned the job to tackle the complex issue amicably. The KESC is on a notice from Pepco to pay Rs3 billion by April 1 next against a total outstanding amount assessed at Rs37.5 billion for purchase of power from the National Transmission and Dispatch Company (NTDC), a subsidiary of Pepco. The Pepco wants KESC to enter into a regular power purchase agreement with the NTDC that should stipulate payment schedule in future and also a plan to clear all outstanding dues. On March 6 some 20 million people of Karachi woke up to find suspension of power generation, transmission and distribution as the Pepco abruptly and without any notice cut off power supply from its system to the city. This suspension closed down the generation of the KESC system also. After more than two hours when Islamabad was informed of the Pepcos abrupt action and its impact on Karachi, the power supply from Wapda system was restored. Normal supply with load shedding was resumed late in the evening as Wapda supplies were at 200 megawatt as against a demand of 750 megawatt a day. Debt: It is a circular debt contends the Chief Executive of the KESC retired General S.M. Amjad making two points on the issue. First, the clearance of Pepco is linked with the recovery of KESC dues from the federal, provincial and local government agencies in the city which are identified as strategic customers by the government. Recoverable amount from these strategic consumers is 19 per cent of our total revenue and we are instructed by the government not to cut their power connections, he disclosed, and emphasised that payment to Pepco is linked to receipt of outstanding bills from the government agencies that include about Rs4.75 billion from Karachi Water and Sewerage Board (KSWB). Second, the KESC disputes Rs37.5 billion outstanding amount as it maintains that the Pepco is charging on marginal cost obtained from its most expensive and uneconomical power generating unit. The National Electric Power Regulatory Authority (Nepra) decided in May 2006 to allow Pepco to charge on the basis of marginal cost. The Pepco purchases power from a number of companies. Hydro power roughly constitutes 35 to 38 per cent of the total mix of electric power generation. Hydro power is the cheapest source of energy and till privatisation of the Karachi Electric Supply Corporation Wapda was charging on the basis of a mean cost of whole mix that came to Rs3.69 a unit. Pepco is now demanding Rs9 plus for a unit. But officials in Pepco Lahore consider the KESC an inefficient monopoly. This is not a circular debt, a senior official in Pepco informed Dawn on telephone from Lahore. The KESC is now a private independent entity and should ensure its recoveries from its consumers and not link it to payment of its dues to us. He said that Pepco bills to KESC for purchase of power were in accordance with the Nepra decision. Intervention: But, in short, the KESC is seeking government intervention for quick recovery of about Rs11-Rs12 billion from public sector consumers. Also, the cost of electric power being purchased from Wapda system should be on a mean basis rather than on marginal cost. Once these two arrangements are made, the KESC would be in a much better position to improve its cash flow and plan for meeting the rising power demand for future, an official explained. We have not increased our tariff of water supply and distribution for our customers for last more than ten years, a well placed source in the KSWB said who revealed that the KESC billing had jumped up from an average of Rs30 million a month in 1997 to Rs180 million a month now. The board has improved its bill recovery after paying 25 per cent of the recovered amount to 18 town committees and 178 union councils of the city. The latest reports suggest that the board has given fresh employment to more than 4,500 persons which is more than 50 per of the existing workforce of about 8,000. There is yet no idea on increase in the wage bill of the utility and its impact on its balance sheet. In countries like Singapore and South Korea, the ratio of employees in water utility is two to three for every 1,000 connections. But in Pakistan in most of the utilities including KSWB it is more than 25 for every 1,000 connections. Then there is water loss through leakages and pilferage, with increase in population and problems in water supply and distribution mainly because of old and worn out distribution system. The provincial government had been asked a few years ago to further augment water supply from River Indus which too would need a big capital investment. A revamping of water distribution system is also a capital- intensive activity. The next government will have to work out a strategy to harness resources for this essential need of the city. Repayment: The KESC has entered into a long-term arrangement with the Sui Southern Gas Company and the Pakistan States Oil on payments for fuel. For long the utility remained a defaulter of both the companies and there were frequent reports of KESC getting notices from SSGC and PSO of suspension of oil and gas supply. But well-placed sources in the SSGC disclosed that the KESC was now sticking to the payment schedule worked out in October last year. It was paying all current dues well in time every month with Rs500 million to adjust the accumulated default of Rs4 billion. The PSO also informs that it was receiving all payments from the KESC according to the arrangements it has reached with the utility. In Karachi, most of the industrialists and businessmen are not ready to buy the idea that Wapda should bill the KESC on the basis of marginal cost. The fuel cost in whole country is uniform because we in Karachi contribute to the pool argued a businessman. He said Karachi being a port city where imported oil and fuel comes, the cost should be lowest. Similarly, the people of Karachi pay the highest revenue and have contributed most in payment of foreign and domestic loans acquired for the construction of the Tarbela, Mangla and Warsak Dams. How can the benefit of low cost hydro power be denied to Karachi? (By Sabihuddin Ghausi, Dawn-Economic & Business Review, Page-1, 17/03/2008)

Government earning to touch new heights

ISLAMABAD: With the increase of 7 per cent in POL prices effective from March 16, the profit of government, oil marketing companies and dealers have surged up to new heights in the shape of general sales tax, development levy, freight margin, dealers commission and distribution margin.

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The increase in general sales tax (GST) and petroleum development levy (PDL) would help the government generate more revenue to achieve the target of Rs 1.025 trillion by June 30, 2008. The Federal Board of Revenue (FBR) is, right now, facing Rs 40 billion deficit in the revenue collection. However, when contacted, one of the FBR members, on condition of anonymity, told The News that the government had zeroed sales tax on import of crude oil in November 30. "Now we collect sales tax on the POL products that refinery makes out of the zero rated crude oil." He said over 14 per cent increase in POL prices in the fortnight would help generate significant revenue to achieve the target. To a question, he said that the increase effective from March 1 would alone help the FBR collect Rs1 billion to Rs1.5 billion a month. However, the FBR is right now working over the impact on revenue with the new raise in GST on POL products effective from March 16. According to the Ogra notification on new increase in POL prices effective from March 16, the landed cost of petrol, sans the taxation, freight margin, dealers commission and oil companies margin, stands at Rs39.09 per litre, HOBC Rs58.66 per litre, kerosene oil Rs30.85 per litre and Light Diesel Oil Rs29.60 per litre. The notification unveils that the government has increased the GST on petrol by Rs0.53 per litre with 15 days from Rs7.66 to Rs8.19; HOBC by Rs0.64 per litre from Rs9.11 to Rs9.75; Kerosene oil by Rs0.36 from Rs5.05 to Rs5.41 and LDO by Rs0.33 per litre from Rs4.70 to Rs5.03. The government has further increased the distribution margin of oil marketing companies on petrol to Rs1.68 per litre from Rs1.64 per litre; HOBC to Rs1.82 from Rs1.77 per litre; kerosene oil to Rs5.41 from Rs5.05 per litre. Likewise the government also raised the OMCs' margin on LDO to Rs5.03 from 4.70 per litre. The outgoing regime also raised the petroleum development levy on petrol from Rs2.47 per litre to Rs3.04 per litre; HOBC from Rs9.11 to Rs9.75 per litre; kerosene oil from Rs5.05 per litre to Rs5.41; LDO from Rs4.70 per litre to Rs5.03. However, the government did not increase the dealers' commission on POL products except petrol. On petrol, the dealers' commission has been increased to Rs1.92 from Rs1.88 per litre. Rate of inland freight equalisation margin has also been increased on petrol to Rs3.37 per litre from Rs3.10; HOBC to Rs6.36 per litre from Rs5.86; kerosene oil to Rs3.96 per litre from Rs3.65, and on LDO inland freight equalisation margin has soared to Rs2.83 per litre from Rs2.74. (By Khalid Mustafa, The News-3, 18/03/2008)

First aid for the poor

THE first task in the economic sphere confronting the democratic government is to provide relief to the poor who are in a state of acute distress. The relief package could consist of a new poverty reduction strategy designed for three levels of impact in time: immediate first aid for the poor; targeted programmes for short-term impact; and institutional changes for medium-term impact. This article outlines a first aid programme for the poor that can be undertaken immediately. Subsequent articles will present the elements of a poverty reduction strategy for the short and medium terms respectively. A three-pronged first aid programme for the poor should comprise: (i) food security programmes consisting of targeted food subsidy for the poor on the one hand and urban lungars (free meals) on the other; (ii) income for work; and (iii) asset-building for the poor. The idea is to combine immediate relief with a subsequent stream of regular income, through employment and assetbuilding. This programme ought to be conducted on the basis of a partnership between the government, members of parliament working actively for the poor in their constituencies, councillors in local governments, development NGOs, womens NGOs and chambers of commerce. Let us briefly articulate each of the three elements of the first aid programme for the poor and the institutional mechanisms for implementation and monitoring. Food security for the poor This would consist of a government-sponsored targeted food subsidy for the extremely poor and a private-sector-based network of lungars in the urban areas. Consider the targeted food subsidy programme. According to earlier estimates there may be at least 1.4 million households (about 10 million persons) in the category of the extremely poor, defined as those who borrow for food consumption purposes. Subsidised flour, lentils and cooking oil could be provided to a carefully selected set of extremely poor households with the total subsidy for all three items amounting to Rs1,000 per household per month. This means an annual food subsidy expenditure of Rs16.8bn by the government for 1.4 million households. This programme could be financed from a new fund that could be called the National Relief Fund (NRF) for the poor. It could be created through an act of parliament stipulating that ten per cent of privatisation proceeds be transferred to this fund. In the period 1999 to 2007, privatisation proceeds amounted to Rs363bn. This means that a relief fund of Rs36.3bn could be created immediately. Implementing such a programme would require members of the national and provincial assemblies to work closely with the Baitul Maal to quickly prepare a provisional list of extremely poor households in every constituency in the country. The prime ministers office, supported by the Pakistan Poverty Alleviation Fund (PPAF), development NGOs such as Kashf and Baanh Beli and specialised womens NGOs such as Shirkat Gah and Aurat Foundation, could then finalise the list of extremely poor households that would be eligible for subsidised food items. To ensure gender equality the distribution mechanism should include representatives from womens organisations, women members of parliament and women councillors at the local government level. Moreover, wherever possible the subsidised food items should be handed over to women members of recipient households. The purpose of private-sector lungars is to strengthen food relief in the urban areas by providing dal and roti in the evening to the extremely poor in the locality. In pursuit of this objective, chambers of commerce and traders associations could be encouraged to establish lungars in each locality, and also at the sites of sufi saints. A network of lungars named

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after national martyrs of democracy such as Mr Zulfikar Ali Bhutto and Mohtarma Benazir Bhutto could also be established through foundations named after them. Lungar networks could also be established in the name of national heroes such as Justice Iftikhar Chaudhry, Aitzaz Ahsan, Munir Malik and Ali Ahmed Kurd. These lungars could be financed through donations from members of the countrys chambers of commerce, traders associations, philanthropic organisations and individual citizens. They could be administered by city-based coalitions involving chambers of commerce, NGOs, local government councillors and philanthropic organisations such as the Edhi Foundation. To enable a scientific specification of poor households and systematic impact assessment of the food subsidy programme and the lungar networks, a time series database on the nutrition status of the extremely poor households needs to be established. These regular surveys could be conducted for the same set of households on a six-monthly basis by a reconstituted Federal Bureau of Statistics (FBS) whose independence is ensured by an act of parliament. Validation of the FBS data on a sample basis could be undertaken by a committee of independent experts. Wage employment through improved irrigation Pakistans farmers are facing an acute shortage of irrigation water. This is due to the failure to build adequate storage capacity on the one hand and deteriorating irrigation efficiencies on the other. The reduced water availability is occurring at a time when deterioration of the top soil has increased the requirement of water per acre. To overcome this water deficit it is proposed that a national campaign be launched for building dams, desilting and lining of canals wherever possible and building new lined watercourses. This construction activity would not only bring more water to farms but would also be a major mechanism for generating employment and sustainable incomes for the poorest sections of rural society. Asset-building and income streams for the poor To enable the rural poor to quickly build an asset base and generate increased incomes for themselves, a national credit programme is proposed whereby poor tenant farmers and agricultural worker households could be provided with loans for one additional milch animal per household. This programme of asset-building for the rural poor would combine loans with establishing a marketing infrastructure for milk collection and cash payment at the doorstep. This would give an almost immediate asset and associated steady income stream to the poor peasants. Those who get employment in the irrigation infrastructure programme or successfully use their loans for milch animals would become eligible for an additional loan equal to their annual income from employment or milk sales. This additional loan would range from Rs40,000 to Rs70,000 per household. The loan recipient would be provided with training and support for identifying micro-enterprise projects which she/he could undertake at the household level to enhance and diversify the income base. Training and support for micro-enterprise development could be provided by organisations such as the PPAF. The programme for first aid to the poor proposed in this article is designed to provide immediate economic relief to the poorest while at the same time enabling them to start building their assets, increasing incomes and thereby laying the foundations of economic democracy. (By Dr. Akmal Hussain, Dawn-7, 24/03/2008)

ADB initiative to revive TAP gas pipeline project

ISLAMABAD, March 24: The Asian Development Bank (ADB) is regrouping officials of Turkmenistan, Afghanistan and Pakistan in the third week of April to revive the TAP gas pipeline project in view of the energy shortage in the region. Sources in the Ministry of Petroleum and Natural Resources told Dawn on Monday that India was willing to attend a meeting of steering committee of the $6 billion, 2,000km-long project in which it has the status of an observer. However, the sources said there were still challenges to the project. They said that the security situation in Afghanistan and relations between Pakistan and India needed to be improved and fuel subsidies in the two countries would have to be phased out. Above all, the long-term competitive advantage of the TAP over the option of Liquefied Natural Gas (LNG) has to be determined. The TAP pipeline of 56-inch diameter needs at least 30 billion cubic metre (BCM) of gas per year from Turkmenistan to reach Pakistan via Afghanistan. The sources said that an earlier steering committee meeting of the TAP project, scheduled for Nov 27-28 last year, did not take place after Turkmenistan signed an agreement with Russias gas giant Gazprom to increase gas supplies to Europe at enhanced rates. The sources said that senior Pakistani officials had been informed by Iran that it had sorted out 40 to 50 per cent logistic issues to undertake the work on the Iran-Pakistan-India gas pipeline project. Pakistan asked Iran earlier this month to finalise the project by April because of its rising gas requirements. And Iran said it was holding final talks with India to persuade it to join the project. Iran has told Pakistan that if India continued to show its reluctance under the US pressure to join the project, Iran will invite China to join the project. Chinese have told us that they are ready to join it, a source said. Pakistan has asked Iran to enhance the volume of gas to be supplied by 50 per cent if India opts out of the deal. And in that case Pakistan will be making a formal request to the Iranian side to allocate an additional volume of 1.05 BCFD (billion cubic feet of gas per day). Pakistan is to get a total of 2.1 BCFD of gas from the IPI project and India 3.2 BCFD. If India stays away, the pipeline

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length will come down to about 1600km, reducing the project cost. The volume of gas that Pakistan will get will increase to about 3.2 BCFD. The sources said that the government was working on yet another project to meet its growing gas requirements. The Sui Southern Gas Company was accelerating work on developing an LNG terminal in Karachi. Next month, the sources said, a contract would be awarded for developing the terminal for which floating storages were being procured for fast-track import of gas from Qatar and other countries. Korea and Japan have developed this system and Pakistan wanted to follow suit by acquiring special vessels. Instead of exporting raw gas, Qatar will be adding value and export LNG to get a better price. (By Ihtasham ul Haque, Dawn-16, 25/03/2008)

Bush clears way for $300m aid to Pakistan

WASHINGTON: US President George W Bush has decided to waive a domestic law for Pakistan to pump in $300 million security assistance in the country amid stepped up efforts by Washington to bring its new civilian government on board in the war on terror. Bush has decided to exempt Pakistan from a law that restricts funding to the countries where the legitimate head of the state has been deposed in a military coup with a view to facilitating the transition to democratic rule, the White House said, adding it was important to efforts of the US to respond to, deter, or prevent acts of international terrorism. It said Bush, who had given the waiver to Pakistan every year since 2003, had asked the US Congress for about $300 million for security assistance to Pakistan. White House spokesman Gordon Johndroe said the Bush administration still had concerns about the human rights situation in Pakistan, where President Pervez Musharraf overthrew the then Prime Minister Nawaz Sharif in a bloodless coup 1999, but stressed that President Musharraf was a key ally in the war on terror. The Pakistani government is conducting military, police, and intelligence operations to fight terrorist groups on Pakistani soil and bring terrorists to justice, Johndroe said. In a message to Secretary of State Condoleezza Rice, Bush has said that he has made a determination to waive Section 608 of the Department of State, Foreign Operations, and related programs appropriations act, 2008. (The News-1, 27/08/2008)

Increase will cause deep hole in our pockets: citizens

The citizens, especially users of public transport, have reacted strongly to the increase in fares saying it would cause them a lot of trouble and burn deep holes in their pockets. For this, they criticised the Sindh government for giving in to the demands of transporters. They also slated the government for its failure to control inflation and suggested that, instead of announcing increase in fares, it (government) should have provided some subsidy on oil products to keep fares under control. Interestingly, the transporters have not yet called off their strike slated for April 1 and 2, saying that the announced increase in fares was less than the one proposed by them. It is worth mentioning here that the fares were last revised in May 2005. I blame the government and not the transporters for this increase, said Faiq Ali Khan, a public transport user adding that, It is the fault of the government since it has failed to control inflation and this increase would have a cascading effect on the general public, especially the poor that use public transport and make majority of citys population. He said: Every next day I read news about people committing suicide owing to poverty and after this increase the frequency of such acts would increase. Khan, who teaches at a private coaching centre, said that someone who earns between Rs4,000 to Rs5,000 would now have to settle for one meal a day since half of his earning would go to paying for transport. If our politicians stop using imported 4WD vehicles and start using 800 CC vehicles, there would be a huge reduction in the import of oil, he said and asked why the government does not reduce the facilities given to high ups who are escorted with scores of police mobiles which causes an increase in oil consumption. Khalid Masood, a senior citizen, said that one can understand that the government cannot provide subsidies on petrol for all, but at least it should give subsidy to the operators of public transport, as, according to him, this increase would have a direct bearing on the lowincome segment of society. Women are already facing the height of inconvenience in public transport buses, this increase would upset them further, said Faila Gul, who works at a private firm. Majority of women work to support their families and this increase would be an additional burden on them, she said, adding: A large number of women work in factories and hardly earn Rs5,000 and with this increase, they would be facing extreme inconvenience. With the increase of fares we would have to spend approximately Rs2,000 a month on transport and what would we be saving then? she questioned. Talking to The News, President Karachi Goods Carriers Association, Khalid Khan said: We do not favour increase in fares but demand from the government to give us some subsidy since we are one of the largest consumers of diesel in the country.

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The ministry press release said that the announcement has been made after consulting the transporters. (By Farooq Baloch, The News-13, 28/03/2008)

Proposed project a threat to ecosystem

The proposed multi-billion dollar Sugar Land City project will destroy estuaries and oysters found at the mouth of Hub River besides bringing misery to the local population that has been inhabiting the area for centuries now. The massive project will lead to an environmental disaster and destroy estuaries and oysters found at the mouth of the Hub River, Mohammad Nauman, an associate professor at Karachis prestigious NED University of Engineering and Technology told The News. Oyster is a term commonly used for a number of different groups of bivalve mollusks, most of which live in marine habitats or brackish water. The shell consists of two usually highly calcified valves which surround a soft body. Gills filter plankton from the water and strong adductor muscles are used to keep the shell closed. Some of the groups known as oysters (true oysters) are highly priced for purposes of human consumption (both raw and cooked). However, certain other species which are also called oysters (for example the pearl oyster) are not widely eaten, at least not in the recent times. Tahir Qureshi, Director, Coastal Ecosystem, the International Union for the Conservation of Nature-Pakistan (IUCN-P), confirmed that the proposed Sugar Land City will have an adverse impact on oysters and the ecosystem of the area. The mouth of the Hub River is already contaminated with industrial pollutants and the biodiversity is threatened in the area. The development of Sugar Land City will further deteriorate the existing situation and impact the pristine and threatened ecosystem of the area, he said. The Master Plan of Sugar Land City involves the development of most of the citys public beaches, such as Hawkes Bay and Sandspit as well as Manora and Cape Monze. The project has been initiated by Limitless, the first integrated real estate developer launched by Dubai World a private developer. Dubai World is the parent company managing and supervising a portfolio of businesses and projects. Sugar Land City will be the first overseas project for Limitless. The first announcement of the project came on Dubai Worlds website on June 5, 2006, where it stated that Limitless will develop the Karachi Water Front Project. This was followed by The News that a Memorandum of Understanding (MoU) has been signed by Pakistans former Minister of State and Privatisation and Investment, Umar Ahmad Ghuman, and Dubai World Chairman, Sultan Bin Sulayman. The MoU was followed by a high-level meeting held in Islamabad on June 24, 2006, which was chaired by former Prime Minister Shaukat Aziz. It was decided in this meeting that since the area indicated by Dubai World is very large, the development may start in phases. It was envisaged that in the first phase, Manora along with Sandspit and the areas behind it in the Karachi Port Trust (KPT) western back waters, up to KPTs land limits with Hawkes Bay, would be offered to the group. In the second phase, while developing the Hawkes Bay Beach Front, it will be ensured that a few portions are left open for the general public for recreational purposes. This project involves an area of 60,000 acres with a total investment of $68 billion that has been approved by the federal government. The first phase of the project will involve an investment of two billion dollars over the next 10 years. It is also expected to involve much larger investments in the later phases. Yet another multi-billion dollar DHAs Waterfront Development Project is planned over a stretch of 14 kilometres of land from Sindbad (Old Casino) up to the Golf Course on Clifton Beach. The plan divides the coastline into seven distinct zones (A to G) and envisages high-rise commercial building complexes, hyper marts, food courts, cinema, amusement park, five-star hotel, an underwater world with a Dolphin Park and aquarium, amphitheatre complex with a capacity of 6,000 people and water sports facilities, according to leading town planner and architect Arif Hasan. Right from the beginning, however, the project has been resisted by saner elements since they feel that it would jeopardise urban planning and create ghettos along with resorts for the super rich. They also argue that the project is a bad omen for biodiversity. Dr Ejaz Ahmed, Deputy Director general, Worldwide Fund for Nature-Pakistan (WWF-P) argued, for instance, that the development of Sugar Land City will also affect the coral reefs at Charna Island. Corals are an important part of the ecosystem and play an important role in reducing the intensity of tsunamis. They act as rocks. They are also important in eco-tourism, he said. More importantly, the development of Sugar Land City would uproot as many as 200,000 people who have been living in the Union Council-8 (Keamari Town) for centuries. The historical villages of the Baloch inhabitants will be displaced which will bring more miseries for the inhabitants, Prof. Nauman said. The development of Sugar Land City will lead to resorts for the super rich on one hand and ghettos for the poor on the other, he added. This view is corroborated by Mubarak Baloch, Nazim Union Council (UC) 8 (Keamari Town). The radius of UC 8 is about 80 square kilometres and that means that a large number of goths (hamlets) will be devoured by Sugar Land City, he said. Strangely enough, the federal government is adamant about going ahead with Sugar Land City despite the fact that even the Karachi Master Plan 2020 points out that the ecology of the area should not be destroyed by any project. Karachi has a coast of 90km, much of it with vulnerable mangroves that needs protection and preservation as an ecological system. Furthermore, the nature of the sea and the coast are such that any modification of the basic structure of the coast can have serious and far-reaching implications on the shape and structure of the coast through erosion and

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deposits that can affect both the ecosystem and impact on the harbour and access channels, reads the proposed programme of the coastal development. (By Shahid Husain, The News-20, 28/03/2008)

APRIL
Growth rate may fall to 6pc, says SBP
KARACHI, March 31: All major indicators are going against economic growth and previous governments huge spending and understatement have compounded the situation, says the State Banks second quarterly report issued on Monday. The report presents a grim picture of economy but still sees some hope of achieving 6-6.5 per cent growth as against the targeted 7.2 per cent for the fiscal year 2007-08. The SBP said the fiscal deficit the gap between earning and spending had turned into a threat and the bank found evidence that it was understated. The troubling aspect is that the fiscal deficit may be understated. Evidence suggests that at least a part of the subsidy on fuel prices during July-Feb FY08 was not financed from governments account, the report said. Instead of making payment, the government provided guarantees to oil companies which borrowed from banks through these guarantees. This hidden spending will appear next year as fiscal deficit. Finding reasons for the lower economic growth, the SBP report said that so far principal drag on the years growth had been the outcome of Kharif harvests and a slowdown in the LSM (large-scale manufacturing) growth. The growth in LSM fell to 4.5 per cent during July-December as compared to previous years six-month growth of 8.3 per cent. This is alarming, especially in textile sectors export growth which recorded a fall of 3.4 per cent during this period. The textile sector earns over 60 per cent of the entire export earnings of the country. Overall, the slowdown in LSM during the six months was broad-based and was seen in 11 of 15 industrial groups. Of these, paper and board, metals, fertiliser and electronics industries registered a decline in production. In contrast to these under-performers, pharmaceuticals, POL, cement, engineering and wood industries showed a strong growth. Domestic as well as external factors, including continued strong increases in international commodity prices, domestic energy woes and dampened demand (particularly for textile exports), are responsible for relatively slow economic growth in the country, the report said. Economic losses in the aftermath of Dec 27, 2007, have further weakened the chances of meeting the annual target. Sighting the inflationary pressure as the real woe to the economy, the report said risks to macroeconomic stability had increased considerably as fiscal and current account deficits turned out to be considerably wider than envisaged in the monetary policy framework. The rising fiscal deficit and its financing posed severe complications for the monetary policy framework for FY08, the report said, adding that it had eroded the impact of monetary tightening measures undertaken in August last year, and increased the risks of a further surge in inflationary pressures. The decline in countrys foreign exchange reserves, which fell to $14 billion in February from $15.6 billion in June last year, had weakened the Pakistani rupee as it could not hold its grounds against the US dollar and depreciated by 3.5 per cent during Jul-Feb FY08, the report said. The SBP reported that most indicators for the services sector showed a robust growth during the first half of the current fiscal year. The report showed a strong growth in the electronic media and telecommunication sub-sectors on the back of governments liberal policy and foreign direct investment (FDI) in recent years.In particular, expansion in cellular services is impressive as cellular density has more than doubled during the period between July 2006 and December 2007. The report said that the agriculture sector was likely to record a reasonable growth during the current fiscal year. However, prospects of achieving the targeted 4.8 per cent growth for the year remained dim, it added. The SBP said that record sugarcane and maize harvests, anticipated good wheat harvest and above-target growth in minor crops were unlikely to overcome the drag from the disappointing performance of some major Kharif crops (cotton and rice). The livestock sub-sector, hit by bird-flu virus may see some slowdown in growth, it said. (By Shahid Iqbal, Dawn-1, 01/04/2008)

Ministers & portfolios

ISLAMABAD: The names of the new cabinet ministers, and their portfolios, are as follows: Shahid Khaqan Abbasi, commerce; Hameedullah Jan Afridi, environment; Raja Pervaiz Ashraf, water and power; Khwaja Muhammad Asif, petroleum and natural resources; Ghulam Ahmad Bilour, local government; Ishaq Dar, finance and economic affairs; Tehmina Daultana, culture; Nazar Muhammad Gondal, narcotics control; Khawaja Muhammad Khan Hoti, social welfare; Rana Tanveer Hussain, defence production; Ahsan Iqbal, education;

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 Qamar-uz-Zaman Kaira, Kashmir and northern areas; Rehmatullah Kakar, housing and public works; Mehtab Ahmed Khan, railways; Chaudhry Nisar Ali Khan, communications; Najmuddin Khan, frontier regions; Humayun Aziz Kurd, population welfare; Chaudhry Ahmed Mukhtar, defence; Farooq H. Naek, law and justice; Naveed Qamar, ports and shipping; Shah Mehmood Qureshi, foreign affairs; Khwaja Saad Rafiq, science and technology; Sherry Rehman, information and broadcasting, and; Syed Khursheed Ahmed Shah, labour. (Dawn-1, 01/04/2008)

State Bank cuts growth target to 6-6.5pc

KARACHI: The State Bank of Pakistan (SBP) has reflected a deteriorated performance of key economic indicators of the country during second quarter of current fiscal 2007-08. The SBP in its second quarterly report issued on Monday estimated that real Gross Domestic Product (GDP) of the country would be in the range of 6.0 to 6.5 percent against original target of 7.2 percent besides of elevated inflation in the range of 8.0 to 9.0 percent much above the target of 6.5 percent for year, thanks to unanticipated high commodity prices, a main cause to bring about stringent inflationary pressure in the economy. In FY08 the central bank projected Monetary Asset (M2) growth in the range of 15.5 to 17.5 percent against initial target of 13.7 percent, which was recorded at 19.3 percent in FY07. The current account deficit is projected to be around 6.0 percent of GDP during FY08 reflecting the rising import growth and slow expansion in textile exports, SBP said. The central bank estimated exports at $19.7 billion for current fiscal year against $18.9 billion of original target and $17.1 billion in FY07, contrary to this central bank projected import to $32.1 billion, which was recorded $17.1 billion in FY07. SBP calculated worker remittances in the range of $6.0-6.5 billion compared to $5.8 billion original target and $5.5 billion of FY07. Central bank observed that reducing the fiscal deficit in remaining part of the fiscal year will be challenging but is nonetheless essential. The SBP said that a part of deceleration in revenue growth during H1-FY08 was likely to be reversed as substantial non-tax receipts were expected in the later half of the fiscal year however; the annual growth in tax collection was likely to remain weak. The report added the combination of rising fiscal deficit and weak external receipts had pushed the government borrowings from SBP to a record Rs359.3 billion during July -March FY08, compared to only Rs25.6 billion in the corresponding period of last fiscal year. This has been instrumental in sustaining the growth in broad money (M2) for the period at 17.6 percent YoY, significantly offsetting the central banks efforts to tighten monetary policy, the Report added. Growing macroeconomic imbalances, particularly widening fiscal and current account deficits continued to create complications and add to inflationary pressure, the SBP said and maintained that Pakistan had been so far largely been untouched by continuing turmoil in the international credit markets. SBP observed that rise in fiscal deficit in H1-FY08 had more troubling implication than the increase in previous year and noted that modest increase in the fiscal deficit during the preceding two years had been relatively less troubling, as (1) revenue growth had remained strong, and (2) rise in spending essentially reflected the impact of post earthquake relief and reconstruction (excluding this the fiscal deficit remained below 4.0 percent of GDP); these substantive expenditures would fall sharply in a few years. In both of the year the current expenditure during the first half of the fiscal year had remained below 7.0 percent of the full year GDP, in the contrast, the fiscal deficit during the first half of FY08 is estimated to be roughly 3.6 percent of the estimated annual GDP- nearly twice the figures for the last two years, this incorporated a decline in revenue growth as well as rising current spending. The report said that impact of the widening current account deficit, driven essentially be the trade deficit was compounded by a decline in financial & capital account balance in the same period. The SBP said that sustained larger current account deficits pose risks to macroeconomic stability. Over the last few years, Pakistan was able to comfortably sustain current account deficit due to favourable domestic and international investment conditions that encouraged large non-debt creating financial inflows into the country. As a result, Pakistan was not only able to run large deficit but also added to its foreign exchange reserves. However, that will be an increasingly risky strategy, given the stresses on the domestic economy as well as the relatively less favourable dynamics in the international capital markets. Report also suggested that volatility in portfolio investment points to the need to reduce dependence on these flows and the corresponding need to increase domestic savings. The latter, in particular would increase market depth and lower dependence on potentially volatile external flows. Pakistans need to improve its infrastructure and its dependence on imported inputs, reducing the current account deficit to sustainable levels must perforce target export growth. The most efficient measure here would be those targeting a reduction in inflation and to reduce the cost of doing business in Pakistan. The Report said the information available by mid-February 2008 suggests that agriculture sector is likely to record

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reasonable growth during the fiscal year. Prospects of achieving the targeted 4.8 percent growth for the year, however, remain dim, largely due to disappointing performance of cotton and rice crops. The Report pointed out that large-scale manufacturing (LSM) has been encountering headwinds since the start of FY08. Domestic as well as external factors are responsible for the relatively slower growth in this sector compared to the stellar performance of preceding years. These factors include: the continued strong increases in the international commodity prices, domestic energy woes and dampened demand (particularly for textile exports). Economic losses in the aftermath of December 27, 2007 have further weakened the chances of meeting the annual target. Overall, the slowdown in LSM during H1-FY08 was broad based and was seen in 11 out of 15 industrial groups. Most of the indicators for the services sector suggest robust growth in this sector during the first half of FY08. Wholesale and retail trade seems likely to perform well given a significant increase in imports (which accounts for more than half of the value addition in this sub-sector). This sub-sector is also likely to benefit from expansion in the network of domestic and foreign chain store, the Report added. (By Shahzad Anwar, The News-15, 01/04/2008)

SBP cuts GDP growth forecast to 6-6.5pc

KARACHI: The State Bank of Pakistan has cut its forecast for full-year gross domestic product (GDP) growth from the 7.2 percent target set in the beginning of this fiscal year to 6 or 6.5 percent, citing domestic turbulence and external shocks as the reasons. Due to strong aggregate demand amidst a continuing fiscal stimulus, inflation in the fiscal year 2008 would be in the range of eight and nine percent, significantly above the target of 6.5 percent for the year, said the central bank. M2 (money supply) growth is likely to be in the range of 15.5 and 17.5 percent against the target of 13.7 percent. The bank projects the current account deficit to be around six percent of GDP during the year against the target of five percent, reflecting the rising imports growth and slow growth in textile exports. It is likely that the annual fiscal deficit will exceed the four percent of GDP target, the central bank said. The cumulative fiscal deficit for the first half of fiscal year 2008 as a percentage of estimated annual GDP was almost twice that seen in the previous two years, reaching a seven-year high for the period. The principal drag on the years growth has been the outcome of kharif harvests and the slowdown in large-scale manufacturing growth. The services sector, on the other hand, seems set to show good performance for the sixth consecutive year. Agriculture growth: Prospects of achieving the targeted 4.8 percent agriculture growth for the year remain dim, the bank said. The record sugarcane and maize harvests, anticipated good wheat harvest, and above-target growth in minor crops, are unlikely to overcome the drag from the disappointing performance of cotton and rice crops. Overall, the slowdown in large-scale manufacturing during the first half of fiscal year 2008 was broad-based and was seen in 11 out of 15 industrial groups. Inflationary pressures in the domestic economy have continued to mount throughout the July to February period, with particularly sharp increases in the later months of the period, despite the central banks efforts to contain the growth in aggregate demand. Consumer price index food inflation began to strengthen in September 2007 and was recorded at 16 percent in February 2008 after reaching a local peak of 18.2 percent during January 2008, the highest level seen since April 1995. Pakistan could not sustain the modest improvement in the current account deficit seen during the first quarter of fiscal year 2008, and it widened sharply in succeeding months. The cumulative July to January current account deficit rose by 47.1 percent year-over-year, compared to the 51 percent increase in the same period of the previous year. Given that the decline in the financial account surplus was quite moderate, it is clear that the decline in the countrys foreign exchange reserves essentially reflects the sharp increase in the current account deficit. Overall foreign exchange reserves declined to $14 billion by the end of February (fiscal year 2008) compared with $15.6 billion as at the end of June in fiscal year 2007. As a result of the worsening of external account during the July to January period in fiscal year 2008, the Pakistani rupee could not hold its grounds against the US dollar and depreciated by 3.5 percent during July to February. Growing macroeconomic imbalances, particularly the widening fiscal and current account deficits, continued to create complications and add to inflationary pressures. The fiscal deficit during the first half of this fiscal year is estimated to be roughly 3.6 percent of the estimated annual GDP - nearly twice the figures for the last two years. This incorporates a decline in revenue growth, as well as rising current spending. Support to aggregate demand due to fiscal deficit contributed directly to a rise in monetary aggregates; raising inflationary pressures, complicating monetary management, and stoking the growth of the current account deficit. The impact of the widening current account deficit on the countrys overall balance was also compounded by a decline in the financial and capital account balance. (By Mushtaq Ahmad, DailyTimes-B1, 01/04/2008)

Commission working on new privatisation plan

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ISLAMABAD, April 1: The Privatisation Commission will finalise in 10 days a plan to sell a number of state sector enterprises, including banks and power companies, by June 30. Sources told Dawn that Minister for Privatisation, Investment, Ports and Shipping Syed Naveed Qamar presided over the first meeting on Tuesday and stressed the need for accelerating the privatisation process. The minister said the coalition government needed proceeds from privatisation to lower the foreign debt burden and arrange funds for poverty alleviation. The minister was informed that preparations to float Global Depository Receipts (GDRs) of the National Bank of Pakistan (NBP) and Habib Bank (HBL) had been completed and the transactions were expected to be completed before the end of the current financial year. Similarly, the sources said, the sale of GDRs of the Kot Addu Power Company (Kapco) had been finalised, and it would be completed with the approval of the new minister. Mr Qamar said that privatisation would contribute to the overall economy by generating more taxes and employments, increasing production and improving quality and efficiency. He said that previous Peoples Party governments had taken trade unions into confidence over the sale of units but the former government had not bothered about them. He said that strong relations with trade unions would be rebuilt and they would be again made partners in the privatisation process and their legitimate interests would be safeguarded. He said the government would fully involve the people, the press and parliamentarians to make the privatisation process transparent. We would carry out the privatisation of state-owned enterprises in the interests of the people of Pakistan who are the real owners of these assets, he added. Mr Qamar also directed officials of the commission to put up a realistic timeline for the privatisation of public sector entities. (By Ihtasham ul Haq, Dawn-1, 02/04/2008)

ADB doubtful about Pak growth sustainability

ISLAMABAD: The Asian Development Bank (ADB) has raised doubts about long-term sustainability of growth patterns for Pakistan, owing to domestic political uncertainty, higher global oil and commodity prices. The ADB also lowered down Pakistans GDP growth forecast to 6.3 per cent against the actual target of 7 per cent, due to the lingering energy crisis, while the revised upward inflations touched 8 per cent against the envisaged annual target of 6.5 per cent for the current fiscal year. Issues of long-term sustainability therefore, arise, especially in the context of high global oil and commodity prices and domestic political uncertainties, stated the Asian Development Outlook (ADO-2008) released by the ADB states on Wednesday. The ADO 2008 also outlined twin deficits current account deficit and fiscal deficit, as major challenges for Pakistan in the future line of action. External debt rose by another $2.5 billion in the first half of FY2008 as a consequence of the rising current account and fiscal deficits, while foreign currency reserves were also depleting. Revenue shortfalls produced by slowing economic activity and expenditure overruns, may limit fiscal space and reduce public investment, which in turn may affect private investment and growth. In addition, continued tight monetary policy conditions in view of persistent inflation could serve to dampen demand and limit any expansion. Despite tight monetary conditions and moderating growth, inflation is expected to overshoot SBPs target of 6.5 per cent and reach 8 per cent, reflecting continued pressure on food prices and the pass-through of some higher global oil prices. Yet, inflation pressures have persisted, with food prices rising to 11.6 per cent in January 2008 (based on a 12-month moving average), compared to the 8.5 per cent, a year earlier. The fiscal deficit is likely to exceed the Governments target of 4 per cent of GDP for the FY 2008, mainly on higher interest payments and a rise in development expenditures. With the fiscal deficit widening, and external inflows remaining subdued, the Governments borrowings from SBP in FY2008 had risen more than threefold by 19 January 2008, relative to the same period in FY2007. This led to a sharp 90 per cent increase in the net domestic assets of the banking system, and resulted in an annualized growth of 19.2 per cent in M2. The current account deficit in the first 7 months of FY2008 worsened by 47 per cent, compared to the same period in FY2007, and is likely to widen to 6.3 per cent of GDP for the full year. The trade gap widened by over 25 per cent in the first 7 months of this fiscal year. The financing of the current account deficit remains a key issue, given the deterioration in the financial account caused by the halt in foreign portfolio investment in the first 7 months of FY2008. Difficulties in global financial markets could further affect capital inflows. In addition, planned issues of global depository receipts may not materialize. The declaration of emergency on 3 November 2007 and the downgrading of Pakistans credit rating outlook resulted in a net outflow of $243 million from special convertible Pakistani rupee accounts held by foreigners during the month. Altogether, net foreign investment tumbled by 34.9 per cent in the first 7 months of FY2008 relative to the same period in FY2007, caused by a slowdown in FDI growth and virtually no portfolio investment as foreign investors shied away from the stock marketsa demonstration of the high level of volatility of such inflows. With a weakened financial account, the burgeoning current account deficit led to a drawdown on SBPs foreign reserves of almost $1.5 billion between 31 July 2007 and 15 February 2008.

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External debt rose by another $2.5 billion in the first half of FY2008 as a consequence of the rising current account and fiscal deficits. Improved economic fundamentals have enhanced the resilience of the economy and helped absorb shocks, including higher global oil prices and 2005s devastating earthquake. Growth, however, has generated a heavy imbalance in the external current account, which could affect the economic momentum. The current account deficit has been financed largely from strong incoming foreign investment. External sources have also been employed, increasingly, to finance the fiscal deficit. (By Mehtab Haider, The News-15, 03/04/2008)

Milk sellers cream profits as prices skyrocket again

In a recent survey conducted by The News, in which around 40 shops in various areas of Karachi Central were surveyed, at least 90 per cent of the shops were found to be selling milk at rates that exceeded the state-published threshold price. Over the past few days, cattle owners have increased prices at which milk is sold to wholesalers. The latter have, in turn, increased their profits while selling it to retailers. Further down the chain, end-users are now getting milk at around Rs42 per litre (as opposed to the official rates of Rs34 per litre). All-Karachi Milk Retailers Welfare Association member (AKMRWA), Zahoor Elahi, blames cattle farmers for the entire problem. The City District Government Karachi (CDGK) raids only us, he said. Government officials have taken money from these dairy farmers and they are not being attacked or questioned at all. Only retailers are being targeted. Around 35 milk sellers were arrested on Wednesday alone, Elahi said, adding that the number varied on other days. Another AKMRWA member, Malik Tahir Husain, said that the price of milk for retailers was around Rs1,240 per 37.5 litres at the end of last year. Middlemen had to be paid Rs 40, bringing the total price for retailers to approximately Rs1,280 per 37.5 litres (Rs 34.13 per litre). Prices have now been increased to Rs1,430 per 37.5 litres (Rs38.13 per litre), including Rs50 which have to be paid to middleman, he said. Even though milk is supplied to retailers at rates fixed for every 37.5 litres, it should technically be 40 litres, Husain said. Prices have risen even though were not even paying for 40 whole litres. Also, retailers have to pay a number of additional costs for rubber bands, polythene bags, electricity, rent and labour, for instance. The prices of all of these have increased, he said. How are we supposed to pay for this, when we are not allowed to keep even a Re1 profit? As a result, the city has seen many of its milk shops change their prices from Rs38 per litre to Rs40 per litre over the past few days. Most milk sellers have fixed a rate of Rs40 per litre, but in many posh areas, the some milk sellers are charging Rs42 per litre, Husain said. Despite that, we have not raised the prices of yoghurt, lassi, or other dairy products at our shops. People in many areas have also complained about how milk retailers change their prices to the State-imposed rates when magistrates or city government officials are around, but revert to increased prices as soon as the officials have left. They wait for the time when the official inspection is over, and then they just rudely tell us to either pay for the milk at the prices they demand, or go somewhere else, says Mobeena Ahmed, a resident of Mehmoodabad. Dairy farmers claim meanwhile, that milk prices have not been raised arbitrarily. Rather, they said, the rise is a result of an increase in the prices of feed and fodder for the cattle. The prices of chaara are sky high, said Haji Akhtar, a dairy farmer. In such a case, how can they expect us to not increase the selling price of milk to middleman and retailers? (By Xari Jalil, The News-20, 03/04/2008)

ADB not satisfied with power sector reforms

KARACHI, April 3: Despite considerable effort having been made, the Asian Development Bank-assisted power sector reforms in Pakistan have yet to fully achieve its desired objectives. This was stated by ADB Country Director Peter L. Fedon while speaking on the Role of the Asian Development Bank in Pakistans Development at a meeting of the Pakistan Institute of International Affairs members here on Thursday. The meeting was presided by PIIA Chairman Fatehyab Ali Khan. Expressing his concern over the energy crisis in Pakistan, Mr Fedon said the power sector in this country was characterised historically by huge losses, both technical and commercial, which had to be tackled by the government. Every year, he said, the government had to provide a subsidy of close to $1 billion to make up for the difference between the notified tariff and actual cost of electricity. These accumulated debt overhang/arrears to date stood at $4 billion, he added. He pointed out that the ADB had supported the power sector reforms and investments through its $355 million energy sector restructuring loan (in 2000), $800 million power transmission enhancement (in 2006), $510 million renewable energy development programme (in 2006) and $800 million power distribution enhancement (in 2008). While Wapda has been unbundled to a degree, the successor generation, transmission and distribution companies lack a clear mandate to focus on commercial performance and client orientation and do not have the necessary financial and operational independence, he observed. He was of the view that chronic under-investments in the sector had led to a generation shortfall, transmission constraints and distribution bottlenecks, as well as a distorted mix of energy sources. The nuclear power generation is small.

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He stressed that the overall efforts for reforms had to be expedited to ensure energy security because the current situation in the power sector highlighted the very high economic cost to the nation. The cumulative lending assistance from the Asian Development Bank to date amounting to $18.6 billion for the reforms was aimed at promoting economic growth and development but at times these reforms did not produce the desired results, he said. One of the priorities set by the ADB is the better implementation of projects with balanced approach. Some of its projects in Pakistan, including those in Sindh, are not moving properly, Mr Fedon observed. He said that the Banks policy reforms measures related to improving policy and regulatory environment and supporting increased efficiency and effectiveness in both public and private sectors. The conditionality which attempts to buy reform from an unwilling partner has rarely worked. However, he had no reply when asked that why the ADP appeared approved of the alleged anti-worker policies pursued by the Shaukat Aziz government, especially with regard to reforms through SMEDA. He also had no answer when his attention was drawn to the negative impact of the governments investment policies vis-a-vis the power sector in the 90s. Mr Fedon stressed that the new government should focus on the priority areas infrastructure, logistics, energy, water, connectivity, urban services and private sector development , and said that with right policies and better implementation, Pakistan could replicate success. He pointed out that the ADB contributed to Pakistans major reforms and investment programmes over the past 10 years and these included capital market development, trade export promotion, industry, energy, agriculture, access to justice, decentralisation, financial (non bank) markets, governance, local government capacity building, etc. The ADB official said that the bank was supporting mass transit system costing $2 billion in Lahore through private sector investment and discussing with the government on an improved urban transport system for Karachi. (Dawn-19, 04/04/2008)

Fluctuation in prices makes Hindu community anxious to invest in gold

Instability in prices of gold, while affecting many quarters, has caused anxiety in the Hindu community in particular. There is tremendous pressure to invest savings in gold before the precious metal becomes completely unaffordable for fathers who cannot compromise on the Hindu custom of dowry, The News has learnt. Irrespective of their caste and community, the demand for gold among Hindus remains constant as gold is not just seen as social security but also a symbol of marriage without which a Hindu girls marriage is inconceivable, says Chandar Keswani, a Sindhi Hindu who comes from a middle class background. Keswani has two daughters. Although his eldest daughter is just ten years old, his anxiety is apparent. I have been keeping an eye on the increasing prices of gold and my brother-in-law has been advising me to invest in gold before its rates inflate again but I do not have enough savings yet, he says. However, he did manage to invest a few hundred thousand rupees when the prices rose up to Rs17,600 (per 10 grammes). On an average, a Hindu family is expected to give at least seven to eight Tolas of gold (equivalent to 95 grammes) as dowry. At the current gold price, which is about Rs18,473 per 10 grammes, a family has to save at least Rs1.7million for gold jewellery which is only a part of the dowry. Furniture, kitchen utensils and electronic goods are among other items. Wealthy Hindus sometimes give away as much as 20 to 30 Tolas of gold. A woman cannot enter wedlock without gold jewellery because it reflects our centuries old culture and religion, adds Keswani. The significance of gold derives from effigies of Hindu gods like Lakshmi (God of Wealth) in whose picture gold coins are seen dropping down from her palms. Gold is considered to be a symbol of good luck for the Hindu community. Although the Hindus in Karachi, who migrated from interior Sindh over the past few decades, have, by and large, adapted to the citys secular environment, the deep-rooted custom of dowry is still prevalent even among the educated Hindus. They see investment in gold as a productive saving for a woman in times of difficulty, apart from its religious significance. Its there in our psyche. However, the rise in gold prices has limited their purchasing power thus compelling them to seek better job opportunities or work over-time in their present jobs. We have no choice. Our salaries are not increasing with the rise in the inflation rate. We have no choice so we have to put in extra hours to survive in a competitive market and yet be able to save enough for our daughters wedding, complains another member of the community. On the other hand, Hindu merchants are not content either as the uncertain political situation in Karachi does not earn them enough profit to save. While the trend of giving away assets, such as property or a share in business, is fast becoming popular among Hindus in other parts of the world, Keswani, who is also an intellectual, predicts it will take a few years for Hindus in Sindh to adapt to the change as Pakistan is gradually moving away from a predominantly agrarian economy to a market economy. Given the present circumstances, only the fittest will survive, he said. (The News-13, 04/04/2008)

SC takes up Rs 54 billion loan write-off case

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ISLAMABAD: A huge financial scam against the Shaukat Aziz-led government reported by The News in October last, about the top guns of Pakistan quietly getting loans of Rs 54 billion written off using their political clout, has now brought officials of the State Bank of Pakistan and the Finance Ministry in the trial box of the Supreme Court of Pakistan. The SC has started proceeding on a suo moto action and a copy of the suo moto notice has also been sent by the Registrar of the Supreme Court to The News to make its correspondent party to the proceedings to verify the facts before the court. The date for the hearing of this scandalous case has been fixed for April 10 before the bench being headed by Chief Justice Abdul Hameed Dogar.The News had reported last year that influential people had got Rs 54 billion bank loans written off on the basis of a decision taken by the financial team of Gen Pervez Musharraf in October 2002. This shocking disclosure was made in a secret report submitted before the Public Accounts Committee (PAC) of the National Assembly by the Auditor General of Pakistan.While the Shaukat Aziz government claims to be the first in the history of Pakistan that completed five years in office, few people have suspected that it would also be 'credited' with writing off such an unprecedented amount of loans within its five years in office to facilitate the top guns of the regime. The AGP report had shown that a total of 50,000 persons, including politicians, civil and military business concerns and business tycoons of Karachi, Lahore and other areas, were the direct beneficiaries of this massive favour. Two chief ministers of the provinces and their families having big business concerns and stakes are also the beneficiaries of these written off loans.The ex-chief minister of a province, whose family owns sugar mills, also got his loans written off under this scheme. The chief minister of another province got loans written off outstanding against his Ghee mills. Even some foreign firms and multinational companies and a private bus service operating from Lahore to different cities of the Punjab were also extended this facility. Earlier, soon after elections in October 2002, the then finance minister Shaukat Aziz and his financial team at the State Bank approved a 'written off loan scheme' in the same month (October 2002) after certain top politicians of the government put them under pressure to ease the financial burden of loans from their business concerns. Former minister of state for finance Omar Ayub had then strongly defended the policy of the government to introduce a scheme to help the borrowers settle their non-performing loans (NPLs) with the banks, including the National Bank. He had stated that these NPLs were settled in the light of Circular No 29 issued by the State Bank. Omar said a total of 50,414 borrowers availed of the facility by settling their loans under this scheme, which he confirmed was introduced in October 2002 after the general elections. Omar said these decisions were taken by the boards of these banks that were quite independent and were not under the influence of the government. He said actually these non-performing loans were becoming a burden on the banks itself, so the decision was taken to rather settle them after offering them a package. (By Rauf Klasra, The News-3, 04/04/2008)

More of our men are committing suicide: experts

KARACHI: Suicide has become a major public health problem in Pakistan but despite this there are no official statistics and national rates are unknown. Rates for men are consistently higher than women; the highest rates for men were between the ages 20-40 years in Larkana. Given the stigma, experts believe these figures to be an underestimate. To determine rates experts carried out an analysis of suicide reports from six cities in Pakistan. Their findings were put together in an article Epidemiology of Suicide in Pakistan: Determining Rates in Six Cities that appeared in the Archives of Suicide Research in April. Suicide is one of the ten leading causes of death in the world today, accounting for almost a million deaths worldwide annually. Along with neuro-psychiatric disorders, suicide contributes 12.7% to the global burden of disease. Information on suicide from Islamic countries is lacking, including those with populations exceeding 100 million people such as Bangladesh, Indonesia, and Pakistan. There are no official data on suicide from Pakistan. Data on suicide is not included in the national annual mortality statistics. As a result, national rates on suicide are neither known nor reported to the WHO. Pakistans population of 162 million makes it the sixth most populous country in the world. Ninety-seven percent of its people are Muslims, while Hindus, Christians, and Zoroastrians form smaller but important minorities. Official unemployment stands at 12% of the eligible workforce. Health spending is 0.7% of the national annual budget. Mental health does not have a separate budget but is believed to be 0.1% of the health budget. Under Pakistani law both suicide and deliberate self-harm (DSH) are illegal acts, punishable with a jail term and a heavy financial penalty. Every case of suicide or attempted suicide must be taken to one of the government hospitals designated medico-legal center (MLC), where the police register a case and conduct an enquiry into the circumstances of the act. In practice, although prosecution is rare, harassment and extortion of money from survivors and their families is not uncommon. People avoid going to the MLCs and many seek treatment from private hospitals that neither diagnose such cases as suicide nor report them to the police. There are also strong social sanctions against suicide and families are often ostracized. For these reasons suicide is under-researched and under-studied in Pakistan. Despite this there is compelling evidence that incidences of suicide have increased in Pakistan in recent years. The lay press in Pakistan regularly report on suicide incidences in Pakistan. These news reports are based on surveys of police stations of different cities and reports of NGOs that collect information on suicides. There is therefore need to gather evidence to inform policy for development of preventive programs. The absence of suicide rates in Pakistan is a major impediment in informing policy, monitoring suicide incidences or estimating effectiveness of suicide prevention programs. The six cities include capital cities of three provinces, i.e., Karachi (Sindh province), Lahore (Punjab province), and Peshawar (NWFP province), while the other three cities

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(Faisalabad, Rawalpindi, and Larkana) have populations in excess of a million people. Only one province, i.e., Balochistan (capital Quetta) is not represented in our study. Suicide rates in Islamic countries are considerably lower than other countries. In 1989 experts carried out a 71 nation cross-national analysis and showed when factors such as social, economic, and demographic modernity are controlled, Islam has an independent effect on lowering suicide rates. However, there is good evidence from a number of Islamic countries such as Iran, Turkey and Bangladesh that suicide occurs regularly in Islamic countries. In a recent study of suicide and undetermined deaths in 17 Islamic countries, experts argue that in many Islamic countries culturally unacceptable suicidal deaths may be hidden in the Other Violent Death (OVD) category, thereby artificially lowering suicide rates in these countries. The study highlights that suicide not only occurs regularly in Pakistan but rates are not as negligible as generally believed. When age- and gender-specific rates are calculated, they show much higher figures. It is important to note we used denominator of 20-59 years age group, as population percentage was available for this, rather than 20-40 age group. Therefore, rates are lower than would have been obtained with a lower denominator, i.e., 20-40 years age group. Currently, when a death of a person occurs, the head of the family is supposed to report it to the municipal administration within four days. For this a register is maintained in the town council office. Although there is a column for cause of death, this is filled according to the statement of the person notifying the administration of the death. Death certificates issued by hospitals usually state cardio-respiratory arrest/failure rather than suicide. (DailyTimes-B1, 05/04/2008)

Stress on poverty reduction

THE emphasis on eliminating poverty through the pursuit of social justice in the prime ministers hundred-day programme is a welcome change from President Musharrafs policy, which favoured the trickle-down recipe of poverty alleviation. The previous regimes erstwhile economic gurus went about the business of calculating the percentage decline in mean poverty in relation to the increased rate of growth, which became its battle cry. The much-advertised official verdict was that poverty in Pakistan had declined by over 10 per cent in the last four years. The merits and demerits of the official calculations notwithstanding (the veracity of the official calculations is subject to intense debate), by becoming obsessed with average reductions the previous regimes policy approach to poverty failed to develop an appreciation of the deep structural constraints impacting poverty in Pakistan. These structural constraints impact poverty in a number of ways. Their primary impact is the tremendous variation in household poverty that is caused at the district and sub-provincial level. These constraints have resulted in the creation of high-poverty districts that are stuck in poverty traps, where endemic poverty is persistent over the long run. The socioeconomic channels through which growth trickle down is said to happen remain extremely fragile in these districts. That is, growth alone has not and will not deliver in these districts. Given these poverty characteristics, it is highly probable to have reductions in average poverty coexisting with endemic poverty in the high-poverty districts. This happens because growth-led poverty reduction occurs in the low-poverty districts, where channels of the trickle-down effect are strong. The upshot of this process is that the reduction in average poverty ends up widening the poverty gap between different types of households and between households in different districts, thereby compromising precepts of social justice and democracy. This should not be read as an anti-growth argument. The argument is two-fold: (a) growth in itself is unlikely to dent endemic poverty in high-poverty districts; and (b) social justice requires that design of policy that uses the dividends of growth to mitigate and reduce endemic poverty in these districts as well. If the objective is to eliminate poverty, then policy should concern itself with reducing the large and persisting variation in poverty across districts in addition to reducing average poverty. I illustrate this argument about sub-provincial poverty traps with reference to Punjab using the Multiple Cluster Indicators Survey (2003-04) of the provincial government. The important point about this survey is that it is statistically representative at the district level and allows poverty inferences to be made at this level. The analysis that follows is based on work that I am currently doing with Ms Lyyla Khalid (Lahore University of Management Sciences) and Dr Naved Hamid (Lahore School of Economics). In order to make the argument tractable I divide Punjab into four regions. The north consists of the four districts of Rawalpindi, Attock, Jhelum and Chakwal. The west consists of the districts of Mianwali, Bhakkar, Khushab, Layyah, Muzaffargarh, D.G. Khan and Rajanpur. The south consists of the districts of the old Multan division and the old Bahawalpur state. The centre contains the remaining districts of the province. Using a poverty line based on the Economic Survey methodology we find that north Punjab has poverty head-count ratios (HCRs) of around 12 per cent and the centre has HCRs in the range of 20 per cent. In contrast, the west and the south of Punjab have HCRs of around 45 per cent, indicating the existence of poverty levels that are more than double that found in the north-centre districts of the province. Interestingly, rural poverty calculations show a similar trend. In the north, rural poverty remains extremely low and more or less in line with overall poverty in the region. However, in the case of the centre, rural HCRs are 10 per cent higher than overall HCRs in the region at nearly 30 per cent compared to 20 per cent. In the south and the west rural HCRs are extremely high and in the range of 55 per cent. The severity of poverty in the south-west, measured by the shortfall in household expenditure from the poverty line, is six times higher than the north and three times higher than the centre. This indicates that more than half the rural population of the south-west districts in one of Pakistans most developed provinces is living in conditions of endemic and abject poverty.

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Nearly a decade ago, Haris Gazdar using a different dataset that was unrepresentative at the district level, found similar gaps in sub-provincial poverty in Punjab, with the south and west emerging as the endemic poverty belt of the province. In spite of the statistical issues with the dataset, it appears that he had found an essential insight into the structure of poverty in Pakistan, which has failed to find appreciation in policymaking. Writing at the time of independence, Malcom Darling documented exactly the same sub-provincial gaps in poverty across Punjab. This suggests that the current regional gaps in poverty across Punjab appear to have persisted over the long run. Furthermore, our analysis suggests that seven districts in Punjab have rural poverty HCRs of over 60 per cent. These include the districts of: Muzaffargarh; D.G. Khan; Rajanpur; Rahimyar Khan; Bahawalpur; Bahawalnagar and Lodhran. Together these seven districts constitute a crescent of endemic poverty at the bottom of the province. We also find that the severity of poverty tends to be the highest in this crescent. Punjabs endemic poverty crescent is in stark contrast to the districts of Sialkot; Jhelum; Rawalpindi; Chakwal; Gujrat; Lahore; and Attock, which have poverty HCRs of below 15 per cent and a low severity of poverty ratio. The extremes of poverty in Punjab in 2003-04 ranged from a poverty HCR of six per cent in Sialkot to HCRs of more than 65 per cent in Rajanpur. These findings have important implications and raise important questions. The most important implication is that there are many Pakistans existing in the state of Pakistan. The people of these different Pakistans have different opportunities, aspirations, and access to different assets and endowments and are faced with different constraints. In some parts a majority of citizens are concerned with improving livelihoods, in others they are battling to survive the disease of abject poverty. These differences in outcomes will clearly have important implications for the design of a programme of social justice in Pakistan. The findings suggest that the one-policy-fits-all approach adopted by the provincial and federal governments is unlikely to work. This will, in all likelihood, increase the poverty gap between different sub-provincial regions and different types of households. It also suggests that on an index of abject poverty the placement of citizens from all districts is not equal and a policy emphasis on reducing averages may benefit residents of some regions more than others, as has been the case during the previous regime. Growing gaps at the sub-provincial levels are going to weaken the country politically. The most obvious question that needs to be addressed is why does poverty tend to be endemic and persistent in the high-poverty districts and sub-provincial regions as opposed to the low-poverty districts. And, finally, what implications does this have for policy. (By Ali Cheema, Dawn-7, 07/04/2008)

Trade union leaders want Rs12,000 as minimum wage

Trade union leaders on Sunday said that, considering the recent price hike, the government should the increase the minimum wage for workers to Rs12,000 per month. Addressing a joint press conference at the Karachi Press Club (KPC) Karamat Ali, Director PILER; Farid Awan, General Secretary, All Pakistan Trade Union Federation (APTUF); Mohammed Ali Shah, Chairperson Pakistan Fisherfolk Forum (PFF); Shaikh Majid, General Secretary, Peoples Labour Bureau (PLB) Karachi; and others lauded Prime Minister (PM) Yousuf Raza Gilanis speech in the National Assembly on March 29 and announcement of repeal of IRO 2002 and the increase in minimum wage and expressed the hope that the new government would pay attention to these matters while implementing its commitment of raise in minimum wage and repeal of IRO during its first 100 days. However, they said these announcements needed clarification on applicability and implementation. They said the government had to do a lot to turn these announcements into reality. The general impression is that the announcement of raising minimum wage will ensure Rs6,000 income for every one. But the trade unionists said they were afraid that this might not be the case as the present minimum wage even if fully implemented would benefit only a small number and exclude a vast majority of population. If the government is sincere to these commitments then it would have to make amendments in the laws and devise proper implementation mechanisms aimed at ensuring a minimum income for every citizen, they added. They said the PMs announcement to raise the minimum wage from Rs4,600 to Rs6,000 was for the unskilled workers. The relevant law Pakistan Minimum Wages for Unskilled Workers Ordinance 1969 authorizes the government of the day to fix a minimum wage for unskilled workers. As per law this shall apply only to commercial and industrial establishments. This means a vast majority of workers in services, self-employed, home-based workers and unpaid family workers will not benefit from the recent announcement. The law clearly says that it shall not apply to the civil armed forces, postal, telegraph, telephone services, ports, railways, fire fighting services, electricity, gas, water supply, public conservation and hospitals. In addition, this law is not applicable to agricultural workers, which makes 23 per cent of total workforce, as they did not come under the preview of labour laws. The public understanding of the minimum wage is that the government must ensure a minimum income for every citizen. We think it is a just demand and the government need to declare universal applicability of the minimum wage, they emphasised. They strongly recommend to the government to universalise the applicability of minimum wage and make sure that every employed person receives a minim wage of Rs6,000 and help those self-employed whose income falls short of that amount. It can be done through state run targeted schemes such as food support scheme.

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They also demanded that the next steps to realise recent announcements should include implementation mechanism and institutions otherwise this announcement would not bring any benefit to the poor workers. They said the state had to bring its laws in conformity with Core Labour Rights (CLRs) particularly ILO Conventions 87 and 98, to ensure fundamental rights of free association, collective bargaining and dispute resolution. The mere announcement of lifting ban on trade unions or even repeal of IRO will not serve the purpose of freedom of association unless fundamental changes are made in laws. If we look carefully, IRO 1969 was restrictive to formation of trade unions and IRO 2002 increased the number of restricted areas and made it impossible to form a trade union and use the right of collective bargaining agent. The government may need to go back and fully restore the Trade Union Act of 1926, which provides freedom of association and formation of trade unions in all sectors except the armed forces. It is interesting to note that ban on trade unions were never discussed in the parliament. Similarly IRO 2002 was also not discussed in the parliament rather imposed as part of the so-called Legal Framework Ordinance (LFO). They suggested that the new government should announce a special parliamentary committee to scrutinise labour laws on priority basis and ensure that all laws and changes are thoroughly discussed in the parliament. (The News-20, 07/04/2008)

Milk crises grips city Over 200 dairy farmers arrested

The city was deprived of milk on Monday after a strike by cattle owners. They stated that the strike was in reaction to the raids by the City District Government Karachi (CDGK) who had arrested over 200 dairy farmers uptil now, for overcharging. The CDGK has been wrongfully arresting cattle farmers, for overcharging, whereas they do not realise the fact that the cost has been increased to such an extent that we cannot afford to sell milk to the middleman or the retailers at the governments rates, says Rashid, a dairy farmer. The strike by the cattle owners caused immense disturbance in the city, resulting in a rise of prices in several areas. Milk from the price of Rs40 per litre, was drastically increased to around Rs44 per litre. Meanwhile, in smaller localities, milk shops closed down, too, as a result of not receiving any supply from the cattle farms. Malik Tahir Hussain, a milk retailer says that he did not receive the supply that usually reaches his shop every morning. We have been using milk that was refrigerated since yesterday and selling it to the public, but we have received no fresh supplies today, he said. Hafiz Nisaar Gaddi, President of the All Karachi Milk Retailers Welfare Association told The News that he had heard from various sources, that the cattle farmers and the Executive District Officer (EDO) of Enterprise and Investment Promotion (E&IP) had a closed door meeting, the outcome of which was not revealed to anyone. This meeting is the last update we received, but even after pressing for answers, we have not been told of anything, he said. Everyone can guess as to why the city government does not crack down upon the dairy farmers even when particular elements responsible for the rising prices have been pointed out by us. According to Gaddi, the CDGK only had a crackdown on the farmers in the first week of April, 2008, when their trucks were stopped, and many of them were arrested. He says that there had been a decision taken by the government to lower the prices of milk, and that more attention should be given to milk prices rather than quality. We have been told by certain sources, that the government has now ordered the farmers to sell milk that is low in quality at lower prices, instead of good quality milk at a fair price, he said. Husain also said that the milk that was fresh and bought directly from Landhi Cattle Colony which is the biggest in Sindh, would normally give out 4.4% cream, which retailers could buy directly from the farmers. Now, however, he said, the city government had only allowed for the milk to be sold via open market, which meant that middlemen would automatically be involved in the process. The middlemen sell the milk now, with Rs50 commission, instead of the earlier rate of Rs40 commission, he says. On top of that the middlemen are known to mix water in the milk, and so all the freshness is lost. Haji Akhtar, President of Dairy Farmers Association, complained of being sidelined always by the milk retailers. We have major increases in our costs. Since the past ten days our trucks have been held up by the CDGK officials. Our costs have risen over time where fuel, truck rent, labour, water bills, and electricity bills are concerned. The fodder and feed come from the Punjab and the costs of that has increased too. So much milk has been wasted since the past 10 days. And after everything if we are asked to sell milk at Rs32 per litre, it becomes an outrageously low figure for us. We cannot sell milk at that price, he said. Akhtar said that there should be a press conference, where the farmers, middlemen and retailers were all present, so that once and for all the issue should be resolved. EDO of E&IP, Dr. Shahab Imam denied all reports of any talks with Haji Akhtar, or any cattle farmers, and said that Akhtar had cases against him registered in the Shah Latif Police Station. He said that Akhtar was involved in the smashing of his car windows, and having his laptop stolen, and that Akhtars word was not too trustworthy. If Akhtar wants to have a talk, we agree to doing that, but we demand that people from all walks of life be involved in that discussion. (By Xari Jalil, The News-14, 09/04/2008)

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Aziz govt overspent Rs558bn, fudged figures: Dar

ISLAMABAD: Holding the Shaukat Aziz government responsible for "figure fudging" and creating mess on the economic front, Finance Minister Ishaq Dar said that all findings would be tabled before parliament for action against those who violated their own Fiscal Responsibility Law. The economic situation is so alarming that the government had to revise downward all macro-economic projections including GDP growth target from 7.2 per cent to six per cent, fiscal deficit target surged from 4.5 per cent of GDP to over six per cent, FBR target from Rs1025 billion to Rs990 billion, inflation going up from six per cent to 10 per cent, current account deficit up from 5.5 per cent to 10 per cent of GDP, possibility of raising basis points on Pakistan's issued bonds from 200 points to 600 basis points over LIBOR (London Inter-Bank Offering Rates) by June 30, 2008. "The mismanagement of economy has resulted in overspending of Rs558 billion and if the government does not take corrective measures then fiscal deficit will touch 9.5 per cent of GDP by June 2008." Ishaq Dar presented these startling and disturbing figures about Pakistan's economy at a press conference along with Information Minister Sherry Rehman here at the PM Secretariat on Wednesday. He said that these figures would be presented before parliament, the National Assembly Standing Committee on Finance and the Public Accounts Committee for scrutiny of the facts where Shaukat Aziz and his entire team would be asked to explain this sad state of economy. He said the caretaker government was also responsible for this mess, as they too took no step to control the situation. Instead, they hiked POL prices and power tariff. He also said that over 73.6 per cent population lived below poverty line, according to two dollar a day definition. Flanked by Special Finance Secretary Dr Ashfaque Hassan Khan, Secretary Finance Dr Waqar Masood and Chairman FBR Abdullah Yousaf, Ishaq Dar said the government would take tough measures to put the economy back on the right track by rationalising the POL prices, focusing on agriculture and manufacturing sectors and tackling energy crisis through conservation for achieving the desired results. To improve the economic situation, he said, the government would generate $2.5 billion from foreign inflows, reducing expenditure and by mobilising revenue generation from various avenues to revive the derailed economy. The public debt, he said, touched new height during the last eight years. It rose to Rs 2946 billion from 1947 to 1999, but climbed to Rs5695 billion by June 2008, showing an increase of Rs2749 billion in the last eight years. "Those who claim to have broken the begging bowl have actually enlarged it," Ishaq Dar observed. He said external debt has climbed to $42.5 billion from $37.5 billion in 1999 despite receiving significant inflows. He also said the credit rating of the country could also be downgraded.He said the growth in money supply (M2) is fuelling inflationary pressure as it is projected to grow by 19% till June 2008, resulting into CPI inflation exceeding 10% and food inflation 14%. The money in circulation was Rs643 billion in 1999, which grew to Rs4065 billion by June 2007. It is projected that the money circulation will reach Rs4837 billion by June 2008. Answering a question about the strategy to reduce the fiscal deficit to 6per cent of GDP, he said that the decision on imposition of new taxes could be taken in the budget on the basis of progressive taxation. However, he said the POL prices could be rationalized and the cabinet would take a decision in this regard. To another question about the officials who were part of the team of the previous regime and are still sitting with him, he said that the standing committees of the National Assembly, the Senate and the Public Accounts Committee have the right to summon any one to question about these figures. He also outlined the coalition government's strategy to revive the economy, saying that the government would focus on hitherto neglected agriculture and manufacturing sectors in the months ahead. (By Mehtab Haider, The News-1, 10/04/2008)

Inflation at all-time high in March

ISLAMABAD, April 10: Strong domestic demand and rising food and energy prices pushed up inflation in the month of March to an all-time high of 14.12 per cent. The coalition government is yet to initiate measures to contain an unprecedented rise in prices of all commodities of daily use, seriously eroding the purchasing power of the people, particularly of the middle and lower income groups. Figures issued by the Federal Bureau of Statistics show that food inflation, measured through the Consumer Price Index (CPI), ballooned to 20.61 per cent in the month of March, the highest-ever increase not only in the country but in the entire region, over the figure for the same month last year. In February, the food inflation stood at 16 per cent. All food items, including vegetable and fruits, potatoes, chicken, fish, cooking oil, vegetable ghee, mustard oil, rice, masoor and whole gram, gram pulse and besan, ready-made food, tea, dry fruits, and sweetmeat saw the unprecedented price hike in March. The double-digit food inflation is being witnessed since September 2007. For 2007-08, a 6.5 per cent annual inflation had been projected. The inflation in the first nine months (July-March) reached 9.49 per cent, up from eight per cent during the same period last year, suggesting that the annul inflation may exceed 10 per cent. The cities which recorded higher than average national inflation were Nawabshah (19.15pc), Shahadpur (18.45pc), Loralai (17.88pc), Hyderabad (17.69pc) and Mardan (17.59pc).

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Other towns which witnessed inflation in the range of 15 to 17 per cent include Faisalabad, Gujranwala, Vehari, Mianwali, Samundari, Sukkur, Larkana, Mirpurkhas, Kunri, Peshawar and Khuzdar. Transportation charges recorded an increase of 3.19 per cent in March and another hike in oil prices will take fares further up and also push up the prices of services and goods. The previous government kept prices of petroleum products frozen for quite some time to contain non-food inflation which stood at five per cent over the past year. But it is not just food or oil getting more expensive, the wholesale price index (WPI), the most commonly used measure to monitor the cost of production, rose to 19.79 per cent in March, which again was the highest-ever increase in the country. The WPI indicates an increase in wholesale prices of more than 425 items. It witnessed a 16 per cent increase in February. Another big blow to the people was the rise in medical expenses which in March was 6.54 per cent. Similarly, house rent went up by 10.60 per cent over last year. (By Mubarak Zeb Khan, Dawn-1, 11/04/2008)

Defence ministry accounts Rs26bn irregularities detected

ISLAMABAD, April 11: Mismanagement and irregular payments worth over Rs26.822 billion in the accounts of various departments under the Ministry of Defence, including Military Land and Cantonments, Military Engineering Services and Defence Production Division, have been detected. According to an audit report laid before the National Assembly on Friday, major irregularities worth Rs23.076 billion were found in the accounts of the Military Land and Cantonments (ML&Cs) Department. The Auditor-General of Pakistan (AGP) in its report for the year 2005-06 has also detected irregularities of Rs3.304 billion in the accounts of Defence Production Division, Rs254.259 million in Army, Rs150.739m in Military Engineering Services (MES), Rs19.714m in Air Force and Rs15.693m in the accounts of Navy. Deputy Speaker Faisal Karim Kundi referred the report, which was finalised in July 2007, to the Public Accounts Committee (PAC) for a para-wise discussion on it. As the report was prepared some eight months ago, there is a possibility that some of the irregularities might have been rectified by the authorities concerned till the time the PAC takes the report for discussion. As per record of the director-general Secretariat of Heavy Industries Taxila (HIT), an expenditure of Rs8,494.863 million was incurred under head carryovers during the year 2002-03 against budget allocation of Rs5,826.441 million, observes the AGP in its report. It says the excess expenditure of Rs2.668 billion has not been regularised yet and no disciplinary action has been taken against those responsible for this irregularity. Moreover, it says, the details of the expenditure and special items purchased were not provided by the organisation till finalisation of the report. It says the issue was also raised in September 2005, however no reply was furnished by the authorities. Cantonment boards in Okara and Walton have failed to recover Rs21.54 billion on account of property tax from Wapda. Under a government decision, all Wapda buildings and poles existing in the cantonment limits should be assessed for recovery of property tax. An amount of Rs16.42m on account of property tax is still outstanding against Fauji Foundation buildings for the period upto June 30, 2005. Earlier, this amount was about Rs27 million, but the management of Fauji Foundation paid a little over Rs10m during August and December 2005, it says. The report also highlights irregularities of Rs222.533 million in the accounts of Cantonment Boards of Rawalpindi, Chaklala, Walton and Bahawalpur due to non-recovery of composition fee and lease money, unauthorised commercial use of residential property and encroachments on defence lands, unauthorised construction of commercial buildings and occupation of defence lands due to non-renewal of lease agreement. It observes that the director-general procurement (Army) paid $2.21 million in advance to a firm in Rawalpindi as the cost of 130 diesel engines for trucks in 2002. Certain mechanical problems were detected due to supply of incorrect pressure plates when engines were installed in the trucks. It was decided to replace the same with the correct plates from Korea. This action had not been finalised till November 2005. Thus total amount incurred on procurement of engines remained blocked without useful return needing regularisation, besides expeditious replacement of defective plates, it says, adding: the para was examined by the departmental accounts committee (DAC) on October 3, 2006. It was stated by the procurement agency that the defective pressure plates had been repaired and delivery of additional pressure plates (45 in number) was awaited. The procurement agency, however, did not produce documentary evidence to confirm rectification of defective plates. It says that despite the DACs directives, a revised reply containing full details was not submitted by the authorities till finalisation of this report. The report has also pointed out unnecessary advance payment of Rs246.961 million to a radio telecom company in March 2004 by the DG Munitions Production (DGMP) for upgradation of 2,100 radio sets. Deliveries were required to be made in 12 months after receipt of 100 per cent advance payment of foreign exchange and 50 per cent of local charges and receipt of radio sets from the Central Ordinance Depot (COD), Rawalpindi, the report says. It further says that as per record of the DGMP, Rawalpindi, the requisite radio sets were not delivered to the firm for

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upgradation till June 2005, thus resulting unnecessary blockade of public money which was paid to the contractor in advance. When pointed out by the audit, it was replied that explanation for placing demand without availability of serviceable sets for upgradation was sought from the concerned directorate, which intimated that PRC-77 Radio Sets were a main stay of the Pakistan Army operational communications. Therefore, withdrawal of large number of those sets from the field formation was not considered feasible. Reply of the indenter, Service Headquarters, upheld the audit contention that demand was raised without proper feasibility and just to afford benefit to the firm, it says, adding that the DAC had called for revision of the contract but further action was awaited till finalisation of this report. The audit report has pointed out a loss of $216,484 to the national kitty due to non-deposit of money recovered by the PAC Kamra and Aircraft Manufacturing Factory (AMF) from the joint sale and marketing account of Karakuram-8. When pointed out in October 2005, the management stated that the amount was utilised for clearance of advance given to the AMF team for Dubai Air Show and making payment for clearance of outstanding charges. The reply was not tenable as the amount was required to be deposited into the government treasury, it says. Another irregularity of Rs90 million has been pointed out by the report due to unauthorised investment of government money in profit and loss deposit scheme. It says that a non-lapsable revolving fund with seed money of Rs100 million was created by the government of Pakistan in Pakistan Aeronautical Complex (PAC) Board, Kamra, for management of commercial activities of various factories. Citing Article 78 of the Constitution, it says that all moneys received by or on behalf of the federal government should be credited to the public fund of the federation. It was noticed from the record held in the PAC Board, Kamra, that an amount of Rs90 million out of the revolving fund was invested in Profit and Loss Sharing term deposit scheme of the National Bank of Pakistan, PAC Branch on October 15, 2002, it says: adding that the decision of the PAC Board on its own for investment without permission of the government was not covered under any rule. It points out that in a number of cases, local purchase of stores, acceptance of necessity and contracts were concluded in piecemeal by the lower authorities to avoid sanction of higher authorities of the MES, thus causing Rs37.425 million irregularities. (Dawn-2, 12/04/2008)

Poor woman commits suicide with two children

LAHORE, April 12: A woman committed suicide with her two children by throwing herself in front of a train in Naseerabad area of the city on Saturday. Police said Ms Bushra, 30, carried a bag which contained a suicide note. Reading from the note, a police official said Ms Bushra, wife of a welder, had committed suicide because of poverty. The woman appeared on the main railway line along with her two children at around 12.20pm when a train coming from the Cantonment station was approaching there. Despite an alarm raised by shopkeepers and some passers-by, she threw herself on to the track, rickshaw driver Rashid Naseer, who witnessed the incident, told Dawn. He said Ms Bushra covered the eyes of her son and daughter with her hands before taking the leap. Police said the woman, wife of Mohammad Ramzan, came from Mecca Colony, Gulberg-III. The children were identified as Zubair, 5, and Saima, 3. When the news was broken to Ramzan, he went into a state of shock and was hospitalised. A rescue 1122 official, while quoting the note, said the woman had termed poverty the main cause of her suicide decision and requested that if any of her children survived during the attempt, he or she be handed over to her parents. She said she was doing it on her own and no one should be held responsible for the deaths. She wished that she should be laid to rest near the grave of her sister Sumera. (By Faisal Ali, Dawn-1, 13/04/2008)

ADBs proposal to further

The Asian Development Bank last week proposed to the government a further increase in Pakistans electricity tariff, claiming that the measure could be used as an energy conservation tool and a source of earning additional revenue. The question is: additional revenue for whom? (a) For the Independent Power Producers, who are already earning huge profits based on their front-loaded capacity-payment-cum-power purchase agreements and their very high internal rate of return of 18 per cent guaranteed by the government under the 1994 Energy Policy? (b) For the privatised Karachi Electric Supply Corporation, which has notably failed to live up to its commitment to invest in additional generation capacity, or in upgrading the distribution system throwing the citys electricity supply regime into chaos and resulting in massive power cuts in the summer months, with disastrous economic consequences for the industrial and commercial sectors? Or (c) additional revenue for the national exchequer? Even if it is supposed to be additional revenue for the national exchequer, there will, in fact, be no additional revenue going into the public kitty when the consequent effect of loss of industrial production and the slowdown in commercial activities and in the services sector are taken into account. To paraphrase an old American saying, what we would gain on the swings, we would lose on the roundabout. Moreover, any further increase in Pakistans electricity tariff, which is already the highest in the world, would further fuel inflation across the board, increasing manufacturing costs and making

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the countrys products even more uncompetitive in international markets. This, in turn, would further widen Pakistans rapidly growing trade gap, which has doubled in the last three years and is currently running at an annualised rate of $ 19 billion. The growing trade gap, in which soaring international oil prices are the biggest factor, has started to eat into our foreign exchange reserves, which have fallen to $ 13.5 billion from $ 16 billion only a year ago. Exports have been stagnating at about $ 17 billion a year for the last several years, while imports continue to shoot up. This state of affairs cannot continue indefinitely, and the new government needs to take urgent steps to arrest the trend. A further increase in the power tariff, as proposed by the Asian Development Bank (ADB), in hardly the way to go about it. It is high time that our planners stopped thinking of electricity as an end in itself aimed only at increasing the revenues and profits of the public and private sector utilities and started thinking of it as an input in the development process to be made available to consumers at cheap rates. High electricity tariffs, besides encouraging power theft, have forced many factories to go off the national grid and resort to setting up their own generation facilities. The additional investment involved in buying, installing and operating gasfired or oil-fired generators has further added to manufacturing costs, making Pakistani products more expensive domestically and less competitive in export markets, with very adverse consequences for the economy as a whole. Given this sorry state of affairs, government planners simply cannot afford to procrastinate any longer and must quickly find realistic solutions to the problem. The ADBs proposal to further increase the electricity tariff as a means of energy conservation is a no-brainer that should be dismissed out of hand. If factories are forced to use less electricity because of higher tariffs, what will happen to their level of production? It will go down thats what! For boosting economic growth and exports, token cuts in electricity tariffs will not do the trick. To have a meaningful impact on reducing manufacturing and farming costs and making Pakistani goods and commodities more competitive in export markets, electricity tariffs need to be slashed by at least 50 per cent. The time for tokenism is over. What is needed now is a new approach to the whole question of the price at which electricity should be sold to industrial consumers and farmers, the two sectors that produce exportable goods and commodities. The government needs to look at electricity not as a product on which to levy higher and higher taxes but as one of the key inputs in manufacturing and agriculture. In this context, the government should even consider selling electricity to consumers at below cost if that is what it is going to take to boost GDP growth and exports. The deficit resulting from selling electricity at below cost would, in the long run, be made up for many times over by the boost that low-priced electricity would give to industrial and agricultural output, and, consequently, to exports. A plan to reduce electricity tariffs need not involve re-inventing the wheel. A model for it already exists in the form of the very successful, people-friendly approach adopted by planners in the United States in the 1930s for reviving the economy of the impoverished Tennessee Valley region in the depression-era dustbowl states. The Tennessee Valley Authority (TVA), created in 1933, was the first agency of its kind in the world and one of the most successful even today. Back in the 1930s, vested private interests in America, led by private power companies, accused the TVA of selling electricity at an uneconomical price. But when the capital costs of a project are allocated among the many subtle and diverse activities fostered by the TVA, who can determine the exact price of the consequent electric power? The TVA was aimed at the re-birth of the entire watershed of the Tennessee River, and all its tributaries, including parts of seven US states and more than 40,000 square miles. This was regional planning on a proper scale. Private enterprise could not afford the vast outlay. And seven states could not integrate seven plans for seven sections of the Tennessee Valley. An unprecedented form of authority was needed and an unprecedented use of money. Yet nothing short of such a grand design could restore hope to an impoverished people. Of all the new and startling programmes announced by the TVA in 1933, the one that caused the loudest uproar was the plan for generating electric power and the method of distributing it to the people living in the Tennessee Valley. Could the federal government, using taxpayers money, set up an arbitrary yardstick for measuring electric power rates? Was this a fair method of determining what a consumer should pay for a kilowatt-hour of energy? So went the argument, back and forth. Yet the widespread use of low-price electric power generated by the TVA eventually came to play a vital part indeed, perhaps, the most vital part in the reconstruction of the land in the Tennessee Valley. By 1933, the valleys people seemed lost, seemed abandoned, in twentieth century America while successive US presidents (Calvin Coolidge and Herbert Hoover) droned their banal tales of prosperity vetoed bills sponsored by Senator George Norris of Nebraska aimed at blocking the sale of hydroelectric rights on the Tennessee River to the car magnate Henry Ford for private exploitation. Coolidge and Hoover thought that the government could only do evil by intervening in the economic process. Would the soon-to-be new president, Franklin D. Roosevelt, under the wise old Senators guidance, reconsider this time-honoured American doctrine? Hence the trip to Muscle Shoals on the Tennessee River on which Norris took Roosevelt early in 1933, when half the depression-hit American banks were closing and Roosevelt still had a month to wait for his inauguration. Daring was the order of the day, for it needed absolute daring to imagine that the long woes of the Tennessee Valley might be repaired by human foresight, human planning. But Norris had faith that it could be done. Thus he unfolded his plan to Franklin Roosevelt on that fateful day at Muscle Shoals. And two months after Roosevelts inauguration, the Congress of the United States created the Tennessee Valley Authority. The plight of the inhabitants of the Tennessee Valley could not have been redressed without this investment of the whole nations energy, money and imagination. Therefore the power plants at the great TVA dams are all labeled: Built for the People of the United States.

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It is high time that Pakistan, too, adopted a similar people-friendly approach to the whole question of electricity tariffs. (By Kaleem Omar, The News-15, 14/04/2008)

Rising food price crisis grips WB meeting

WASHINGTON: The World Bank met here on Sunday faced with a mounting food price crisis that has sparked deadly unrest in developing countries, underscoring the urgency of fighting hunger and poverty. Policymakers of the development lender are due to discuss a massive "new deal" plan to reduce hunger announced earlier this month by bank president Robert Zoellick. The mounting food crisis has moved to the top of the agenda of this weekend's spring meetings in Washington of the 185-nation World Bank and its twin institution, the International Monetary Fund. On the eve of the meetings, Zoellick said the crisis could mean "seven lost years" in the fight against worldwide poverty. IMF managing-director Dominique Strauss-Kahn wrapped up his organisation's meeting Saturday with a dire warning about the food crisis and its economic and political impact. In Haiti, the poorest country in the Western Hemisphere, the prime minister was ousted late Saturday after more than a week of violent protests over rocketing food and fuel prices. The World Bank announced the same day a 10-million-dollar grant to Haiti to support government efforts to "rapidly scale up social safety net programs, including school feeding, while pursuing longer term measures to create jobs." Going beyond such short-term aid, Zoellick has proposed a "new deal" for global food policy, similar in scope to a 1930s program under US president Franklin D Roosevelt that tackled the problems of the Great Depression. Zoellick is urging countries to provide the minimum 500 million dollars immediately sought by the World Food Program to address the food crisis. The World Bank plans to nearly double its lending for agriculture in Africa, to 800 million dollars. Zoellick wants sovereign wealth funds to increase their investment in Africa among other measures to soften the impact of a slowing world economy on the most vulnerable countries. Haruhiko Kuroda, president of the Asian Development Bank, said Sunday that "inflation is perhaps the most potent threat facing the region today," with inflation expected to be the highest in central Asia this year. "Coordinated policy responses to mitigate price pressures on fuel and food commodities may be required and monetary and fiscal policy could provide further support should the external environment continue to deteriorate," he said in a statement, stressing the importance of a "country-specific" policy response. Skyrocketing prices of rice, wheat, corn, cooking oil, milk and other foodstuffs come against a backdrop of a spreading global financial crisis, a US economy teetering on recession and currency market imbalances. According to a World Bank report released last week, increases in global wheat prices reached 181 per cent over the 36 months leading up to last February, and overall global food prices shot up 83 per cent. In recent months, rising food costs have lead to violent protests in Egypt, Cameroon, Ivory Coast, Mauritania, Ethiopia, Madagascar, the Philippines, Indonesia and other countries in the past month. In Pakistan and Thailand, army troops have been deployed to avoid the seizure of food from fields and warehouses. (The News-1, 14/04/2008)

Help the poor directly

EVEN the least informed amongst us are now aware that there has been a sharp increase in the international prices of wheat and oil. Admittedly, some groups (other than farmers) rebut this as a reason for enhancing the support price of wheat with the argument but wheat is grown in Pakistan and hence international developments cannot be presented as explanations for the higher price of wheat/atta. How can we shield ourselves from a globalised environment, especially given our porous borders? Without getting into the argument of whether there should be a support price for wheat and the level at which it should be set as a floor price to protect farmers, it is time to accept that the days of cheap food, even staple diet items, and oil are gone. Neither is it possible for the government to continue to subsidise these products for all sections of society, given its fiscal position. This means that even the middle- and lower middle-class will have to take a hit in their purchasing power in the shortterm and change their consumption patterns before their incomes rise adequately to enable them to adjust to this reality. However, there is little doubt that the poorest households are ill-equipped to shoulder this additional burden. They need to be protected through some targeted subsidy, largely by shifting the savings from the general subsidy on oil and wheat from which even the more affluent households benefit to finance such support.This writer would propose a combination of cash transfers and an employment guarantee scheme, the latter for the poor able-bodied and able to work but unable to find employment in lean parts of the agricultural season, especially in the backward/least developed districts. This article, however, deals only with cash transfers. Cash transfers as social assistance programmes would only target the poor and vulnerable segments of the population. These would include the disabled, the elderly, female-headed households, orphans, widows and unemployed and unskilled household heads with large families. Direct cash grants are a better way to assist the poor. Indirect mechanisms like utility stores from which all segments of the population, even those not deserving, benefit and food stamps are a round-about, administratively cumbersome and expensive way (the transaction costs to the government being high) of achieving the objective of assisting the poor.

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Cash transfers will give poor households freedom with respect to consumption choices and greater flexibility on how to meet these needs, which will vary from one household to the next, depending on individual situations. Pakistans poverty line is estimated to be approximately Rs1150 per capita per month (per adult equivalent). The six million households below the poverty line already have some sources (using an average of approximately two bread earners per household) to meet between 45 to 60 per cent of expenditures on subsistence living. This assumes subsistence living to be represented by an amount roughly one-third lower than the minimum wage of Rs6000 per month. The additional cost per annum of a cash transfer scheme of Rs2000 per month to help around three million of the poorest households will not exceed Rs70bn, barely 0.7 per cent of the GDP. To make this cost estimate more realistic and check duplication of efforts to achieve the same objective i.e. poverty reduction, funds earmarked for wheat subsidy should be reduced and diverted to such a scheme. These would include subsidy being provided through utility stores and poverty alleviation programmes funded through zakat and Pakistan Baitul Mal and similar programmes being run by the provincial government such as the Punjab governments Kifalat Allowance that supports 640,000 households. A major proportion of the remaining budgetary allocation needed to finance this proposal can also be met from the gradual withdrawal of subsidies for electricity (partly because GST is not levied on electricity consumption) and diesel (the subsidy on the latter being more than Rs16 per litre). This is admittedly a politically challenging endeavour. A self-targeting mechanism can be employed for the urban areas, where only the poorest katchi abadis would be chosen for the disbursement of this cash grant the destitute and vulnerable would be targeted by virtue of their inhabiting a very poor locality. We will have to accept that there could be some leakage, perhaps even to the tune of 10 per cent, to those less deserving than envisaged as eligible under such a scheme. The focus should be on delivery mechanisms to improve targeting. Admittedly, such a selection process cannot be employed for the rural areas. A more transparent system of targeting is recommended in this case, allowing for the active involvement of the union council, thereby using an existing recognised institution, which is also accountable to the local population. The union councillors would be required to select potentially eligible recipients of the cash subsidy and have the selections verified and validated through the following means: a. The identity of households selected for the cash grant would be publicly displayed at the offices of the union council as well as at public places in the community so that the process of selection remains transparent and can be challenged by the community. b. The public distribution of cash transfers should take place on a pre-notified date. Public officials and elected representatives should be present at the time of disbursement to lend authenticity and credibility to the process. Distribution of the cash grant in a public forum, in the presence of peers and the community of beneficiaries, would ensure transparency and accountability and keep away the ineligible who would wish to avoid public scrutiny. c. There should be institutionalised third-party monitoring of the selection process to ensure that targeting has been transparent as well as subjected to third-party evaluations of the distribution process.In the medium to long term, it is recommended that a database be created, based on household profiling conducted for the entire country using the NIC of the head of household as an identity for the profiling. Admittedly this will be an administratively complex and costly exercise, the starting point for which would be the database of the Pakistan Baitul Maal. Its authenticity would be confirmed and refined over a period of time through third-party evaluations. This database would then be shared between the cash transferring agency, the Baitul Maal and the zakat council so as to improve the productivity of, and synergy among programmes. It would also attempt to minimise duplication and correct serious exclusion errors in the selection of beneficiaries and avoid substantive abuses and corruption in the implementation of the programme. This database would also ensure that not more than one person from a household becomes eligible for the disbursement. Furthermore, there would have to be reassessment and certification of beneficiaries every two to three years. (By Shahid Kardar, Dawn-7, 16/04/2008)

SC appoints new advisers in case about loan write-off

ISLAMABAD, April 15: The Supreme Court on Tuesday modified its earlier decision and appointed Sharifuddin Pirzada and A.K. Dogar as amici curiae (friends of the court) in place of Abdul Hafeez Pirzada in a case about writing off of bank loans totalling Rs54 billion in 2002 owed by businesses run by some top-level politicians. A three-member bench, comprising Justice Mohammad Nawaz Abbasi, Justice Ijazul Hassan and Justice Mian Hamid Farooq, had initiated suo motu action on a press report saying that the SBP had approved the scheme to quietly write off bad debts. The court impleaded the Indus Valley Oil Extraction Company of Karachi as an aggrieved party when Mr Hafeez Pirzada told the court that he was the firms chairman and should not be appointed as the amicus curiae. The bench adjourned the case till May 7 and observed that it wanted to settle the issue through day-to-day hearings. During the hearing, Syed Iqbal Haider represented the State Bank of Pakistan which at the last hearing had presented a report before the apex court stating that these commercial loans had been written off in October 2002 under a scheme to clean up non-performing loans (bad debts) that had surpassed Rs231 billion. In a 1,400-page reply, the SBP had justified that its 2002 guidelines devised under Section 33(b) of the Banking Companies Ordinance of 1962 was aimed at providing an opportunity to the borrowers to settle their outstanding liabilities on flexible terms and, wherever possible, help revive their businesses or sick units.

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According to the report, the colossal level of non-performing loans had affected the financial health of banks and development finance institutions (DFIs), which in turn had affected their profitability and impeded their restructuring or privatisation. Based on a secret report submitted to the National Assemblys Public Accounts Committee, a news report had suggested that the scheme had favoured 50,427 people, including politicians, civilian and military business concerns and top businessmen of Karachi, Lahore and other cities. The report had also named the then sitting chief ministers of two provinces as beneficiaries because loans owed by their families business concerns, like sugar and ghee mills, had also been waived. Even some foreign firms and multinational companies and a private bus service operating between Lahore and different cities of Punjab were extended this facility. Soon after October 2002 elections, the then finance minister Shaukat Aziz and the SBP had approved the scheme after succumbing to pressure by some politicians belonging to the then ruling party. Instead of launching an effective campaign for the recovery of bad loans, the SBP issued an incentive scheme to banks and DFIs in October 2002 for waiving the loans of organisations showing loss for three years or more after dividing them in three categories. Category A included non-performing loans of up to Rs500,000, category B of loans ranging between Rs500,000 to Rs2.5 million and category C of loans of more than Rs2.5 million. Politicians and the major business concerns exploited the third category to get loans of billions of rupees cancelled. The report said the banks and DFIs had been asked to recover maximum possible amount to settle loans falling under categories B and C through forced sale of available assets. The purpose of the scheme was to clean the banks balance sheets. As a result, the banks and DFIs settled over 50,427 cases. (Dawn-2, 16/04/2008)

ADB willing to finance four-nation gas project

ISLAMABAD, April 18: The Asian Development Bank (ADB) is willing to invest $5 billion in the Turkmenistan-AfghanistanPakistan-India (Tapi) gas pipeline and wants to support energy sector projects in Pakistan. Talking to reporters at the end of his two-day visit on Friday, ADBs Director-General for Central and West Asia Department Jaun M. Miranda said that although the bank was willing to finance the Tapi project, it would not finance the $7 billion Iran-Pakistan-India gas pipeline project on which the United States had reservations. The Tapi project is expected to transport 100 million standard cubic metres per day (mscmd) of gas, of which Indias share is likely to be 60 mscmd. The 1,680-km pipeline will run from the Dauletabad gas field in Turkmenistan to Afghanistan. Mr Miranda said the ADB would not reduce its annual financing to Pakistan, currently ranging between $1.5 billion and 2 billion. However, the bank would try to focus on priority areas. The ADB is at present funding 60 projects in Pakistan. He said the bank was also willing to invest in dams and projects to reduce electricity transmission losses and improve private sectors power production capacity. Energy topped ADBs priorities which included infrastructure, irrigation, urban services and reforms for the decentralisation process. He said the bank would restructure all slow-paced projects to accelerate their progress. Next week, he said, the bank would release another $200 million for reconstruction activities in earthquake-hit areas. (By Sher Baz Khan, Dawn-16, 19/04/2008)

Report finds Rs8.9 billion irregularities in accounts

KARACHI, April 18: A 2003-04 audit report has brought to light financial irregularities to the tune of Rs8.9 billion in the accounts of the Sindh government. The report, which was presented in the Sindh Assembly in the April 16 session, sheds light on the 44 cases in which the government suffered Rs2.4 billion losses due to the non-auction of royalty and cess on coal, theft, misappropriation and a shortage of wheat. The report says that the frequency of violations of rules and regulations and financial irregularities bear ample testimony to the fact that most of the principal accounting officers did not have the adequate institutional capacity to attend to financial management and control issues. It says the auditor-general issued reminders to relevant officials to abide by the regulatory framework and strengthen internal controls to avoid recurrence of the violations, but to no avail. The finance department was also asked to take cognizance of the failure of the internal control environment in different government departments and take effective measures to control the situation, it adds. These irregularities came to light when the receipts and expenditure from the provincial consolidated fund and public account of various departments and autonomous bodies were audited for the year 2003-04. The audit of the accounts has detected 99 cases of around Rs2.4 billion of government dues including market fee, hiring charges of bulldozers, income tax, water charges, hospital and police guards charges that have not been recovered from various departments. The report brings to light 26 cases pertaining to irregular procurements worth Rs134.779 million, in 37 cases assets to

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the tune of Rs97.925million were unaccountable, and Rs18.299million were found missing in 11 cases as the money was not deposited in the relevant accounts. In as many as 34 cases, Rs30.888million was paid in excess to various contractors on various accounts, the report says, indicating that in 60 cases Rs532.051million advance payments still remained non-adjusted. According to the startling findings of the report, in 86 cases details of expenditures to the tune of Rs1.4 billion was not submitted by various departments and in 49 cases accounts of Rs38.6million were not maintained, while Rs103.1million was illegally transferred from development to non-development funds. The report detects 32 cases in which around Rs57.516million was paid as salaries and other allowances to employees appointed during the ban period without observing the prescribed rules and regulations. Besides, 299 cases of other violations have also been detected causing losses worth Rs1.2 billion to the exchequer. It also points out various issues including absence of management controls to prevent unauthorised practices and improper utilization of public money, absence of adequate safeguards to protect public property from theft, misuse etc, non-observance of the codal formalities and the laid down procedures. Out of the 16 departments audited, departmental accounts committee meetings could only be held with the food, home, mines and mineral development, police, forest and wildlife, SGA&CD and works & services departments, two universities and three boards of education, it says. The report recommends that in order to avoid such irregularities the principal accounting officers should take immediate steps to investigate cases of losses, embezzlements, irregular payments and unaccountable cash and stores and take appropriate corrective action and urged an effective recovery system of government dues and their deposit into the treasury. It goes on to say that funds irregularly kept outside by the departmental functionaries be deposited into public account and to regularise the cases of non-compliance where considered applicable, procurements should be made in a transparent manner regulated by in-built checks and balances. Likewise, they should ensure timely production of relevant record for audit in respect of cases besides taking disciplinary actions. (By Habib Khan Ghori, Dawn-17, 19/04/2008)

The 'Anti-Politics Machine'

For the best part of eight years, multilateral 'development' agencies, including the international financial institutions (IFIs), have lauded the Pakistani government's economic reform programme. The narrative went something like this: in October 1999, the Pakistani economy was on the verge of collapse due to gross mismanagement and corruption. The incoming military regime, armed with an abundance of technocratic hitmen, rescued a sinking ship by designing and then implementing a reform programme that addressed the fundamental distortions in the economy. Imagine the surprise then when the World Bank released a report only a few months after the Shaukat Aziz led team of economic managers vacated their cozy positions in Islamabad, asserting that the Pakistani economy is gripped by a multitude of severe crises. The report claims that corruption and mismanagement actually increased during the tenure of the previous government (or should one say sitting government, given that Pervez Musharraf refuses to vacate the Army House / presidency). The report admits that poverty too has increased due to many factors, though unprecedented food inflation stands out as a major cause. Finally, there is an acknowledgment of a major power shortfall and a warning about the serious social conflicts to which this shortfall could give rise. Notwithstanding the rather remote possibility that the World Bank -- along with the International Monetary Fund (IMF) and the Asian Development Bank (ADB) -- has been kept in the dark about the realities of Pakistan's economic 'miracle' engineered by Shaukat Aziz and Pervez Musharraf, the quite remarkable about-turn in its diagnosis of the state of the economy is staggering. In the main, it smacks of intellectual dishonesty: for at least six years the underlying weaknesses in the economy were essentially swept under the carpet, while the easily marketable 'successes' were publicised incessantly, presumably because the prevailing geo-political situation demanded that Pakistan's military regime be presented in such light. Working people have been wondering how the technocrats in Islamabad and Washington managed to simply overlook the fact that a major electricity crisis was in the making, or the fact that the prices of basic food items, including atta, were increasing at rates that would lead to acute deprivation. Granted that food prices have shot up all over the world and Pakistan's is not the only economy struggling to match up to the rigours of global markets, the fact of the matter is that the Shaukat Aziz-Pervez Musharraf regime and its international creditors simply never accorded the basic needs of working people the importance in their policy logic that could have prevented the emergence of some of these eminently avoidable crises. Their rhetoric, of course, was always to the contrary. Pro-poor growth and other slogans were commonplace, as they are in almost all Third World countries where the IFIs have a major say in the design of economic and social policy. But this cannot disguise the fact that the neo-liberal paradigm that underlay the economic reform programme over the past few years clearly privileged the interests of capital, and that too financial capital, over that of the people of Pakistan. Of course there were beneficiaries, and not just the super-rich. A credit boom allowed a significant urban middle class to engage in a major consumption binge, which, alongside investments in the stock market and real estate, explains the relatively high growth rates.

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But again one is taken back by the completely haphazard manner in which this growth was conceived. The consumption boom has exposed the power shortfall, the volatility of the stock market has repeatedly caused multi-bullion rupee losses and urban real estate prices have exacerbated the already severe economic vulnerability of a large majority of asset-poor Pakistanis. It is important to bear in mind that Pakistan is not the first or the last example of a great economic reform story gone bad. The IFIs have backed radical liberalisation of financial markets all over the Third World, and in the vast majority of cases the consequences have been disastrous for the majority of people and the natural environment. The development 'experts' claim that poverty and development are technical matters, and can be meaningfully addressed through plans hatched in boardrooms far removed from the relevant context. James Ferguson famously called the international development industry the 'Anti-Politics Machine', because of the deliberate manner in which poverty and development were presented as 'apolitical' problems. In actual fact, of course, the interventions designed by the IFIs are explicitly political, and reinforce existing socio-economic and political structures. More generally, the IFIs attempt to make what should be policy choices into policy imperatives. Take, for example, the rhetoric that is currently doing the rounds about the need for the new government to under take much-needed measures to correct price distortions, even at the risk of inciting popular opposition. It is said that successive governments have refrained from increasing petroleum prices, even though the increasing prices of oil internationally objectively demanded a domestic increase. The fact of the matter is that governments are well within their rights to maintain subsidies for fuel, or any other good or service for that matter; there is no hard and fast rule that domestic petroleum prices must increase in proportion to international prices. Of course, no economy in the world is insulated from the pressures of the global market, but given this basic constraint, individual states that claim to be sovereign are bound to a particular kind of economic orthodoxy -- not because they must be, but because they choose to be. Iran, for instance, fixes the price of petroleum for domestic consumption at $0.10 a litre. If a consumer wishes to buy more than 30 litres of petrol in a week, the price goes up 10 times. This pricing policy reflects the Iranian government's political priorities, namely to ensure that its citizens are guaranteed consumption security up to a point. Of course, one can point to the fact that Iran is one of the world's biggest producers of oil and can afford such a policy. But there are similar pricing policies in other Third World countries that are not oil producers, such as Cuba and India (though not in all states). Of course, Pakistani governments constantly face a major revenue shortfall -- but this is not because they do not reduce subsidies on basic consumption items, but because they do not tax the rich. The neo-liberal paradigm is projected as divine truth, not because it produces unambiguously positive results for the people of a country -- who should be the beneficiaries of any economic or social policy -- but because it is consistent with the political and economic objectives of dominant national and international forces. Thus, when these same forces overnight turn eight years of 'good governance' into 'bad governance', but yet demand implementation of virtually the same policies, one should not be surprised. One can only hope that Ishaq Dar and his team of economic managers do not uncritically accept the dogma of the 'Anti-Politics Machine'. (By Aasim Sajjad Akhtar, The News-43, 20/04/2008)

Unemployed replace drug addicts in free food lines

It is a trend that cannot be ignored. On the foot path outside Sabir Hotel, situated on the proximity of Jamia Cloth Market, off M.A. Jinnah Road, gather hundreds of poor people every day. They anxiously await for some philanthropist to come and place an order with the restaurant management to provide them with free food. Most of people visiting the restaurant, famous for its Nihari, are daily wage workers. Some years back, it would have been a majority of drug addicts who would come for the free food. Now the number of unemployed persons is rising in these lines. Abdul Rahman, 70, a Pushtoon worker says he has not been able to get a job for the last 20 days and has no choice but to feed himself at the Sabir Hotel. He is a loader and lives in Saddar and has three children who live in Peshawar. One or the other Seth visits the hotel every day and orders meal for us, he says. Either we get Nihari or Daal to eat. It depends upon the Seth. Sometimes we also get Kheer, he adds with a smile. Abdul Rahman earns Rs200 to Rs250 a day, on the days he is lucky to find work. Irfan, a malnourished boy of about 12 also feeds himself at Sabir Hotel as well. He is a rag picker. I earn Rs30-40 every day through picking iron scrap from the roads and I eat at Sabir Hotel daily because I cant afford to buy food, he says. His father is a skilled worker but since he has a large family with five brothers and three sisters, he cant afford to feed his family properly. Irfan lives in the poor locality of New Karachi. Yet another dependent of Sabir Hotel is Mohammad Aslam, 35, a drug addict and knows the art of spinning a story. I am a driver and hail from Hyderabad. I have lost my driving licence. I am not a beggar but have lost my job. I dont have money to apply for another license. I sleep on the foot path daily but am looking for somebody who can give me the fare for Hyderabad. You see there was rioting and arson here yesterday and my mother who lives in Hyderabad is very worried, he says. Most people see through this tale but still give him something to survive. Mohammad Junaid, the grandson of Sabir, the founder of Sabir Hotel, sits on the counter of the restaurant. He confirms that previously only drug addicts would throng the hotel for a free lunch or a free dinner but in the recent years, it is being increasingly frequented by jobless people. This is an indication of lack of economic activity, rise in inflation and growth in poverty and unemployment. So far, the city informal social network has been able to help in feeding the empty stomachs. People hand over their Zakat money to us and we serve these jobless people from that money. A meal costs Rs15 and people start coming here

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after the morning prayers and continue to do so till late night, says Junaid, adding Sabir Hotel was established in 1964 and is offering such services since its inception. Sabir Hotel is not alone in that it attracts jobless people for free food. One can also find hundreds of jobless workers waiting for food at hotels on Tariq Road and other places. These are haven for the people who cant afford to buy food. Even women have started frequenting these hotels in search of free food. Some years back it would be unheard of to see a woman in a line for free food. Now it is also becoming common. Rising poverty and deprevation has not only affected the unemployed, it is biting deep into the pockets of those who earn as well. Food inflation is affecting the lower income and middle income groups more than ever before. Vegetables that were previously available for Rs10/kg are now sold at Rs60-70/kg and I find it difficult to manage the daily expenses, says Nasreen Fatima, 50, a housewife from a middle income family. Media reports show that inflation in Pakistan continues to rise. This week was no different as it peaked at 19.83 per cent as compared to the previous week. Weekly data released by the Federal Bureau of Statistics showed that dearness was 21.44 per cent for families with Rs3,000 monthly income, 21.17 per cent for Rs3,001 to Rs5,000 income, 20.35 per cent for Rs5,001 to Rs12,000 and 18.2 per cent for families with income of Rs12,000. The prices of 23 essential commodities increased during the week while 11 declined from the list of 53 essential commodities used to measure weekly inflation. Data of 53 items collected from 17 urban centres, showed no let up for the poor, who have to spend more money to buy the same goods every week. This state of affairs has led many to question their future as economic conditions worsen, say economists. (By Shahid Husain, The News-13, 20/04/2008)

Acute poverty
YET another person committed suicide due to extreme poverty, this time a woman, taking her two children with her. It is unfortunate that such tragedies keep happening in our country with alarming frequency, which belies claims by the government of having reduced poverty. It is hoped that the new government will give poverty alleviation issue the attention it deserves and not use it merely as a slogan. No doubt the government has limited means but it goes beyond that and involves sheer indifference and uncaring attitude as well. This was amply demonstrated by another news item that appeared in Dawn the same day (April 13) entitled Welfare fund remains unutilised. It is unbelievable that workers suffer while welfare funds remain unutilised. Efficient and prompt use of available funds would have solved labourers housing problem to some extent, apart from providing jobs, thus reducing poverty levels. People of Pakistan deserve something better than what they have been getting from the government, with poor ones deserving extra care and compassion. S.R.H. HASHMI, Karachi (Dawn-6, 21/04/2008)

Burning question for economy

ABOUT five million drug addicts in Pakistan are not only destroying their lives but also affecting every sector of society, including the business sector, causing accidents, reducing or causing loss of productivity, poor work and absenteeism, etc., says a report prepared by Pakistan Drug Free Foundation. The number of drug addicts in the business sector has gone up with the labour class and lower middle class taking to drug use increasingly, for various reasons. Approximately, an addict spends Rs150 a day on drugs. There are five million drug addicts in country, so they spend Rs1,050 million in just one day, in a month Rs31,500 million and in a year Rs378 billion. These are the direct expenses on drugs. There is no data available on the losses borne by our economy due to absenteeism, wastage of time, low productivity and accidents of drug abuser at the workplace. One of the consequences of drug abuse at the workplace is that the economy of Pakistan pays a big price for it, employee accident and errors, high illness rates, wastage of time, low productivity and absenteeism are just a few examples of the effects of illicit drug use, the report said. A survey conducted by the US health and human service indicates that drug abusers function at approximately 65 per cent of their capacity. Up to 40 per cent of industrial fatalities and 47 per cent of industrial injuries can be linked to drug abuse. Employees who abuse drugs are 3.6 times more likely to be involved in a workplace accident and five times more likely to file a workers compensation claim. An estimated 500 million work days are lost annually due alcohol and drug abuse in America. Employees who use drugs are more likely to request early dismissal or time off, 2.5 times more likely to be late for work. Illicit drug users are more than twice as likely as those who do not abuse drugs to change employers. Employees who abuse drugs cost their employers about twice as much in medical claims. According to the US National Institute of Dug Addiction, almost 10 per cent of all employees use drugs. According to the data mentioned above, the problem of drug abuse at workplaces is more in the developed countries of

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the world. This problem also exists in Pakistan but no authentic data is available about the financial losses due to drug abuse at workplaces. At this point, some questions are raised for the authorities who are responsible for such a financial disaster. There is a strong need by the government and the business community to launch an operation to eliminate the silent killer. HAIDER MEHER, Pakistan Drug-Free Foundation (Dawn-6, 21/04/2008)

Food, fuel and fiscal crises

The sky-rocketing food prices have emerged as the new crisis not only in Pakistan, but also on the global economic horizon, eclipsing the already looming fuel and financial crises, which had been dominating the headlines. The world is thus engulfed in a new hydra-headed crisis, with three essential components: food, fuel and finance. The three components have different geographical origins and their effect on different segments of the globe and their inhabitants is highly uneven. But the transmission of these crises in the global economy has become much easier and faster since the regime of liberalisation of trade, capital flows, deregulation and privatisation was imposed through the Washington Consensus in the early 1990s in the name of achieving higher growth and reducing global poverty. Pakistan is affected by all the three components of the mega-crisis in varying degrees. But its economic managers have always tried to deal with such crises individually, rather than as a whole, and in an ad hoc, rather than a systematic manner. The new government, which has yet to come to grips even with the more immediate problems facing the economy, has hardly given much thought to these issues, while the outgoing government had hardly paid any attention to these developments as it relied on the continuing aid and investment, epitomised by its parroting of the precept of a minimalist role of the government in the economy. However, with the economy once again in dire straits and these external shocks looming like a meteorite to strike any time, it is about time to be prepared for the worst and consider pro-active economic policies both domestic and external which can provide some protection against them, at least to those most vulnerable to them. Although the food crisis is now a world-wide phenomenon, ordinary Pakistanis are more concerned about whether to buy an additional nan or a 10kg atta bag (the minimum size carried by utility stores, which costs as much as the daily minimum wage) or to buy medicines, shoes or books for the child or to walk five miles to work to save the enhanced bus fare than about knowing how the markets are loaded against the poor, both at home and abroad. The government in its zeal to publicise its stellar economic performance and growth record, did not pay much attention to the needs of the poor. It mistakenly believed that the government could outsource to the market through the trickle down effects the responsibility towards protecting them against any calamity, such as the one stalking them now in the shape of food inflation. The current food crisis in Pakistan is often blamed on the past governments ineptitude wilful or otherwise in overestimating last years wheat crop and in allowing the export of 0.5 million tons of wheat and then having to import 1.7 million tons of wheat at much higher prices, costing about $1 billion. Plausible and reprehensible as this may be about the culpability of a discredited regime, it oversimplifies the complex issues underlying the current food crisis, which are not unique to Pakistan. From Haiti to Hanoi, the food crisis is rearing its head in all corners of the globe, especially though not exclusively in the developing world, where food consumption constitutes up to 70 per cent of the family budget. A dramatic rise in the worldwide cost of food is provoking riots in many developing countries where millions more of the worlds most vulnerable people are facing starvation as food shortages grow and cereal prices soar. It threatens to become the biggest crisis of the 21st century a century in which poverty is supposed to become history. However, unlike the past, food shortages and famines are not the result of the Malthusian spectre of population growth which most developing countries have managed to control dramatically in the last half-century or even the Ricardian concern about decreasing returns, but much more the result of the inequalities of income and the growing geographical disparities both within and across national borders in the degree of development and incidence of poverty. Some of the problems facing these countries are structural and global, rather than cyclical or transitory and contextual or domestic, in nature. Among the structural problems on the supply side are climatic changes, natural disasters (such as tsunami and earthquakes) and the decline in productivity as a result of the petering out of the Green Revolution. These factors have had particularly adverse impact on the access to land and other income-earning assets (e.g. coastal catchment areas for fish-farmers or terraced lands in mountainous areas) of the poor, whose incomes have fallen, while average per capita incomes have shown steady increases. On the demand side, the structural shifts have arisen from a rise in the incomes of middle classes and the shifts from food grains to cash crops and the increase in demand for processed foods, such as bakery products and fast foods, as well as increase in poultry and meat consumption. The latter has also led to increase in the acreage and production of corn used in raising livestock and poultry it takes eight kgs of grain to produce one kg of beef at the expense of wheat and other food crops. As a result of globalization, there has also been considerable increase in demand for agricultural exports, especially of non-food crops, such as vegetables and fruits, reducing the acreage for and supply of food crops. Further, the rapid pace of urbanisation, especially in Pakistan, has made severe encroachments on farmlands in contiguous areas, which also results in the diversion of irrigation water to meet urban needs. Water is likely to soon become as scarce as oil, the most important ingredient of the second major global crisis, i.e. that of fuel or energy

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With the price of oil per barrel likely to remain in triple digits in dollars (if not in euros), it has also both direct and indirect effects on the pocketbooks of ordinary people. Transport costs, which feed into all other economic activities, are the main carriers of inflationary pressures from this source. The rise in oil prices has also had the inadvertent effect of increasing corn production for the sake of producing ethanol as a partial substitute for oil, but resulting in the lower production of consumable food grains and raising corn prices. The other main effect of the fuel crisis is the generation of electric power, which affects both industrial and home-based activities that are playing an increasing role after the introduction of computers, internet, cell-phones and other electronic gadgets. This has led to increased load-shedding with consequential loss of working days in factories and wages for the workers. Rising transport costs, load-shedding and food inflation are conflating to produce a combustible bomb of social unrest, which may prove more potent than the terrorist threat that has preoccupied public attention. The rising onslaught of consumerism in which Pakistan has always had a lead has further aggravated the problem and has resulted in imports rising much faster than exports and giving rise to unsustainable current account and fiscal imbalances (as much of the domestic energy consumption is subsidised). This leads us to the third most important crisis in the global arena, which could engulf the world into a deep recession comparable to the Great Depression of the 1930s, which also started in the US, with incalculable political and economic consequences. The present financial crisis in the United States owes its origin in the sub-prime crisis triggered by the housing bubble which started sputtering two years ago and was itself the result of the central banks efforts to combatan earlier recession in the wake of the bursting of the dotcom boom in 2001, through a series of interest rate reductions. The US economys growth after that recession was largely jobless, and the Federal Reserve remained deeply concerned about the possibility of Japanese-style prolonged economic stagnation. What the US central failed to do, however, was to prevent the banking sector from financing the housing boom without due diligence and prescience about the consequences of indiscriminate lending. Over the last two decades banks had lobbied in the US to get the government out of its business and to obtain freer rein for financial innovation, such as hedge funds and mortgage-backed securities. However, when the housing bubble burst and the banks losses climbed into trillions and when the likes of Citibank and Bear Stearns and UBS came on the brink of bankruptcy, they lobbied for the Federal Reserve to intervene and bail them out through an unprecedented government rescue plan. Whether this bail-out will succeed in saving the United States financial system on which the global economy rests or whether it would result in a de-coupling of the US economy with the rest of the world remains to be seen. The structural shifts taking place in the global economy need to be factored in to the economic management of Pakistan, along with the domestic political imperatives emanating from the 18 February elections, by the countrys new economic managers. There is a need for new thinking and new institutions, as well as the revival and re-tooling of the old institutions, such as the Planning Commission, the National Tariff Commission and the Security and Exchange Commission, along with the countrys think tanks and NGOs to prepare Pakistan for facing the challenges of the domestic and global crises. (By S.M. Naseem, Dawn-Economic & Business Review, Page-1, 21/04/2008)

Ghee, cooking oil prices boiling up

KARACHI, April 20: Rising palm olien prices have again started pushing up the cost of local 16kg ghee tins, while branded ghee and cooking oil producers have not come out with any price cut despite a fall in the price of palm olien in March. A leading producer ruled out any decline in the prices of 2.5 to five litre/kg tins in the coming days by saying that palm olien prices have again surged in Malaysia and Indonesia for the last two weeks after heavy buying by China and India. The price of 16kg ghee tins, which hold 40 per cent market share and are being widely used by hoteliers, caterers and sweet-makers, is now quoted at Rs1,920-1,940, while it was Rs1,700 on April 1 and Rs1,800 in the third week of March. On Jan 1, 2007 it was available at Rs1,000. The 16kg ghee tin price, which fluctuates on a daily basis, touched the peak level of Rs2,150 on March 1, 2008, but after one week it started coming down after a decline in palm oil rates in March. Consumers have been facing a tough time in purchasing branded ghee and cooking oil in the last one and a half years. In Sept 2006, five kg Dalda ghee was priced at Rs395. On Jan 1, 2007 it was available at Rs440 as compared to the current price of Rs720. On Jan 1, 2007, five litre Dalda cooking oil was also selling at Rs440 as compared to the current price of Rs750. As a result of the rising price of 2.5 and five kg/litre tins, the market share of one kg pouch, which was five to 10 per cent a year ago, has surged to 20 per cent as consumers prefer to buy a smaller quantity as per their requirements rather than five kg/litre tins. Pakistan produces 3.2 million tons of ghee and cooking oil per annum in which the share of ghee is 70 per cent, while the rest is of cooking oil. Market sources said when the manufacturers had procured palm oil at higher rates, they had easily passed on the impact to the consumers. When palm olien rates fell in March, the producers adopted a dilly-dallying attitude. However, since Sept 2006, leading packers had increased the rate nine-fold.

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Many packers had earlier said that if the falling prices of palm olien continued for two to three weeks, they would then think about cutting the rates. The palm olien rate remained lower for two weeks but consumers are still waiting for any relief from branded packers. The government had not checked with the branded packers as to why the rates had not been brought down despite a cut in palm oil rates in March. The palm oil rate had fallen to Rs3,800 per maund (37.23kg) in the third week of March from Rs4,600 in the first week of March, while in Malaysia it declined to $1,280 per ton from $1,540 peak level in the first week of March. A packer said the palm olien rate is now quoted at $1,360 per ton while it is priced at Rs4,150 per maund in the local market. Two weeks ago, the palm olien rate was $1,330 per ton. The palm oil rate in Malaysia and Indonesia had been rising for the last two weeks. Consumers deprived It may be noted that the Pakistan Vanaspati Manufacturers Association (PVMA) had not questioned their members (branded item producers) as to why they had deprived the consumers of the benefit from falling prices of palm oil in March. A PVMA member said the government is eating up Rs30 per kg in taxes and duties in the price of reasonable quality ghee and cooking oil of Rs125-130 per kg available in the market, while the high-quality varieties sell between Rs140-150 per kg.There is a need to cut the sales tax of 15 per cent and import duty on palm oil so that consumers could get an immediate relief, otherwise there are dim chances for any relief for consumers in ghee and cooking oil, said a source.A sizable quantity of palm olien has been arriving from Malaysia following a 10 per cent duty cut on palm olien imports from Jan 1, 2008, under the Free Trade Agreement (FTA) between Pakistan and Malaysia. However, its impact in the shape of price cut was just Re1 per kg. (By Aamir Shafaat Khan, Dawn-13, 21/04/2008)

No strategy in sight to curb steel price surge

ONE of the most contentious battles in the war against inflation is being fought in the steel sector. Various ministries in the government of India are taking opposing views on measures to be adopted to control the price of the metal, and even different industries have adopted contrasting stances. The finance, commerce and steel ministries have failed to hammer out a unified strategy to counter the sharp hike in the price of steel, even as opposition parties and the Left supporters of the United Progressive Alliance government demand stern action against steel producers. But despite the national uproar, steelmakers are pushing ahead with price hikes. Last week, yet another steel major, state-owned Rashtriya Ispat Nigam Ltd, hiked the price of all its products by Rs6,000 a tonne. Inclusive of excise duty, the hike works out to Rs6,840 a tonne. Steel manufacturers, including private sector majors like Tata Steel, Essar, JSW Steel, Ispat Industries and Uttam Galva, had a few days earlier imposed a Rs5,000-Rs6,000 a tonne raw material surcharge on hot-rolled, cold-rolled and galvanised coil products. Some like Tata Steel have rolled-back the hikes following pressures from the steel ministry. Steel Authority of India Ltd (SAIL), another state-owned giant, is undecided but could end up going in for a Rs5,000 tonne hike, according to sources in the industry. SAIL is also facing a huge increase of up to 40 per cent in the price of coking coal that it buys from state-owned Bharat Coking Coal. Another state-owned giant, NMDC Ltd, has also raised the price of iron ore by 70 per cent with retrospective effective from October last hurting steel producers like Essar, Ispat and JSW, who do not have their own captive mines. Indian steel producers point out that prices here are still lower by about $100 a tonne as compared to international prices. They also cite sharply escalating input costs for the hike in steel prices. The cost of iron ore and coal has seen hefty increases both internationally and in India, triggering off a price hike here. Global steel majors including ArcelorMittal, Nippon Steel and Posco have had to jack up prices following steep escalation in the price of coking coal and iron ore. ArcelorMittal has had to face a 220 per cent hike in coal prices, while Posco has been slapped with a 300 per cent increase in coking coal prices, besides a 65 per cent escalation in iron ore price. Domestic steel prices have soared by over 20 per cent so far this year steel futures have seen a massive 50 per cent increase but threats of stringent action by the steel ministry have seen some of the producers roll-back the prices. Under pressure from the government, steel producers have refrained from raising the price of flat steel products used by white goods makers and auto manufacturers but have increased the price of construction-grade steel. ***** THERE has been growing pressure on the government to force steel producers to slash the recent hikes. The Automotive Component Manufacturers Association of India has warned the government that parts exports would be seriously hurt if measures are not taken to curb steel prices. Most auto components including engines and engine parts, transmissions, gears and suspensions use steel; a 30 to 50 per cent hike in their price would render the Indian auto component industry uncompetitive in the international markets. Even automobile manufacturers have been urging alloy steel producers to moderate their price increase. Steel ministry figures indicate that the price of the benchmark 2 mm hot-rolled coil widely used for the production of auto-grade steel jumped by Rs10,000 a tonne in the spot market over the last one month.

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Worried over the impact the hike in steel prices will have on inflation the wholesale price index breached a 41-month high of 7.41 per cent for the week ended March 29 the government has been itching to take on the steelmakers. Finance Minister P. Chidambaram, who was severely criticised in Parliament last week by the Left parties and the opposition for not taking the appropriate measures to curb inflation, accused steelmakers of behaving like a cartel. If their behaviour does not change, the government will not hesitate to take tough measures, warned Chidambaram. The Left parties have been urging the government to ban futures trading in steel along with several agricultural commodities to curb inflation. While many political parties have been urging the government to ban futures trading, B.C. Khatua, the chairman of the Forward Markets Commission, is opposed to any such moves. The volumes of steel futures traded are insignificant to influence the physical market prices, he explains. The cabinet committee on prices is formulating various policy measures to curb inflation, including imposing a ban on steel exports, slashing the duty on steel and zinc imports to zero, jacking up export duties on iron ore and reducing the countervailing duty on construction-grade steel. However, there are serious differences between the finance, commerce and steel ministries over these crucial measures. The commerce ministry is opposed to any hikes in duties on iron ore exports, as it fears that the long-term commitments entered into by mining firms with overseas buyers will go awry. But the finance ministry is insistent that if excise duties on steel products are to be cut, then it would have to hike the export duty on iron ore, to compensate for the loss in revenues. Ram Vilas Paswan, the steel minister, wants a ban on exports of hot-rolled coils, an imposition of 10 per cent duty on cold-rolled coils and five per cent on galvanised steel. Paswan has also assured the Left parties that the government would consider their plea for a ban on futures trading in steel. And Paswan also played up to the leftists, by telling steelmakers to cut down on their profits. We want to tell the steel industry that your profits have increased despite a rise in input costs. You should now think of reducing your profits, he added. The minister says the government might, as a last resort, bring steel under the purview of the Essential Commodities Act to curb its prices. ***** THE powerful domestic steel industry is, however, not taking things lying down. The Indian Steel Allliance (ISA) has written to Prime Minister Manmohan Singh, pointing out that a blanket ban on exports would hurt many producers who have set up export-oriented plants. The ban on exports will hardly have any impact on inflation, the alliance says. Just around eight per cent of Indias total steel production is exported, so banning it would not make much sense. Also, most of the items that are exported do not have a ready market in India, or are available abundantly. Worse, while the government encourages export of raw materials (iron ore), it would be banning the export of the valueadded finished product (steel items), which could be a travesty. Notes Venugopal Dhoot, president, Associated Chambers of Commerce and Industry of India (Assocham): It is ironical that we continue to export freely a very important raw material, iron ore, with a nominal export tax, and the end-product, steel, is being banned from export. Assocham points out that the move to ban exports would affect the credibility of the Indian steel industry internationally. International buyers will seek other markets and India will lose its share, says Dhoot. It will again take years for us to regain the markets. Besides, Indian steelmakers would be dragged to court by international buyers, even as the products made for them would pile up in warehouses in India. India produces about 56 million tonnes of steel annually. According to the International Iron and Steel Institute (IISI), demand is expected to grow by 8.9 per cent this year and 12.1 per cent in 2009. India, along with China, Brazil and Russia (the four so-called BRIC nations), will be driving growth in the global steel sector, points out the IISI. Global steel consumption in 2008 is expected to grow by 6.7 per cent to 1,282 million metric tonnes, and next year by 6.3 per cent. This, despite a sharp slowdown in the US and other Western economies. But steel prices are unlikely to fall this year and next, as there is hardly any addition to capacities over the next two years in India. (By Anand Kumar, Dawn-Economic & Business Review, Page-V, 21/04/2008)

Using remittances for development

REMITTANCES have emerged as a major source of foreign exchange. Global official remittances have increased from $2 billion in 1970 to the present level of over $80 billion. About sixty per cent of the global remittances flow towards developing countries. And these exceed the global official development assistance as well as capital market flows to the developing countries. However, over the years, concerns have been expressed on the limited productive use of these remittances. It is estimated that 50-60 per cent of remittances are spent on current consumption and only about 10 per cent go into investment. Much of the remittances are used for repayment of loans, in daily expenses such as food, clothing, child education and healthcare and basic subsistence needs. Funds are also spent on building or improving housing, buying land or cattle or

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durable ,consumer goods such as washing machines and televisions. Remittances are also utilised for financing migration of other family members on social ceremonies and community development activities. Generally, only a small percentage of remittances is used for savings and what is termed productive investment e.g. income and employment-generating activities such as buying land or tools, starting a business and other economic activities with multiplier effects. Due to poor infrastructure, lack of access to credit, and limited opportunities for small-scale investment, the migrants are making rational decisions about the use of their remittances. While Overseas Pakistanis Foundation (OPF), offers investment advisory services to returning migrants and assists them in obtaining services from relevant government departments in setting up business, much more effort is needed to influence the pattern of utilisation of remittances for productive purposes. First, there is a need for policy change to promote remittances. For migrants, the desire to remit savings through official channels is a function of convenience, flexibility and profitability of their transaction. Convenience depends on the ready availability of financial intermediaries who can easily remit funds to their families. Flexibility affects deposits more than remittances and is related to the availability of facilities for migrants to keep their deposits in foreign exchange and make withdrawals when desired. Profitability is determined primarily by the gap between the official rate of exchange and the unofficial rate available to the migrants. Besides this gap other important factors relate to the real interest rate, inflation rate and exchange rate, as well as expectations regarding changes in these rates. In order to encourage migrants to hold their saving balances in financial assets at home as opposed to the host country, the government has introduced foreign currency denominated bonds. A special package of foreign exchange remittance card (FERC) has been implemented and under these, five categories of remittance cards are offered to those overseas Pakistanis who remit $2,500 to $50,000 in a year. A wide range of incentives are also being offered to the foreign exchange remittance card holders. To encourage savings, the government provides temporary and permanent migrant workers with the incentives to remit to foreigncurrency accounts (RCFAs), which can be repatriated, by domestic banks by offering a premium over and above the interest rates available in the international financial market. However, Bangladesh offers additional incentives through a preferential exchange scheme applied to conversions of foreign exchange from the RCFAs to local currency. Its Wage Earners Scheme (WES) enables migrants to sell their foreign exchange to importers at daily auctions at a premium over the official exchange rate. In India, non-resident Indians are allowed to open foreign currency non-resident accounts which can be denominated in dollars or pounds sterling. The balances on these accounts and interest earned are repatriable The deposits are also exempt from wealth tax. In terms of productive investment of remittances, it is noted that the focus of the incentive policy regime is on the high skill/income migrants living abroad permanently, either in the industrialised or developing countries. There is very little effort that is addressed to low skill, low income, temporary migrants, mostly workers in the Middle East who provide a substantial amount of foreign exchange through transfers and re-enter the labour market in search of employment on their return. The prospective returnee should be provided an enabling environment to place her/his saving into productive investment. South Korea has launched an experimental training programme for returning migrants. It aims at training returning migrants in new skills so that they can move to other industries or establish their own businesses. In Thailand, banks offer an advisory service on investment opportunities to its migrant-worker customers. The workers who seek advice are also eligible to obtain supplementary loans from the bank if they have a good record of savings. In the Philippines, the POEA (Philippines Overseas Employment Administration) in collaboration with the ILO has established training centres in various high-migration regions. These centres provide business consultancy, information services, training in small-scale business management and financial supports to returning migrants and their family members. In Sri Lanka, the Department of Labor initiated a counseling service for return migrant. A Return Migration Branch was established in the Research and Development Division of the Ministry of Labour, to identify the problems of returning migrants and provide counseling and advice. Along this, Pakistan has a Non-Repatriable Investment Scheme under which overseas Pakistanis (including those returning permanently) are allowed to import machinery and equipment at concessionary rates of duty to establish manufacturing enterprises. Migrant workers are also encouraged to invest in export processing industrial zones. In India migrant workers are given preferential access to capital goods and raw materials. Even Bangladesh offers special incentives for domestic investment.. Sri Lanka was the first labour-exporting country in Asia to launch an entrepreneurship development programme for returning migrants. This programme, inaugurated in 1982 by the Sri Lankan Ministry of Labour in collaboration with the Merchant Bank of Sri Lanka (referred to as ML-MB Programme) aimed at guiding returning migrants in business creation. In Turkey and Yugoslavia, investment by migrants, is encouraged through workers companies and village development cooperatives. Policy makers in Pakistan need to focus on diverting remittances into productive avenues. (By Nusrat Khurshedi, Dawn-Economic & Business Review, Page-V, 21/04/2008)

Inflated egos and inflation

IS inflation some kind of a sudden plague, which hits without warning, spreads contagious havoc for a while and then disappears as mysteriously as it came? Finance ministers would love such an explanation, wouldnt they? Unhappily for governments, and fortunately for mere mortals, the voter is not gullible.

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Inflation is an interesting phenomenon. It is a consequence of decisions not taken, as much as decisions taken. A simple analysis of statements made in parliament during the debate on inflation by Finance Minister P. Chidambaram and Cricket Minister Sharad Pawar (who also looks after agriculture when he gets time from running the Board for the Control of Cricket in India) will indicate what I mean. The most startling analysis of basic causes was made by Pawar when he pointed out that the poor had acquired more liquidity, were therefore buying more food, and this, in conjunction with a change in dietary habits was pushing up food prices. Well, thats it then. All you have to do is tell the poor to behave. They should remain semi-starved, as they have been for thousands of years, so that the middle-class and rich can buy food at acceptable prices. The poor, Mr Cricket Minister, are not fools: they do not think that any government can suddenly change their diet from bajra roti and dal into pilao. Even a government that pompously claims to belong to the aam aadmi, or the ordinary people, does not raise hopes among ordinary people. Life has taught them to be realists. The poor do not expect pilao, but they do believe that if they began life with just two rotis for a meal they have a right to three rotis after a while. Is that too much? The insensitivity of Pawars statement did not seem to upset anyone in the political class, proving how insensitive everyone has become. The point is more moot. When did the shift in dietary patterns as for instance, the rising demand for wheat in the traditionally rice-eating south take place? On the morning of the debate in parliament? This change in food habits has been a slow turn, years in the making, and the agriculture ministry has been studying this pattern for a long while. So what did the agriculture minister do about it? Nothing. Did he encourage a shift in crop production through, for instance, incentives to ensure that India did not face a wheat shortage? Here is a consequence of decisions not taken. There is a further twist to the story. We underestimate the role of corruption in inflation. There was a wheat shortage earlier. When did Sharad Pawar step in to import? Not when world prices were low, but when prices had peaked and you had no option but to buy at available rates. The importer of that wheat on behalf of Sharad Pawar is probably flying around in a private jet. A check might unearth some interesting details. On April 16, the government announced it would import one million tonnes of edible oil. Had prices of edible oil begun rising at the stroke of the midnight hour on April 16? Why did the honourable minister suddenly wake up before a debate in parliament? As long as prices only threatened the livelihood of the poor, the government of Dr Manmohan Singh did nothing. When prices began to threaten the life of the government, there was a flurry of activity. The government of Dr Manmohan Singh is guilty of collusion in inflation. The economic principle that has driven this government is the oft-repeated trickle-down theory, a favourite of World Bankers infesting this administration. Every economic phrase has a human meaning. This particular phrase means that the government knew that there would be a waterfall for the few at the top floating in swimming pools, and only a trickle would reach those dying of thirst at the bottom. Its attention has always been focused on the management of the waterfall. We should have expected this, but we do not have a memory. What was the rate of inflation during the five years that Dr Singh was finance minister under Narasimha Rao? In 1991-92, inflation was 13.7 per cent, and these are the figures for the subsequent years of his finance ministership: 10.1 per cent, 8.4 per cent, 12.5 per cent, 8.1 per cent. There is a correlation between inflation and political instability. Food prices are not the only factor, but they are a principal reason because food security is an important basis of collective national confidence. The government of Dr Singh, Chidambaram and Pawar believed that food security could be left to market forces. Market forces have now begun to bleed this government. Inflation during the Jawaharlal Nehru decade, between 1951-52 to 1960-61, was 1.8 per cent. That was undeniably the most stable period of the last 60 years. Inflation averaged 6.3 per cent in the sixties, and the Congress was swept out of power in the states between Punjab and Bengal. It barely managed to survive at the centre in the 1967 general elections. Inflation rose to 10.3 per cent during the seventies; the turmoil was as high as inflation. Two national governments were voted out of office. Inflation dropped to 7.2 per cent in the eighties and 7.8 per cent in the nineties, but the people still considered it too high and the turnover of governments was high. Calm returned when inflation was reduced to less than five per cent in the first half of the new century, despite a serious drought for one year. Anything above five per cent creates political tremors. Dr Manmohan Singhs five years as finance minister reduced the Congress Party from about 240 seats in the Lok Sabha to 145 seats. At the same rate of attrition, his five years as prime minister could take the Congress to below 100 seats. Dr Manmohan Singh has been kept out of the politics of power since he became prime minister, but the administration of power has been his responsibility. If he had spent even half the time examining the earth beneath his feet as he did staring transfixed at a nuclear deal with George Bush, he would have seen that angel of death known as inflation approaching many months ago. (By M.J.Akbar, Dawn-7, 23/04/2008)

Number of food insecure people rises to 77m

RAWALPINDI, April 22: Households in Pakistan are devoting a larger proportion of resources to food and cutting back on consumption, with the number of food insecure people increasing from 60 million to 77 million in 2007-08, resulting in increased levels of malnutrition. The International Fund for Agricultural Development (IFAD) has issued a short paper with the objective of improving the understanding of what soaring food prices at the global level mean for poor rural people across the developing world.

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The paper reveals that the prices of basic food commodities have increased rapidly over the past three years. In only the first quarter of 2008, wheat and maize prices increased by 130 per cent and 30 per cent respectively. The paper is based on a questionnaire sent to IFAD country offices and responses were received from over 40 countries, including Pakistan. Rice prices, which increased moderately in 2006 and in 2007, rose 10 per cent in February, 2008, and a further 10 per cent in March. The threat to food security in developing countries is on the rise, the paper says.It is clear from the responses received that in almost all developing countries food prices have increased during 2007 and early 2008. In some cases, prices have more than doubled, and in some countries there have been absolute scarcities of food in local markets. Yet it is not immediately apparent that poor rural people face a single and uniform crisis of food prices. On the contrary, the situation varies considerably from one country to another and in the urban and rural areas of each country. Not only does the extent of the price hikes differ enormously but also the factors shaping these prices vary profoundly. Feedback from many countries suggests that increasing fuel prices are a major driving force behind rising food prices. This has affected both input prices and transport costs. But in the final analysis, food prices are ultimately determined today as they have always been in large part by production levels and in a number of countries rising prices reflect, above all else, unfavourable agro-climatic conditions, the paper says. In the most countries, IFADs target group poor rural people are both sellers of food commodities and buyers of foodstuff, at different times of year. Typically, they sell immediately after harvest to meet their immediate cash requirements and buy food in the months prior to the next harvest. In all regions, and in most countries, prices paid to food producers have increased over the past year. The extent to which they have increased varies considerably country by country and crop by crop. (By Amin Ahmed, Dawn-16, 23/04/2008)

Inflation is crushing the poor

KARACHI, April 23: Though global crude oil prices nearly hit the $120 mark on New York Citys trading floors and the worlds bureaucrats have lately been waxing philosophical about the international food crisis, people like Aurangzaib and countless others like him worldwide are feeling the acute pinch of these crises the most. Originally from Attock and now settled in one of Karachis katchi abadis, Aurangzaib, who is married with four kids (two sons and two daughters), is a driver by profession and gets by on minimum wage. Things are very difficult. Survival is difficult. I earn Rs6,000 a month. I cant make ends meet. We barely get by. With my monthly salary I can usually cover for only 15 days. The remainder of the month is very tough. I usually have to depend on credit in the hope that I will pay everything off once the new salary comes, he says. Though things have steadily been getting worse, he feels price hikes during the past one year have particularly hit him hard. There has been a great change in the last one year alone. I would say the cost of everything has gone up by 50 per cent. Six to seven thousand rupees used to be enough to get by. Now, I think even if I earned Rs10,000 it would barely be enough. In fact, Aurangzaib says the fare hikes on public transport have forced him to change jobs. I live in a katchi abadi of North Nazimabad. I used to work quite far from home and used to travel by bus. I changed jobs and now I walk to work, as my employer lives close by. The bus fare between two stops is now Rs9. That means nearly Rs20 going and coming daily. Considering how expensive everything else is I had to change jobs as I couldnt afford to commute anymore. As for food, he says many things people with higher incomes take for granted are rarities for him and his family. We usually cook vegetables or lentils at home. We cant afford meat. The last time I had meat was a month a go. A year ago things were a lot better. But it seems as time goes by things get even more challenging. Since my wife has kidney problems, shes on a special diet. We do not buy wheat flour (atta), mostly because its hard to find these days. Instead, we buy readymade roti from a tandoor three times a day. Government responsibility Asked what he thought the government could do to control the situation, he says its the governments responsibility to control inflation. Life is unbearable for the common man. When told the government says oil is expensive in the world market while there is a global food shortage, he said these explanations offered him little solace. What can I say? Oil might be expensive, but its crushing the poor. If there is inflation in this country, how will the poor cope? The prices for everything have gone up. But my salary has been the same for a year. Ghee used to be Rs70-75, now its about Rs140. Im the one who has been affected, not the government. Why dont the people in power think about the common man? Have they ever thought about how we live? Have they ever thought about how we survive? Aurangzaib says that if the present state of affairs continues, he might have to sacrifice his childrens education. I pay Rs2,500 just as house rent. My kids are in school. I pay full attention to their education and I want them to complete it, but the way things are going I dont think Ill be able to. Im the sole breadwinner in my house. In a situation where even the middle class is being squeezed and finding it hard to make ends meet, it is truly a miracle that the working class is still putting up a fight to put food on the table. People like Aurangzaib dont want handouts, but just a chance to live with dignity, a simple logic that seems to escape the powers that be. (Dawn-17, 24/04/2008)

January 2003-08 Over Rs1bn spent on Musharrafs world visits

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ISLAMABAD, April 23: President Pervez Musharraf undertook 37 foreign tours between January 2003 and January 2008 costing the national exchequer a total of Rs1.468 billion. According to the information provided by Foreign Minister Makhdoom Shah Mehmood Qureshi to the National Assembly on Wednesday, President Musharraf was on foreign tour every 50th day on average and spent a total of 201 days abroad during these five years. The foreign minister placed this information before the lower house through a written reply to a question by Raja Mohammad Asad Khan of the Pakistan Muslim League-Nawaz (PML-N) who had asked the minister to provide complete details of the presidents visits, expenditure on each visit, names and number of the entourages and the purpose of the visits. Interestingly, no member of the National Assembly raised the issue on the floor of the house and the question went unnoticed. No member of the PPP or the PML-N, the parties which had been strong opponents of Gen Musharraf in the last eight years, questioned the utility of these foreign visits and the logic behind spending the huge amount on foreign trips when the country is already in the grip of severe economic crisis. The data shows that President Musharraf visited a total of 45 countries during this period with most of the visits to Saudi Arabia and the United States. The president went to Saudi Arabia eight times, whereas he visited the US six times. The other most frequently visited countries by the president were UAE, Turkey, Switzerland, Malaysia, UK, France, Afghanistan, Belgium, Indonesia, Morocco and China. The president went on eight foreign tours in 2003, seven in 2004, eight in 2005, five in 2006, eight in 2007 and one in January 2008. The presidents 15-day visit to the US, the UK, Belgium and Cuba in September 2006 cost the national exchequer a total of Rs227.95 million. Surprisingly, the presidents five-day tour to China in February 2006 cost Rs168.89 million. About the purpose of this visit, the minister says: The close Pak-China relationship requires frequent exchanges between senior leadership and the president undertook the visit in that context. Similarly, the presidents trip to four European countries in January 2008 cost Rs146.56 million to the national kitty. The president visited Switzerland for participation in Davos Economic Forums annual meeting, whereas his visits to Belgium, France and the UK were for bilateral purposes. Another 14-day outing of the president in November-December 2004 cost the exchequer Rs90 million. The president visited Morocco, Brazil, Argentina, Mexico, France and the US for bilateral purposes with a 53-member entourage from Nov 26 to Dec 9, 2004. In September 2004, the president had already spent Rs60.76 million on his visits to the US, Netherlands and Italy. In January-February 2007, President Musharraf visited Jordan, Syria, Egypt, Saudi Arabia, Indonesia, Malaysia, Iran and Turkey and these trips cost Rs111.75 million. The purpose of these visits was to make efforts to resolve the outstanding Palestinian dispute and unity of Muslim Ummah. The reply does not provide complete information as to where and how this amount was spent. The data shows that the presidents one day visit to Afghanistan in November 2004 with a 30-member strong entourage cost just Rs35,272. Following are the countries President Musharraf visited during Jan 2003 - Jan 2008 with number of visits to each of the country: Russian Federation (1); Malaysia (3); Saudi Arabia (8); US (6); UK (3); Germany (1); France (3); Tunisia (1); Algeria (1); Morocco (2); Canada (1); China (2); Korea (1); Turkey (4); Switzerland (3); Sweden (1); Finland (1); Azerbaijan (1); Netherlands (1); Italy (1); UAE (5); Afghanistan (3); Brazil (1); Argentina (1); Mexico (1); Kyrgyzstan (1); Uzbekistan (1); India (1); Indonesia (2); Philippines (1); Qatar (1); Australia (1); New Zealand (1); Kuwait (1); Yemen (1); Norway (1); Belgium (2); Cuba (1); Jordan (1); Syria (1); Egypt (1); Iran (1); Spain (1); Poland (1) and Bosnia (1). (By Amir Wasim, Dawn-2, 24/04/2008)

Punjab seals local govts record, freezes accounts

LAHORE, April 23: The Punjab cabinet has decided to seal the record and freeze accounts of all district, tehsil and union councils in the province for a special audit. The cabinet, in its first meeting held on Wednesday, also decided to launch a crackdown on proclaimed offenders in various cities, particularly in Gujrat, and to strictly enforce the ban on serving more than one dish at weddings. Chief Minister Dost Mohammad Khosa presided over the meeting. Sources said the cabinet was informed that none of the local councils had followed the standard accounting practice while spending billions of rupees since their inception in 2002, and that the local audit system had ignored prescribed rules and procedures. No district government had appointed internal auditors, which was mandatory under the Local Government Ordinance. The sources said the purpose of the special audit would be to recover embezzled funds and punish the corrupt. The sources added that the local government system could also be declared unviable and a source of corruption and mismanagement. They said the cabinet also felt that it was necessary to crack down on criminals because Punjab appeared to have become a safe haven for them. Briefing journalists on the meeting, Law Minister Rana Sanaullah Khan and Finance Minister Tanvir Ashraf Kaira said that the local councils had become a symbol of corruption. The audit, to cover the period from 2002 to date, would not affect ongoing schemes. The ministers said the decision to launch the crackdown on proclaimed offenders had been taken to make the people feel secure. Efficient police officers would be given full opportunity to deliver while those posted on the basis of personal likings would be transferred. The ministers said the flour crisis was the result of an artificial shortage which would be overcome to a large extent by

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curbing hoarding and smuggling. Honest and hardworking officials would be posted in border districts to control wheat and flour smuggling. They appealed to the people and media to identify elements involved in hoarding wheat and flour and said there was a proposal to reward individuals providing such information. The ministers said the power crisis would be resolved before next summer and steps would be taken to reduce loadshedding. They said instructions had been issued to review cases registered on political grounds by the previous government so that they could be withdrawn. The ministers said the caretaker provincial government was a continuation of the PML-Q rule and accused it of making illegal transfers and postings and protecting its cronies. Such steps, they added, were bound to be reversed. (By Intikhab Hanif, Dawn-1, 24/04/2008)

Wasteful trips
HAD we truly stood to profit from President Musharrafs numerous trips to foreign countries, the expenditure of almost Rs1.5bn incurred on his travels would have been considered money well spent. But in the last five years from Jan 2003 to Jan 2008 we have seen the president undertake 37 trips abroad, often with large entourages, with little to show for it. Pakistan has hardly progressed over the years and, apart from the fact that we finally have an elected government in power, there has been no improvement in terms of the socio-economic health of the nation. So one would be justified in inquiring about the point of such trips. In several instances, the president flew to the same country more than once as in the case of Saudi Arabia which he visited eight times. Sometimes, the presidents choice of country also rankled for example, what on earth did he achieve by visiting Poland last April? Moreover, some of his trips were in sheer bad taste as was his visit to the US in September 2006 to promote his autobiography which he did with much fanfare. Equally ill-advised was his European tour earlier this year, which he undertook with the intention of removing western misperceptions regarding the political situation in Pakistan. If indeed any explanation was due, was it not the job of the Pakistani missions in the countries he visited to do the needful? It is unfortunate that under President Musharraf, Pakistans image has been of a country run by an individual rather than a government with properly functioning institutions. President Musharrafs foreign trips have only reinforced that image. He should have realised long ago that not only are such trips wasteful for presidential security and protocol cost the taxpayer a lot of money he has also weakened the role of diplomats and others entrusted with the task of strengthening foreign relations. We hope things will change now. A government that has been elected and has popular support should not feel the compulsion to send its leaders on foreign jaunts to establish its credentials and polish its image. (Dawn-7, 27/04/2008)

How to achieve food security?

FOOD security has been a global concern. At times, the world was simply short of food supplies. The infamous Bengal famine was not a case of shortage but that of greed and mismanagement. This country had seen food rationing during 1960s.The situation changed after green revolution and thereafter it remained a problem of reach. Lately, the food security has emerged as a complex phenomenon. There is pressure on grains due to competition with oil crops including those for edible oils as in Pakistan and bio-fuels from corn and mustard oils in the West. The demand for animal and plant protein has increased which causes cropping competition to grain crops by fodders and edible legumes.The land and water resources are stressed and population keeps growing. The climate change has started to make its impact. The cropping patterns needs readjustment to cope with the change. Severe droughts in Australia, a major wheat supplier of the world, have restricted global trading in grains. The war risks to some countries have pressured them to build strategic reserves. Wronged estimates and mismanagement are also part of the problem. Escalations in the cost of production have restricted the ability of farmers in developing countries to make seasonal investments leading to stagnant and declining yields. In case of wheat, we are also faced with new disease threats. Recent rains and hail storms in Punjab have damaged the standing crop. The yield expectations from the current crop are not likely to beat the last years crop. A part of the problem has roots in lack of sufficient investment in research and development (R&D) for agriculture. There is only one major variety (cultivar) of wheat which has dominated the production scene since 1991 and that has become susceptible to rust disease. Delay in replacement of one variety of wheat is partly to blame for the crisis. The terms of trade have also discouraged agricultural growth. While we can continue making long-term plans and justify investment in the agriculture sector, it is an emergency situation where one should act to minimise shock by reducing the known/preventable losses. Wheat harvesting in Sindh is almost over and it should be in full swing in Punjab which produces the bulk of the crop. Harvest and post-harvest losses of wheat and other grains range between 15 and 18 per cent, enough to match the expected import, provided the said losses are prevented. An empirical study undertaken at the University of Agriculture, Faisalabad (UAF), is summarised in the following tables. Wheat and rice and to some extent maize have mutuality. To a certain extent, surplus in one case can compensate the shortage of other grains. This article focuses on wheat alone. In case of wheat, the immediate concern should be to attend the harvest operations and then plan for the rest of post-harvest and marketing chain. To manage preventable losses in harvesting and post-harvest activities is a challenge. If managed properly, every reduction in losses will be a corresponding gain. Aggressive and effective wheat procurement by the government is not likely to work due to the limitation of procurement

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price. The market remains wide open to the market forces and to unscrupulous elements. The government can still help the farmers by proper weighing and ensuring fair and timely payment in an open market. Storage is an important factor in the marketing of wheat. The storage base has to be evenly spread at farmers, traders and flour millers level. The urban consumers have left the practice of storing wheat at household level due to nonavailability of local milling facilities (chakkis), shifting more reliance on wheat flour supplied in the open market. A campaign may be launched to revive the old practice of buying and storing wheat at household level. The financial support should also be provided for the promotion of local milling facilities. In the long run farmers could be facilitated (credit on commodity) to store their crop as much as they can in order to fetch high prices of their produce before next harvest. The storage of wheat needs to be identified from hoarding. The government should enhance its storage capacity by hiring private storages and keep record of wheat storage in the private sector. Storage limits be imposed. Globally, there are 25 million tons of wheat reserves against the required quantity of 60 million tons, a point to note and demands the sealing of borders to stop smuggling. As a follow up, there should be continuous monitoring and audit of movement of wheat from the government and private storage to the flour mills and from the flour mills to the consumer. Specific measures are needed to be taken which include: Inter- and intra-province controlled movement of wheat as per government policy through out the year. Wheat buyers/traders be registered who declare the purchase and stock position on daily basis. Reliable estimates of wheat production and consumption for the year 2008-09 are needed badly to avoid the repeat of last year. The obvious gap has to be met by timely arrangements for wheat import. It is reported that the purchasing power of the poor has declined by 50 per cent, thanks to inflation. The poor people spend up to 75 per cent or more of their income on food items. Price of wheat has quadrupled in the international market. The wheat price in Pakistan is still fairly low. Measures should be taken to increase the purchase power of the poor against high wheat prices (like food coupon, ration cards etc.) The wet wheat harvest season is alarming. That can cause a range of problems. The future: Input prices have been increasing disproportionate to the output prices. Terms of trade are against agriculture. We should make them favourable for agriculture to ensure food security. The government should put a halt on the prices of input and make sure that farmers get right price for the produce. Rigorous campaign and monitoring of wheat cultivation should be launched, to ensure sufficient acreage under wheat in the next crop season. If there is one item to be fixed, that should be the availability of quality seed and other inputs to the farmer at right price and at the right time. Soil and water need attention as a next immediate step. The government maintains a buffer stock of around 0.5 million tons. Changing consumption pattern and increased demand calls for substantial increase in this buffer stock to the tune of around two million tons for ensuring the food security. Futures market concept can be introduced on experimental basis. As a long-term policy, investment in research and education is a must to have new knowledge and technology for science based agriculture. The monoculture of one wheat variety was mentioned earlier. The emergence of new wheat pests (aphids and jassids) deserves a closer look. There should be short training courses on the post-harvest grain management for the in-service manpower of the food department. There is also room for developing basic training courses for new entrants of the food handling agencies, realising the fact that grain handling at the post-production stage is a technical job. The UAF has the capacity to offer these services. In summary, urgent attention is needed to manage the preventable losses during harvesting and afterwards. That should be followed by a strict surveillance of marketing channels. The durable solution lies in R&D investments. There is a direct linkage between food security, poverty and rural development. Meticulous investment in agriculture will have mitigating effects on rural and urban poor, resulting in socio-economic stability and large political dividends for the government. The writer is the Vice-Chancellor, University of Agriculture, Faisalabad. (By Iqrar A.Khan, Dawn-Economic & Business Review, Page-III, 28/04/2008)

Inflation who to blame?

The State Bank of Pakistan has recently released the second quarterly report for FY 2007-08, unveiling the skyrocketing inflation figures. These figures came as no surprise to the masses, who are already crippled under soaring prices and severe shortage of essential food items. Crude oil prices touching record high peaks are adding fuel to the fire. Under the circumstances one wonders who to blame for this massive price hike. According to State Bank, high food inflation, owing to the rising international commodity prices as well as factors related to domestic economy, are the main culprits. This situation, besides exposing the vulnerability of our economy to international price shocks, has also bewildered people about what benefit, if any, they have extracted from the so-called phenomenal economic growth of the last five years. Is our economy that vulnerable to external economic shocks? Are there any other factors responsible for this high inflation, besides the surge in international prices? And what can the government do to prevent such an untoward situation? As experts are predicting one of the worst global food crises in history, the prices for food items are hitting a record high in the international commodity market. These prices coupled with an unprecedented hike in crude oil prices are further compounding the global inflationary pressures.

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These factors however, are only responsible for part of the crisis that Pakistan is facing right now. After analysing the current economic situation, one cannot ignore such factors as governments expansionary fiscal policy, the prevalent anticompetitive market practices, inefficient law and order situation resulting in supply disruptions and administrative decisions like the delay in passing on the oil price increase to the consumers. The oil prices have been on the rise since last year. However, the caretaker government, apparently under political pressure, failed to pass on these increases to the public, fearing a political backlash in the upcoming elections. This delay, in turn, failed to check the consumer demand, which could have been substantially rationalised, if the price increase was passed on to the consumers. Such a demand rationalisation could possibly have resulted in significantly lower oil import bill and consequent reduction in current account deficit. The anti-competitive market structure facilitated a few elements in cornering the wheat market and was hugely responsible for the increase in the flour price. Right before the elections, when people were waiting in long lines just to get a sack of flour and the government was desperately trying to import wheat at phenomenally high prices, the administration miserably failed to check the hoarders. Not even n a single case was made public, where a hoarder of wheat was taken to task. The hoarding of essential food items like wheat therefore, pushed up the flour prices tremendously, resulting in a huge increase in food inflation. The increase in food inflation is now responsible for 59 per cent increase in the CPI. Interestingly, in a country where agriculture is the backbone of the national economy and the main source of livelihood for 66 per cent of the population and accounting for 20.9 per cent of the GDP, it is surprising that why the local supply is so vulnerable that we cannot even meet our local demand. Our fiscal deficit currently stands at around more than Rs359 billion, much more than what the government had expected. Most of this deficit has been funded by nothing else but the cheapest and easiest financing source available to the government, through expansion of M2 assets. This is in sharp contrast to the SBPs recommendation to the government last year to retire debt of around Rs62 billion. This expansion in monetary assets apparently has played a key role in boosting aggregate demand and pushing the inflation further up. The new government has also to deal with the dirty laundry of the last government. A case in point is the recent heavy oil subsidy, which was given in terms of issuing guarantees to oil companies, against which they borrowed the unpaid price differentials from the commercial banks, shifting the financial burden to a future date. Most of the subsidy amount, if not all, is still to be paid and will have its adverse impact probably in the next financial year. Under this situation, the government has limited options to deal with the current crisis. On one hand, any decision to tighten the monetary policy runs the risk of generating a recessionary trend and on the other, the widening fiscal deficit is giving little room to the government to grant any relief to the consumers. There is no single remedy for this chaotic situation and the government should adopt a multi-pronged strategy to tackle this issue. In the short term, the government should strengthen the administrative machinery, to check anti-competitive market practices, such as hoarding, as well as to ensure supply of essential food items. In the long run, however, the focus should be on enhancing agricultural productivity, careful agricultural planning and maintaining strategic reserves of essential food items. The situation also highlights the need to thoroughly examine the prevalent market structures in the domestic food market, by organizations like Competition Commission of Pakistan, and design appropriate interventions to prevent these monopolistic trends in future. On the energy front, the government must seriously explore alternative options including ethanol-based fuel. While this option has been tried on a limited scale, the minimal price differential has prevented any significant success so far. A focus on using higher ethanol percentage blends along with the introduction of flex-fuel engines, which can run on gasoline as well as ethanol blends, can significantly help in fighting the rising oil prices. The burgeoning fiscal deficit demands a deep look at the tax and revenue structure, improving fiscal discipline, maintaining a sustained focus on austerity especially in relation to non-developmental expenditure, and ensuring efficient and effective working of bodies like Monetary and Fiscal Coordination Board, with the view to restrict deficit financing and inflationary implications. Finally, the substantial growth in monetary assets, partly the result of deficit finance, raises serious questions about the independence of monetary policy, despite repeated claims by the previous government regarding the independence of State Bank. It is high time that monetary policy is freed from the clutches of political influence and SBP should be given clear targets on inflation control and financial stability. In the end, it all boils down to the ambitious goal of improving economic governance which is easier said than done. (By Hasaan Khawar & Dr Zafar Iqbal, Dawn-Economic & Business Review, Page-VI, 28/04/2008)

Oil prices, food crisis need immediate attention

KARACHI, April 27: Though the independence of the judiciary is important for establishing the rule of law in the country, the two issues that need immediate attention in Pakistan are rising oil prices and the food crisis, which have the potential to destabilise an already vulnerable economy. This was stated by economic analyst Yousuf Nazar at the launch of his book The Gathering Storm in a local hotel on Sunday. Mr Nazar, whose book is subtitled Pakistan: political economy of a security state, has a detailed background in international finance and has now turned to economic analysis. The book is a compendium of his articles. The judiciary is important but the two most potent crises we face are food and oil. The oil price may hit $200 a barrel in the next year, he said, adding that the Pakistani economy was especially vulnerable due to high inflation, current account and fiscal deficits. It is a matter of great concern as a Pakistani. India and China are in a better position financially to cope with the crises. The challenge is there. Shall we grab the opportunity or let is pass? he added.

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Mr Nazar said that powerful global forces were shifting the centre of power from the west to the east, where oil producers were sitting on about $2 trillion. He dedicated the book to the 74 per cent of Pakistanis who live on $2 or less a day. It is also dedicated to the elite for a reason. We stand at a point in history where we see things that might not be the same as the past. The party has come to an end. Citing oil as the crux of the matter, he recalled that it was the oil embargo enforced during the 1973 Arab-Israeli War that ended the longest period of economic growth in the world, which had started in the 1950s. He added that the current crisis was being fuelled by speculation. People think the collapse of the Soviet Union was the result of Jihad or Ronald Reagans policies. After 1980, oil prices collapsed, which precipitated the collapse of a centralised, corrupt, elitist economic system, he said. Federal Minister for Information and Broadcasting Sherry Rehman, who was the chief guest, said economics could not be divorced from politics. Countries where the elite abstain from their responsibilities go nowhere. The elite must become stakeholders and meet the great unwashed, she said. Labelling the authors anti-establishment views as refreshing, the minister said Mr Nazar had written during a period when the countrys elite were supporting a failing economic and political system. She claimed that the collapse of the BJP government in India in 2004, partially due to the backfiring of the India shining slogan, should have come as a warning to Pakistan. The crisis is unprecedented. We are not saying the private sector should not be the driver of the economy, but given the widespread impoverishment, we cannot rely on traditional economic models, Ms Rehman observed. Mobiles and fancy cars She said certain ministers were staying awake at night discussing the bread-lines that were fast becoming common in the country. Lambasting the previous set-up, she said the present government had inherited a moth-eaten country. Planning was short-sighted and top-heavy. There were no social, agricultural or energy policies. The last government had not invested in one megawatt of (energy production) over the last seven years. Mobile phones and fancy cars do not fuel a developing countrys economy. Earlier, several speakers praised the prescience of Mr Nazars work. Salim Raza, CEO of the Pakistan Business Council, said economists had to rethink their paradigm in reference to food, fuel and market stability. He said the lack of awareness on the part of the worlds central banks and analysts regarding the current crisis was immense. However, the effects of the economic depression will be moderated by the decoupling of growth, especially growth in European and emerging markets, alongside huge financial reserves in the Middle East and emerging markets to the tune of $7 trillion, he added. He said Mr Nazars work stimulated debate on important economic issues confronting Pakistan and that it was not doctrinaire or theoretical. Muneer Kamal, CEO of KASB Bank, said Yousuf Nazars work was valuable as it discussed the elitist structure of society and the economy, adding that the nations economic ills were due to this structure. He said in an atmosphere where we mostly have after the fact analysis, Mr Nazars views were welcome. He cited one of the authors articles from August 2006 where he had written that oil would hit $100 a barrel, while in Jan 2007 he had discussed rising inflation. Jawaid Bokhari, editor of Dawns weekly EBR section, noted that Mr Nazar, unlike some technocrats, looks at the big picture. He looks at things critically and raises issues that have a strong bearing on Pakistans future. Quoting the author as saying that Pakistan has a patronage-driven protectionist economy no longer able to stand on its feet in the global economy, Mr Bokhari said we may yet see the full fury of the gathering storm. Policy-makers stick to policies that are no longer relevant. They need to blend continuity and change. Jamshed Mirza, publisher of the book, also spoke. (By Qasim A. Moini, Dawn-13, 28/04/2008)

Foreign ministers to decide signing date Way cleared for gas pipeline accord
ISLAMABAD, April 28: Pakistan and Iran on Monday cleared way for the signing of the $7.5 billion Iran-Pakistan-India (IPI) gas pipeline agreement after removing the hitches that had stalled the accord. The progress was achieved at a meeting between President Pervez Musharraf and his Iranian counterpart Dr Mahmoud Ahmadinejad who made a brief stopover here on way to Sri Lanka on the first leg of his South Asian trip that will also take him to India. This was President Ahmadinejads first visit to Pakistan. He was also the first head of a foreign state to visit Pakistan after the formation of the new government. Both the presidents decided that the agreement over Iran-Pakistan-India gas pipeline project that was termed friendship pipeline will be signed soon, the Foreign Office said in a statement. Diplomatic observers, however, said several contentious issues remained to be addressed. The foreign ministers of the two countries will decide a date for the signing of the agreement after a meeting between their petroleum ministers. The agreement will be one of three accords to be signed in connection with the project. Talks on the pipeline proposed by Iran in the early 1990s remained inconclusive all these years because of differences between the three countries over tariff, transit fee and security issues. Last week, a major breakthrough was achieved when India returned to the talks after about a year and sorted out its differences with Pakistan on transit fee.

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Pakistan and Iran stressed that the project would help promote peace and friendship between the two countries. Dr Ahmadinejad supported Pakistans initiative for including China in the project, saying it would be beneficial for all the countries and promote regional cooperation. Officials described the hour-long meeting between the two presidents useful. They said the talks also covered subjects other than the project, including regional and global issues of mutual interest. President Musharraf and President Ahmadinejad had half an hour of one-to-one talks and were later joined by aides. The Iranian president agreed to provide more electricity to Pakistan to meet its energy deficit that has grown to 3,000 megawatts a day. Iran would supply 1,100 MW daily to Pakistan. A power supply accord will be worked out by power ministers of the two countries and the Iranian energy minister will soon visit Pakistan. The two presidents agreed on creation of an enabling environment to counter terrorism more effectively, the Foreign Office said. The two leaders agreed that peace and security in Afghanistan was vital for the progress and prosperity of the region. They said trilateral talks among the foreign ministers of Pakistan, Afghanistan and Iran were extremely useful for regional peace. It was agreed that the mechanism of the Joint Investment Company and the Preferential Trade Agreement between the two countries should be fully utilised for achieving the $1 billion target for bilateral trade. President Musharraf assured Iran of Pakistans support to its right to have nuclear technology for peaceful purposes. Later, Prime Minister Yusuf Raza Gilani hosted a lunch in honour of the Iranian president. Talking to President Ahmadinejad, Mr Gilani called for strengthening economic and trade ties between the two countries. He said the pipeline agreement would add a new dynamic to cooperation between Pakistan and Iran in the energy sector. The prime minister sought Irans support for his efforts to meet the food security challenge. President Ahmadinejad invited President Musharraf and Prime Minister Gilani to visit Iran. (By Baqir Sajjad Syed, Dawn-1, 29/04/2008)

ADB accepts govts request for $650 million support

ISLAMABAD, April 29: The Asian Development Bank (ADB) has accepted the coalition governments request for $650 million emergency budgetary support. We have decided to disburse $650 million on a fast-track basis to help improve the governments budgetary position and contain fiscal deficit, ADBs Country Director Peter L. Fedon told Dawn here on Tuesday. He said the remaining $1 billion funding, out of the $1.9 billion annual assistance lined up for the calendar year 2008, was being accelerated and maximum funding would be made available before June 30 this year so that the government could manage its financial affairs. Earlier, Saudi Arabia had pledged $300 million oil facility and China promised to help the new government with $500 million balance of payment support. According to Finance Minister Ishaq Dar, there was a Rs522 billion over-run expenditure, which if not arranged by June 30, fiscal deficit would go as high as nine per cent against the target of four per cent set for the current financial year. He said Rs522 billion was desperately needed to contain the deficit at six per cent of the GDP. When asked about the over-run expenditure, the ADB country director said the new government understood this issue better. But as far as the ADB was concerned, he said, it would play its role and help the new government by providing timely financial support. Responding to a question, he said the ADB had proposed a tax on agriculture income and on services sector for new resource mobilisation. More taxes or any other measure needed for this purpose will have to be decided by your government and we cannot say anything about it, Mr Fedon said. He agreed that the increasing international oil prices would cause more problems for countries like Pakistan. International prices, he said, were intensifying food inflation throughout the world and everybody appeared to be helpless. Asked about the growing energy problems, he said that his bank had provided $2 billion to Pakistans distribution and transmission companies to cope with power pressure. He called for establishing more power plants by the private sector to meet 3000MW of daily electricity shortage. He was of the view that the tariff issue needed to be settled to attract more IPPs in the country. Answering another question, he said the ADB would provide necessary support to Turkmenistan, Afghanistan, Pakistan and India to help build TAPI gas pipeline. We are trying to be an honest broker to push forward the regional cooperation in the shape of the gas pipeline project, he said. However, he said, the bank was not responsible for establishing any consortium to arrange funding for the project and that it had to be decided by the countries involved in it. (By Ihtasham ul Haque, Dawn-16, 30/04/2008)

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Man-made crisis pushing 100m into poverty: WB

WASHINGTON, April 29: The World Bank chief warned on Tuesday that 100 million people have already been pushed into poverty due to a man-made food crisis while as many as two billion are on the verge of disaster. This is not a natural disaster, said Robert B. Zoellick, president of the World Bank. Make no mistake; there is nothing natural about this. But for millions of people it is a disaster. He noted that hunger and malnutrition were already the underlying causes of death of over 3.5 million children every year, robbing the future potential of many millions more. In Washington, a US government commission is investigating claims that big investors who buy large quantities for future trading are largely responsible for the current unprecedented hike in food prices across the world. The use of corn and soyabean as bio-fuel also contributed to this crisis by moving farmers away from food to cash crops and by driving food prices beyond the reach of common people. After an annual meeting in Washington earlier this month, the bank warned that the world is facing an unprecedented food crisis which may cause riots and wars if not checked. The next few weeks are critical for addressing the food crisis, said Mr Zoellick on Tuesday. For 2 billion people, high food prices are now a matter of daily struggle, sacrifice and for too many, even survival. Mr Zoellick, who issued the statement after attending a meeting of the UN System Chief Executives Board for Coordination in Berne, Switzerland, said the bank believes that already some 100 million people may have been pushed into poverty as a result of high prices over the last 2 years. For the immediate crisis, the bank urged governments to fill the $500 million food gap identified by the UN World Food Programme. The bank also launched an emergency management programme called the new deal, pledging to nearly double agricultural lending to Sub-Saharan Africa over the next year to $800 million to substantially increase crop productivity. Donors must act now to support the WFPs call for some $755 million to meet emergency needs, said Mr Zoellick. He also warned donors to fulfil their pledges, noting that roughly $475 million have so far been pledged. But pledges wont feed hungry mouths, he said. Donors must put their money on the table, and give WFP maximum flexibility with a minimum of earmarking to target the most urgent needs. Mr Zoellick said that the proposed new deal must embrace a short-, medium- and long-term response: support for safety nets such as school feeding, food for work, and conditional cash transfer programmes. He also called for increased agricultural production; a better understanding of the impact of bio-fuels and action on the trade front to reduce distorting subsidies, and trade barriers. We are urging countries not to use export bans. These controls encourage hoarding, drive up prices and hurt the poorest people around the world who are struggling to feed themselves, he said. The international community, Mr Zoellick added needs to commit to working together to respond with policy initiatives, so that this years crisis doesnt become a generations fact of life. (Dawn-16, 30/04/2008)

MAY
Banks told not to harass defaulter
KARACHI, April 30: A division bench of the Sindh High Court restrained five commercial banks on Wednesday from harassing an alleged defaulter and asked them to produce a list of debtors whose loans amounting to Rs5 million or more were written off. Notices were also issued to the federal interior ministry, the provincial home department and the inspector-general of police to state why police protection was not provided to the petitioner. The bench consisted of Justices Mahmood Alam Rizvi and Dr Qamaruddin Bohra. Petitioner Anwar Mahmood, who deals in artificial jewellery, submitted through Advocates Tahmasp Rasheed Razvi and Syed Haider Imam, that he was a customer of the Standard Chartered, ABN Amro, NIB, Habib Askari banks since the year 2000 and availed of credit card and personal loan facilities. He had been making regular payments since 2000 but defaulted in 2007 when he suffered a loss of about Rs9 million because of a market fraud. He had to sell his shop on M.A Jinnah Road and informed the creditor banks. Having paid a bulk of the principal amounts, he sought relaxation in markup but the banks continued to demand compound interest raising the outstanding amount to about Rs3 million. The bank recovery departments started making threatening calls and sent teams to his residence in Federal B Area to harass him, his wife, five daughters and a widowed ailing mother. He sought protection from police but none came to his rescue. He said the banks were taking the law into their own hands in violation of his fundamental rights. Influential persons owing huge amounts get their loans written off while small debtors were harassed. The bench, which consisted of Justices Mahmood Alam Rizvi and Dr Qamaruddin Bohra, summoned the chief executives and recovery chiefs of the five banks along with the IGP, the town police officers of Saddar and Gulberg and the SHOs of Kharadar and Samanabad on May 9 to ascertain why the petitioner was being harassed and why no protection was being provided to him. The banks were also asked to submit lists of written-off loans amounting to Rs5 million or more.

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Notices issued The Sindh High Court issued notices on Wednesday in two writ petitions moved by former PML (Q) provincial minister Haji Altaf Unnar, who has been booked and arrested for murder attempt on the complaint of Dr Azra Fazal Pechoho, MNA from Nawabshah and sister of PPP leader Asif Ali Zardari, and one petition moved by PML (Q) candidate from Larkana Sarwar Babu Sial. Mr Unnar claimed that he had been implicated in a firing incident under a second FIR registered 14 months after the alleged incident with mala fide intentions and for political victimization. He sought the quashment of the second FIR and his release from unlawful confinement. By another petition moved through his counsel, Advocate Waseef Kehar, the exminister requested the court to direct the provincial government to submit a list of cases registered against him. Babu Sial also contended that he was being harassed and subjected to political victimization. Seeking protection from police highhandedness, he said the home department be directed to produce a list of cases against him. A division bench comprising Justices Mahmood Alam Rizvi and Dr Qamaruddin Bohra issued notices to the complainant MNA, the SHO of the Budhapur police station, Jamshoro, and other respondents besides the advocate-general in Mr Unnars petition and to the AG in Mr Sials petition for May 15. Holding brief for Dr Azra Fazal Pechoho, Advocate Adnan Karim submitted that the firing incident occurred on February 10, 2007, after a raid on a polling station during a by-election in PS-71, Dadu. The MNA was present at the police station and her car was fired upon when she left after the raid, in which Haji Altaf Unnar, Dr Sohrab Sarki, another provincial minister, and 19 others were involved. She lodged a complaint promptly but the police registered another FIR on its own. The complaint remained buried in files until a sessions court ordered its registration as the second FIR. A charge-sheet has already been submitted in the case to a competent court. Wapda appointment The Sindh High Court directed the Water and Power Development Authority to appoint a candidate from Larkana to a junior engineers post as per his entitlement from the quota earmarked for the province.Candidate Zulfiqar Ali Magsi submitted through Advocate Mohammad Nawaz Shaikh that he applied for the post in 2005 after graduating in electrical engineering from Mehran University in 1998. He appeared in a written test held in Lahore and was called for interview. He was later told that he had failed in the written test. Another candidate hailing from Lahore was, however, given grace marks and appointed to the post. He said there were seven vacancies, out of which four were allocated to Punjab and one each to Sindh and the NWFP. One seat was to be filled on open merit. Advocate Nawaz Shaikh argued that if the petitioner had been allowed grace marks, he would have filled the vacancy from Sindh. However, he was discriminated against and denied appointment. The province was also deprived of its quota in the process. A division bench consisting of Chief Justice Mohammad Afzal Soomro and Justices Abdul Rahman Farooq Pirzada allowed the petition and issued a direction for the petitioners appointment. (By Shujaat Ali Khan, Dawn-17, 01/05/2008)

SBP asked to submit list of big borrowers, write-offs

The Sindh High Court (SHC) has directed the State Bank of Pakistan to submit a list of loan defaulters who had borrowed more than Rs50 million from banks as well as other borrowers whose loans had been written off. The order came on a petition of Anwar Mehmood, who moved the court against harassment by private banks officials for the purpose of loan recovery. The court also summoned the heads of private banks directing them to explain why their employees were raiding the houses of defaulters and under which law the respondent banks had given authority to their recovery teams to commit such an illegal act. The petitioner submitted that he had availed the credit cards and loan facilities from private banks including Standard Chartered Bank, NIB, ABN-Amro Bank, Askari Commercial Bank and Habib Bank, but, on account of uncalled for circumstances and suffering fraud in his business, he could not pay the outstanding bills for the last few months. He requested for the adjustment of the same outstanding bills. Petitioners counsel Tahmasp R. Razvi and Syed Haider Imam Rizvi submitted that the petitioner had been paying his outstanding bills for the last seven years, but, instead of taking legal action, these private banks sent recovery teams to his house, which resorted to harassing his family members in his absence. They contended that the recovery teams, aided by police, were harassing the petitioner and his family members, which was unlawful as the Constitution has guaranteed protection of life, liberty, dignity and honour to every citizen. They submitted that, owing to harassment by bank officials, the petitioners ailing mother had died and other family members were mentally disturbed as the recovery team officials were making constant phone calls, raiding their house and threatening them with dire consequences. Citing the example of a man who recently committed suicide due to such an action by a private banks recovery team, the counsel said that the respondents have taken the law into their own hands in complete disregard of banking laws. They submitted that the petitioner had kept paying the outstanding amount for the last seven years and was willing to pay the remaining debts with interest but the manner in which the respondent banks were harassing the petitioner and his family was illegal, adding that, if the respondents were not satisfied with the return of debts by the petitioner, they could file a civil suit for recovery. They prayed the court to restrain the banks officials from conducting raids at the petitioners residence, harassing his family members and insulting them in the public eye.

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SHCs division bench comprising Justice Syed Mehmood Alam Rizvi and Justice Qamaruddin Bohra, after conducting preliminary hearing of the case, took serious notice of the harassment complaint against banks and observed that threatening borrowers and their family members and conducting raids at their residences was tantamount to terrorizing the citizens. Restraining the banks recovery teams from harassing the petitioner and his family members till further orders, the court also directed the heads of private banks, the federal Interior Secretary, Home Secretary, Provincial Police Officer, Deputy Attorney General and Advocate General Sindh to appear before the court on May 9 and submit comments on the petition. (By Jamal Khurshid, The News-13, 01/05/2008)

$300m scheme for uplift of cities approved

KARACHI, May 3: The Sindh government on Saturday approved the Sindh Cities Improvement Programme (SCIP) aimed at improving the quality of life and introducing infrastructure reforms to bring the urban centres at par with the modern cities of the world. Approving the programme, Chief Minister Syed Qaim Ali Shah issued directive for the establishment of the Sindh Urban Services Corporation under the Companies Ordinance-1984. He also directed the officials concerned to work out development projects for other cities, including those falling in the central and southern parts of Sindh. Mr Shah called for curtailing the timeframe for the completion of the programme so that people could benefit from it and start getting modern facilities as soon as possible. Earlier, the chief minister was briefed about the programme by additional chief secretary (planning and development) Nazar Hussain Maher here on Saturday. He was informed that the $300 million programme would be implemented with the cooperation of the Asian Development Bank. He was also briefed about other ADB-funded projects. Mr Maher told him that the SCIP would be launched under the taluka municipal administrations. In the first phase, improvement of infrastructure would be undertaken in Sukkur, New Sukkur, Rohri, Shikarpur, Larkana and Khairpur, he added. In order to improve the standard of living in these cities, modern civic facilities would be provided through the implementation of water and sewerage schemes whereas measures would taken for effective management of solid waste, the chief minister was told. Mr Maher argued that spending billions of rupees on construction of building in cities could not bring improvement in the quality of citizens life because this could not help the government attain the targets of sustainable development. He also expressed his disappointment over the performance of the public health engineering department, and observed that the department discharged its responsibility of only executing scheme. It cannot be held responsible for the failure of any scheme as it is not supposed to operate or maintain the schemes it has executed, he added. He informed the chief minister that there were some 1,700 water supply and drainage schemes executed in various parts of the province but 700 of them appeared to be non-functional. Mr Maher said that under the SCIP, a public utility service corporation, titled Sindh Urban Services Corporation would be set up to provide better basic facilities to urban centres. Briefing the meeting about water supply & drainage, waste management, existing infrastructure and other related issues, Ms Cathey Julian, head of the ADBs Cities Projects Team, told the meeting that the objective of funding the SCIP was to focus on addressing the issues of water supply, drainage and solid waste management issues in the cities of Sindh. She stated that in the first phase of the project, certain projects would be completed with an investment of $30 million under the North Sindh Urban Services Corporation. Headquarter of the corporation would be in Sukkur, she added. The chief minister appreciated the ADBs cooperation in implementing its cities improvement programme, and noted that the people of Pakistan, disappointed by the performance of the previous government, were looking for sustainable development and people-friendly projects that could alleviate poverty, besides improving their quality of life and ensuring availability of basic amenities. Sindh Minister for Local Government Agha Siraj Durrani and Chief Secretary Fazlur Rehman were among the other officials present in the meeting. (Dawn-19, 04/05/2008)

The real challenge

"Providing two meals to the family is getting unmanageable, as the prices have soared out of our reach," laments middleaged Zareen Khan, standing in a queue at a Utility Store in a lower-middle class locality. Another aged lady, Sabiha, with dimmed glasses, also had a similar but more depressing complaint: "Initially, only atta was out of stock. Now it is the turn of other items." These are just two pictures of the chronic atta, rather food, crisis from the very heart of Islamabad. This crisis is getting worse throughout the country, amid allegations that black-marketers are working in collusion with top government officials. "The new government has fixed the rate of wheat at Rs 620 per 40 kg, but this should have been done in September last year," comments a top official of the Ministry of Food, Agriculture and Livestock (Minfal) on condition of anonymity. "The new government must initiate an inquiry into the Rs 16 billion wheat scandal," he demands. The food, mainly atta, crisis in Pakistan has been inherited by the current government from the previous government of Shaukat Aziz, who silently slipped from the country even before the recent elections. He is often blamed for playing up

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wheat production figures -- initially exporting wheat to the neighbouring countries and then importing the same at much higher rates. This went on unchecked till to the ongoing crisis, coupled with increasing petroleum prices, hit the country and its people really hard. In this context, the International Fund for Agricultural Development warned last week: "The households in Pakistan are devoting a larger proportion of resources to food and cutting back on consumption, with the number of foodinsecure people increasing from 60 million to 77 million in 2007-08, resulting in increased levels of malnutrition." Another report, released recently by the World Bank, says: "The prices of rice, wheat, corn, cooking oil, milk and other foodstuffs have all risen sharply in recent months, sparking violent protests in many countries. The global wheat prices jumped over 181 per cent over the past 36 months to February, with overall food prices up 83 per cent. In Pakistan and Thailand, troops have been deployed to prevent the seizure of food, especially rice, from fields and warehouses." A similar warning was also issued by one of top humanitarian officials of the United Nations at a conference held in Dubai earlier this month: "Continually rising food prices could cause unrest and political instability worldwide." His comments came after two days of rioting in Egypt over economic conditions, where the food prices have doubled in the past year. Despite these latest warnings by international organisations, the rights-based food activists seriously question their validity -- there is enough food to feed the world's unfed poor, which is either being mismanaged or black-marketed. "Globally, the food politics is monopolised by the fast-growing international food chains. The ultimate objective of investments by developed countries in developing countries, led by the World Bank in the sector of agriculture, is to gain control over the latter's food resources," explains Mustafa Talpur, a food-rights activist. Food was first declared a right in the UN's 1948 Universal Declaration of Human Rights. By 2004, the UN's Food and Agriculture Organisation (FAO) had adopted "voluntary guidelines for the progressive realisation of the right to adequate food", with 187 governments as signatories. Twenty-two countries, including Pakistan, have enshrined the right to food in their constitutions, either for all citizens or specifically for children. Though the right to food has been recognised and included in the 1973 Constitution, the poor hardly know about it. Despite the global food politics and the latest warnings by international organisations, the case of Pakistan is different, mainly because of the dominance of agriculture in its economy. According to Minfal, agriculture accounts for 20.9 per cent of the gross domestic product (GDP) and employs 43.4 per cent of the total workforce, mainly in rural areas. The wheat production of 23.295 million tonnes in 2006-07 was the highest-ever in the country's history, registering an increase of 9.5 per cent over 2005-06. This is going to cross the limit of 24.045 million tonnes, according to a recent report of the State Bank of Pakistan (SBP). Unfortunately, despite the almost 10 per cent increase in the production of wheat, the country faced an acute shortage of the commodity. In addition, the government has already announced its plans of importing more wheat this year. The comparison of wheat production in Pakistan with the neighbouring countries also offers a bleak picture. India has recently relaxed 36 per cent duty on the export of wheat. Afghanistan has warned about the impending starvation of four million people due to the shortage of wheat. Iran also imports wheat, but even the baked food is subsidised there. Similarly, the Central Asian Republics have been chronically in the deficit of wheat production. As a result, the Pakistani atta is smuggled to meet the food needs of these countries. Alarmingly, the global production of food items dropped by 19 per cent last year. Among these items, the global production of wheat dropped by as much as 36 per cent. Moreover, only in the last 10 months, the prices of food items in the international market have increased by up to 45 per cent, thus further aggravating the global food crisis. In this backdrop -- and coupled with the local ineptitude, corruption and regional black-marketing -- the atta crisis in Pakistan could pose serious challenges if not checked timely. It is also a challenge for the current PPP-led ruling coalition to ensure that the people at least get food items at affordable prices. Moreover, with the lifting of ban on trade unions by the new government, Minfal must also plan unionisation of the agricultural sector in the country, for the protection of rights of food producers, while at the same time creating an equitable equation with the producers, marketers, buyers and regulators for the safe provision and security of food. (By Sikandar Ali Hullio, The News-Policy II, 04/05/2008)

The ultimate choice

Owing to the spiralling price-hike, indulging in corrupt practices remains the ultimate choice for many of the poor segments of society. The unabated hike in the prices of daily-use items -- such as wheat, flour, sugar, rice, vegetables, ghee and cooking oil -- has broken their back. These oppressed people are expressing their resentment at the unchecked price-hike and are frustrated to the extent that they are committing suicides. The other contributing factors to this phenomenon are growing poverty and unemployment. Only in the last few months, as much as 40-80 per cent increase has been recorded in the prices of edible goods and transport fares, while the rich are getting richer following the 'pro-poor' policies of the previous government. The sky-rocketing price hike has paved the way for the people to indulge in corrupt practices. Banks are making hefty profits through heavily marked-up consumer banking, which they should pass on to the depositors by increasing the rate of return on deposits. The increasing inflation is ultimately affecting the poor. Price-hike does not only hurt the poor masses, but also brings bad name to the government. The unusual price-hike is in itself a matter of corruption. The prices of ghee, cooking oil and wheat / flour, the primary staple food, have been rising continuously for the last six months. There are reasons for the price hike -- hoarding and smuggling of the commodities to neighbouring countries, particularly Afghanistan. A buying

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spree and a frustration gripped the common people and long queues emerged in front of the utility stores to get the wheat / flour, ghee and cooking oil at subsidised rates. Media reports suggest that inflation, measured through the Sensitive Price Index (SPI), surged by 22.71 per cent in the week ending April 17 over the corresponding period in the last year, owing to unhindered increase in the prices of essential commodities. The data compiled by the Federal Bureau of Statistics (FBS) shows that SPI inflation, skyrocketing since the adjustment of oil prices in March, surged to 22.71 per cent on April 17 from 12.16 per cent on February 28, making life harder for the low-income groups. The purchasing power of low-income group squeezed by the last increase is yet to bear the impact of first adjustment made by the new government after increasing oil prices in the international market. The current ruling coalition has taken up the issue and is blaming the previous government for its failure to control the prices. Inflation is one of the major challenges for the Pakistan People's Party (PPP)-led coalition government along with trade, current and fiscal deficits. The State Bank of Pakistan (SBP) anticipates that inflation would persist and magnify in the months ahead. It is yet to be seen as to how the new government will tackle the uphill task it has inherited. Ironically, the government has failed to arrest price-hike, inflation and corruption; maintain law and order; and provide good governance, justice, employment and security to the people. School and college fees and prices of textbooks and stationery items have also doubled in the recent past. Public transport fares have been increased by 40-70 per cent, while gradual devaluation of the rupee has cut down its purchasing power by 20 per cent. Overall prices of essential commodities have risen by almost 80 per cent. Lower incomes and enhanced taxation is an additional burden on the poor. The government functionaries -- ministers, MNAs, MPAs and bureaucrats -- cannot comprehend the misery that rising prices are causing to the poor and middle-class people, because the national exchequer bears all their expenses and, in addition, they own properties worth billions besides huge bank balances. They just do not belong to the common people. When a poor man fails to provide two meals to his family members, get proper medical treatment for them, is unable to pay their school / college fees or get them new clothes for Eid, he feels fed up with life and thinks of committing suicide. The answer to hunger and employment is writ large on his face, saying embrace death if you do not find bread. The people working in the private sector are enjoying a handsome salary package with fringe benefits, whereas government servants can hardly make both ends meet. Though the previous regime had constituted a Pay and Pension Committee to compensate about 2.9 million government servants, yet the task is a challenging one in the wake of the widening budget deficit. The previous government had granted an 'ad-hoc relief', keeping in view the increasing pricehike at that time, but what the government employees actually had been demanding was a revision in their basic pay scales. The actual benefit received by government servants in BPS 1-16 was not more than Rs 200-900 in terms of dearness allowance. The problem arises when the government expects from its employees a high proficiency in delivering services. How can people perform better if their social life is disturbed by the imbalance between their actual take-home salaries and their needs? It is a natural phenomenon that when people fail to earn according to their needs, they look for other choices to make extra money. They may either opt for part-time jobs or look for safe ways of corruption. One cannot perform his duties efficiently if his pocket does not allow him to do so. Pensioners are perhaps the worst victims of the recent price-hike. In developed countries, pensioners are given many incentives, such as insurance policies, social protection, old-age funds, etc. In South Asia, pensioners are considered as a burden on the national kitty and are discarded from social life. In Pakistan, where government provides no social security to the pensioners in their old age, the National Saving Scheme (NSS) remains the only hope for them -- they could deposit their gratuity after retirement and get a reasonable profit on it. But in the last couple of years, profit rates on the NSS have been drastically reduced, thereby depriving the pensioners of their last ray of hope. (By Mohammad Saleem Shahid, The News-Policy II, 04/05/2008)

Averting crises
As the new government took charge of the country, it found itself surrounded by many crises of chronic nature. The carry-over wheat crisis has affected a vast majority of the population in the most serious manner. With the retail prices of flour reaching Rs 35 per kg in some areas, the common people are finding it hard to survive. Other food commodities have also experienced a supplementary price hike because of the transfer of peripheral consumption load after the wheat shortage. The global increase in oil prices could no longer be contained by the new government. In less than a month, therefore, petroleum products have experienced an increase of more than Rs 15 per litre. Consequently, the cost of almost all the daily use commodities has escalated. People are finding it difficult to commute from their places of residence to work, due to the rising fares. Electricity is another essential service that is conspicuous by its precarious access. Exponentially rising demand has already put an extraordinary load on the dwindling production potential and distribution companies. From domestic consumers to commercial and industrial users, the level of service across the country has failed to scale up to the desired capacity. As per the statements and review of power generation statistics, no respite is likely to follow in the near future. Besides these main bones of contention, there are perpetual issues of poor governance, and diminishing capacity of the administration to maintain law and order. Other crises that keep resurfacing are that of milk in Karachi of drinking water in other parts of the country. The new government has shifted the entire blame on its predecessors. This may be partly true, but there are deeper issues that have simmered for long and must be addressed without delay.

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One of the crucial issues is our settlement pattern. Our cities have grown in a haywire manner. This growth is mostly sprawling in nature, which renders these settlements entirely inefficient. The average number of people living per acre in Pakistani cities is 160-180. This factor alone causes serious repercussions on the overall performance of people and the city itself. High capital and operating cost of infrastructure, inefficient use of urban infrastructure, weak threshold for a public transport system and unnecessary utilisation of very precious urban (and even agricultural) land are some outcomes. Conversion of land is entirely unregulated, be it Karachi, Lahore, Islamabad, Quetta or Murree. The loss of fertile farm land to haywire urban developments is fallout of unregulated settlement patterns. Examples of outskirts of Lahore, Faisalabad and many other cities in Punjab can be cited in this regard. It is estimated that about 1,000 hectares of precious farmland is occupied annually under dubious housing and urban development schemes. In Karachi, the coastal belt is under constant threat of transformation into high density, high-rise development of outlandish nature. The recently launched real estate developments have also acutely affected subsistence fisherfolk. Various studies show that about 30 million people in Pakistan belong to middle- and upper-income groups. These classes have evolved into a high consumerist clientelle, with demands similar to those in developed countries. The dilemma is that the country does not have the means to support high-consumption lifestyles. Cosy residences with accessories -such as plush lawns and swimming pools; motor cars and fancy vehicles; exotic malls and eateries; holiday resorts; and club houses and golf courses -- are some of the standard requirements. Scarcity of basic resources and urban services, and technologies for supporting high lifestyles are impediments in the fulfillment of these wild desires. But the pressure to make the most of available proportion of resources creates crucial imbalances. For instance, Karachi accounts for 1.7 million vehicles. Limited road space, poor traffic management and uneven land use renders the performance of most of these vehicles ineffective. In the wake of soaring fuel prices, there is likelihood of some reduction in the work trips generated by these cars and motorcycles. The city district government of Karachi has not been able to increase the number of buses and mini-buses to the level of minimum threshold. Unless mobility and locational disadvantages are not removed, neither the middle nor the lower middle classes will be able to effectively survive. The cities generate sewerage and solid waste amounting to millions of gallons and tonnes respectively. However, efficient disposal and utility is yet to be found. Such deficient scenarios are likely to brew the kinds of crises faced by us. High-grade lifestyles demand befitting technological solutions. There is no harm in dwelling in air-conditioned environments or vehicles. But it can only make sense when appropriate means are created for making it happen. We possess serious deficiencies with regard to city and regional planning, project preparation and execution, and project implementation and operation. The road and highway infrastructure is an example. Soon after completion, the maintenance begins due to wear and tear. Thus the expected benefits fail to accrue despite hefty expenditures. Capacity to introduce time-tested scientific solutions is hardly available. Biogas-based power generation is another example. Pakistan is among the top five milk-producing countries in the world. But not a single megawatt of electricity is generated nor fertiliser produced from the millions of tonnes of cow dung produced every day. The Alternative Energy Development Board began a joint venture in Landhi Cattle Colony, Karachi, with the assistance of New Zealand Aid, but it has yet to begin production despite lapse of many months. Cogeneration is another technology that transforms heat from solid waste-based incinerators into electricity. Our power-starved cities can greatly benefit from this simple technology. What we require is scientific project designs, execution and management. Food production for urban dwellers is no more the task of hinterland alone. The world of today has switched to urban agriculture as a sustainable choice. This accounts for uninterrupted supplies of milk, meat, vegetables and fruits. The methods developed so far have provided solutions to a variety of climatic / soil combinations. Many cities in Latin American and South East Asia have resorted to this effective approach. It must be taken into account that the world is facing a price upsurge of agro-commodities, and the experts have predicted a likelihood of a continuous rise in this trend. In this backdrop, the urban agriculture can surely become a useful employment choice for the idle workforce. The basic pre-requisites that need to be fulfilled include a threshold analysis of available land parcels, waste lands and sub-urban lands; hydro-geological analysis to ascertain ground water resources; recycling of urban waste water; cropping studies; and need analysis for consumption. Pakistan has more than 500 cities. If this approach is incrementally applied in selected locations, it will surely lead to positive results. A few types of mega projects are vital for our large- and medium-sized cities. Creation of bus rapid transit system with enhanced efficiency, fare incentives and proportional level of comfort is a top priority. The government must facilitate the reduction in work trips through cars and motorcycles by public transport. In order to take stakeholders on board, the auto manufacturers may be given incentives to participate in this national cause. Improved quality of school buses can greatly reduce private car trips to and from schools. For energy conservation, construction and management techniques can be appropriately applied. It is demonstrated that by scientific design and insulation methods, about 35 per cent of electricity consumption can be avoided. Whereas new plants can bolster the energy sector, savings and conservation can always have a long-lasting effect. (By Dr. Noman Ahmed, The News-Policy II, 04/05/2008)

For the rich only

According to a study conducted by the Centre for Research on Poverty and Income Distribution (CRPID), 63 per cent of poor in Pakistan fall in the category of 'transitory poor'. The State Bank of Pakistan (SBP) has also admitted in its annual reports that the standard definition of 'transitory poor' includes those households that are below the poverty line for most of the time, but not always, during a defined period. The remaining 32 per cent and five per cent of the population that subsist below the poverty line are 'chronic' and 'extremely poor', respectively. 'Chronic' and 'extremely' poor are those households that are below the poverty line all the time during a defined period. Similarly, on the other side, 13 per cent and 21 per cent of total non-poor (above the poverty line) are classified as 'transitory vulnerable' and 'transitory non-poor', respectively.

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This portrays an alarming situation, as more and more people are moving from the 'transitory' category to the 'chronic category', courtesy inequitable distribution of income and wealth, monopoly over assets and regressive tax policies. Rulers in Pakistan have never showed any commitment to economic and social justice as their primary political goal. One wonders if the new government is aware of this state of affairs and is devising some practical ways to help improve the situation. Political economy is the theory of wealth, and of how wealth is created and shared within the society. Its key concepts are production, distribution, exchange and consumption. Historically, political economy is a response to the rise of capitalism and capitalist society. Its concepts are refined, redefined and added to as capitalism progresses from the mercantile or merchant capitalism of the sixteenth and seventeenth centuries to the agricultural and manufacturing capitalism of the eighteenth century; to the industrial capitalism of the nineteenth century to the rise of a unipolar world power in the twentieth century; to the quest for monopolies in the twenty-first century. In the last five years, unfortunately, no one has conducted a comprehensive research to determine all the dimensions of the rich-poor divide in Pakistan. Various studies, wherein inequality-measuring criteria like the Lorenz Curve and the Gini Coefficient have been used, however, provide estimates of inequality in Pakistan. According to A R Kemal, studies on income inequality in Pakistan show different estimates because of the following five important factors: One, different studies use different data sets -- some are based on Household Income and Expenditure Surveys, others make use of income tax data and still others splice the two sets of data. Two, while some studies consider inequalities in income, others consider inequalities in the consumption expenditures. Three, while some studies are done for Pakistan as a whole, others examine income inequalities in both the rural and urban areas. Four, while some studies report income inequalities across households, others report inequalities across population or earners. Five, some researchers classify data by deciles prior to the estimation of the Gini Coefficient; while others employ the income intervals that are not uniform. All studies, however, confirm that income inequality in 2000-2007 was more than in any other time period in the history of Pakistan. The poorest 30 per cent lost their share, while the richest 20 per cent gained in both the urban and rural areas during the Musharraf-Shaukat era. The Gini Coefficient is named after Corrado Gini, an Italian economist who introduced it in 1912. The Gini Coefficient is derived from a statistical formula, and expresses the degree of evenness or unevenness of any set of numbers as a number between 0 and 1. A Gini Coefficient of 0 would indicate equal income for all earners. A Gini Coefficient of 1 would mean that one person had all the income and nobody else had any. Thus, a lower Gini Coefficient indicates more equitable distribution of wealth in a society, while higher a Gini Coefficient means that wealth is concentrated in the hands of a few people. Sometimes, the Gini Coefficient is multiplied by 100 and expressed as a percentage between 0 and 100 ('Gini Index'). According to a US State Department report, released in 2006, the Gini Coefficient for Pakistan is 68.0. According to the same report, the 'Gini Index' for Japan is 14.9, for Sweden is 21.0, for Switzerland is 21.1, for Germany is 22.3, for the United Kingdom is 23.0, for Canada is 23.1, for France is 32.7, for Iran is 41.0, for the United States is 46.6, for Argentina is 52.2, for Mexico is 54.6, for South Africa is 57.8 and for Namibia is 70.7. According to another United Nations report, from 1987 to 1999, the Gini Coefficient for Pakistan was in the range of 0.33 to 0.43, but it increased to 0.68 in 2006, yet the previous government kept on harping the tune of a 'wonderful' economic turnaround. Income inequalities in Pakistan, as elsewhere, largely reflect inequalities in the distribution of assets. Since the poor have virtually no assets and the lower middle-class owns very few assets, income distribution is skewed. Distribution of state land; development of plots and houses for the common people at affordable rates; the sale of shares of public enterprises in smaller lots; human resource development; and credit to micro-, small- and medium-enterprises are some of the ways that might help the poor in acquiring assets. However, the role of various official bodies set up by federal and provincial governments in this regard has been poor to say the least. The income inequality in Pakistan has increased drastically in the last eight years and the trend continues unabated despite all claims of poverty reduction. The main factors that govern personal income distribution include distribution of assets; functional income distribution; transfers from other households, government and rest of the world; and tax and expenditure structure of the government. However, the single most devastating factor for increased income and wealth inequalities in Pakistan remains the regressive tax system. Incidence of tax on the poor in the last 10 years has increased substantially (by about 35 per cent), while the rich are paying almost no direct tax on their colossal income and wealth. Study of Pakistan from this political economy perspective is very crucial, as our society is fast adopting dehumanising characteristics. We are faced with economic disparities, shortage of food and lack of essentials services. The great divide between the rich and the poor in today's Pakistan is assuming alarming proportions, and may eventually lead to a civil war if preventive measures are not adopted immediately. (By Huzaima Bukhari and Dr. Ikramul Haq, The News-Policy III, 04/05/2008)

Govt faces dilemma over increased perks

The induction of more ministers and advisers in the Sindh Cabinet has created a crisis for the provincial administration which is finding it difficult to meet their desires for new cars, well-furnished offices and other luxuries. Officials told The News that the finance department has released Rs20 million for purchasing new cars for the new ministers. Meanwhile, the General Administration has requested the finance department to release more funds for purchasing new furniture, carpets, TVs, computers, fax machines, telephones and air-conditioners. Authorities concerned are under pressure from the ministers who want well-accommodated offices which have already been occupied by the ministers inducted in the first phase. The newly-inducted ministers also approached the chief minister for the fulfilment of their demands.

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The Sindh government had inducted 21 ministers and two advisers in the first phase, while 20 ministers, one adviser and one special assistant were added in the second phase. Twenty-eight of these ministers and two advisors belong to the Pakistan Peoples Party (PPP) and 13 ministers and one advisor belong to the Muttahida Qaumi Movement (MQM). The provincial government had furnished the offices in the recent past during the tenure of the PML(Q)-MQM coalition and provided new cars to the ministers. Most of the new provincial ministers have, however, demanded revenue again for their offices as well as for changing the furniture. Sources said that a clash-like situation has erupted among the ministers for the allotment of offices and cars, because most of the luxury vehicles had already been given to the ministers inducted in the first phase. The ministers are also demanding cars for their personal staff, while the General Administration has informed the authorities concerned that they have a shortage of small cars for the personal staff of ministers. Officials said that departments allotted to the ministers and advisers are also under pressure to fulfil their demands regarding the personal staff. Ministers also want their secretaries and other officers to be of their own choice, so as to be able to run things more smoothly. Meanwhile, the Sindh government has approved the promotion of more than 100 officers from grade 17 to 18 and from 18 to 19. The approval for promotions, which was pending for the last many years, was granted by the Selection Board at its meeting chaired by Chief Secretary Fazalur Rehman on Saturday. The Sindh cabinet had decided last week to approve the promotion of the officers, which was pending due to favoritism by the previous regime. The cabinet decided that after the promotions of these officers and employees, more jobs would be created and provided to the deserving candidates. (The News-13, 04/05/2008)

Failed attempt at privatization

The pace of privatisation has remained very slow since the Supreme Court of Pakistan aborted the moves to privatise Pakistan Steel, and transactions for divestment of a number of state enterprises, in particular industrial units, could not materialise within the scheduled timeframe. The inordinate delay has caused loss of production, sales, productivity and efficiency, resulting in lower profitability, besides other negative socio-economic impacts. Thus there is a need to review, on priority, the status of these units and to accelerate privatisation process if divestment of all listed units is in the national interest. A case in point is that of Hazara Phosphate Fertilizers (Private) (HPF) Limited. The Privatisation Commission (PC)had invited the expressions of interest (EOIs) for acquisition of minimum 90 per cent shares of HPF, in January 2006, while its privatization process is still going on, without any decision. Until February 13, 2006, the last date fixed for receiving the EOIs, nine prospective investors had presented their documents. This was fairly a good response, given the conditions of investment climate and law-and-order situation at that time. Nonetheless, PC, in its best wisdom, decided to scrap the process, which was re-started after losing eight months. Thus, on October 30, 2006 the Cabinet Committee on Privatisation(CCOP) gave fresh go-ahead for completing the transactions of the companys disinvestment. This time PC also asked the interested parties for the statement of qualifications (SOQ) along-with the proposals for managing and operating the HPF. Only the qualified investors could participate in the bidding process that was to be disclosed to them later. Last date of receiving the EOIs was fixed as January 15, 2007. Eight EOIs were received almost from the same prospective investors. But only two parties were considered eligible, on the basis of evaluation of the statement of qualifications, who were asked to bid on June 18, 2007. Somehow, no decision was taken on the bids received and another round of EOIs was arranged by the PC, last date now fixed as December 22, 2007. In response, a total of nine parties showed their interest to buy the company. The PC board, in its meeting held on January 29, 2008, constituted a transaction committee to formulate its recommendations, which were not available until February 15, 2008 when the CCOP reviewed the progress of on-going privatisation of various state enterprises including the HPF. The other state-owned SSP producing fertiliser plant, namely Lyallpur Chemicals and Fertilizers Ltd, had met similar fate in the past. After having been on privatisation list for long, the company was put on sale in 2002 without success, again in April 2006 and was finally sold to a private sector company in February 2007, at almost a throwaway price. PC did not learn any lesson however. It may be recalled that in December 1992 the HPF was sold to a group of private parties at $5.50 million, but the deal was quashed later. Privatisation proceeds of this factory are not likely to be close to this figure any more, even though major rehabilitation and re-commissioning of the plant was done in April 1999 at substantial cost. The HPF project was completed in 1988-89 at a total cost of Rs281 million. It has two main production units; sulphuric acid, which is required for SSP production, and single super phosphate (SSP) Plant. Technology and process employed is modern---production of sulphuric acid by double contact, double absorption method patented by Monsanto EnviroChem, USA and process know-how of SSP by CDF Chemie AZF, France. The process employs a 3-stage scrubbing system to wash reaction gases in order to achieve environmental pollution control standards. Heurty Industries of France had provided basic plant engineering, whereas major machinery and equipment was designed and manufactured by local engineering companies in public sector. The company has authorised share capital of Rs200 million; whereas paid up share capital is Rs191.43 million. This is the time PC should consider revising its modality for selling-off this fertiliser unit, which has peculiar

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characteristics. The plant, located in Hazara, was designed to process local phosphate rock of Kakul and Tarnawai (District Abbottabad) origins, to produce 90,000 tons of granulated SSP fertiliser per annum. But delivery of raw material could not fully meet the annual demand of the fertiliser plant, which was originally committed. Due to inadequate and irregular supply of local phosphate rock, the company had to resort to large-scale imports from Jordan and Morocco. This has resulted in huge transportation cost for raw material, rendering it uneconomical for a private owner to operate the plant at existing location, which is a major condition put by the PC to the bidders, though the unit is offered on as is, where is basis. The plant would need to be relocated by the new owners, somewhere near Karachi or in the southern Punjab, as it would continue to depend on imported rock phosphate. Alternatively, the HPF plant should be integrated with Kakul-Tarnawai mines that are owned by the government of the NWFP, before its divestment, allowing a single ownership and management in the private sector. (By Hussain Ahmad Siddiqui, Dawn-Economic & Business Review, Page-IV, 05/05/2008)

Unaddressed issues in food security

FOR some time past, the question of food security is being discussed both at the international and national levels. The Food and Agricultural Organization (FAO) and the World Food Program of the United Nations as well as other international organisations have been warning of the impending onslaught of food insecurity, at the global level. The warning has also been conveyed to Pakistan. To improve the situation, it is advisable to define what food security is and what is involved therein before reasonable suggestions are made to rectify the situation. There are five main elements which together ensure food security: Availability of adequate food; accessibility of food to every inhabitant, rich or poor, men or women, living in urban or rural areas, in the mountains or in any nook and corner of the country; the price should be affordable for all; reasonable storage facilities should be there to meet emergency demands; nutritional value of food should meet the requirements of a reasonable healthy man/woman measured in terms of calories, protein, fat and minerals. During the last couple of years, Pakistan has suffered almost in all the above four elements which, in one way or the other, are inter-related. Availability is determined by domestic production, imports (if any), plus aid from any aid-giving agency, and exports (anticipated). It should include strategic reserves, which are normally calculated at the rate of 10-15 per cent of annual requirement by the developed countries and comes to about 2.3 million ton against one million ton considered adequate by the government here. Domestic production is adjusted by sub-tracting the seed requirements of the following year, wastages during storage, animal and poultry feed, and anticipated exports. The data regarding domestic production has been questioned during the last few years both at the national and international levels. Data collection needs improvement, as without it, there is a doubt if food security objective can be effectively accomplished. Equally important is the estimation of demand. The demand is determined by expected requirements of food and is measured normally in terms of kilogramme of given grains per head either per year or month or day. More appropriate would be in terms of per year. Wheat is the staple diet of the people. Different basis for demand estimates are made by different institutions. For instance, the Agricultural Prices Commission (now the Agriculture Policy Institute) has been giving 98, 116 and 118 kg per head requirements per year and works out the bases for these assumptions. Lately, the Institute put at 120 kg per capita per year consumption based on the food balance sheet, but actually worked out the requirements on the basis of 124 kg,-- the same as the ministry of food & agriculture. On this basis, the gross requirement for the year 2007-08 was worked out to be 24.10 million tons which included requirements for human consumption, seed, wastages, if any, and a million ton for security reserves. Against these requirements, the production estimates were of the order of 23 million tons, according to the ministry of food and agriculture. But in fact it turned out to be much less only 20-21 million tons. This shortfall plus exports allowed at the wrong time without knowing the correct position of the crop size, resulted in shortages. It is thus clear that the first main element of food security was not in place. The second element in food security is accessibility. With acute shortage of the commodity, the accessibility turned out to be the next problem. The government had to take measures like banning movement of the commodity from one province to the other, and even restricting the inter-district movements. Such restrictions not only badly limited supplies to deficient areas but also helped the prices to escalate. Atta shortage was seriously felt, which created unrest in such areas and even led to riots, never experienced before. As a result of these two factors, the third important element of food security, i.e. affordability came into play. Due to shortages in supplies, and non-accessibility in many areas of the country, the prices reached a level where the poor and even the middle-income groups found it extremely difficult to buy the commodity even if it was available. The government fixed, at intervals, atta price thus raising it every time but failed to ease the situation because of imbalance in the supplydemand situation. The government even tried to help the public, particularly the poor, by supplying atta at cheap rates through the utility stores network, but it was to a very limited extent. The prices of commodities of daily use that went up during the year (April 2007 to April 2008) are as follows: Wheat prices increased by 18 per cent, IRRI rice and maize by 54 per cent each, sugar by 20 per cent, gram (dal) by 36 per cent, moong by 43 per cent and masoor (dal) imported by100 per cent. There has not been any significant increase in prices of other commodities. Although the prevailing situation is the outcome of the wrong policies of the previous government, the brunt has to be borne by the new government. The general impression of the masses is that the present government, despite its promises made at the time of election, is failing in fulfilling its promises. The people are thus getting disappointed and disgusted without realising that such issues cannot be resolved over night. Usually longer time is needed for the resolution of such problems.

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The fourth element which is seldom touched by those concerned with food security is the adequate and quality storage facilities. According to agriculture statistics, published by ministry of food, agriculture and livestock (Minfal), the storage capacity, which at present is 4.3 million tons for wheat, has gone down to this level from 4.8 million tons in 1999. It is apparent that no new storage capacity has been built since then. A significant percentage of this is in very bad shape and is not fit for storing wheat. A few years back, storages at Landhi and Pipri (in Sindh) were so bad that wheat stored there was infested with weevil and other pests and was not fit for human consumption. Even today, atta that is being supplied at many of the utility and other stores is not fit for human consumption. More storage capacity of good quality in different areas of production and consumption is needed for food security purposes. The experience of building silos so far has not met with any success despite heavy expenditure incurred thereon. The fifth element in the food security is the nutrition issue. The government has calculated that keeping in view various factors, the caloric requirements per head per day are 2,350. However, no monitoring of the daily requirements of an individual in terms of protein, fat and other nutrients and their availability has been done. Earlier estimates showed that of such caloric requirements about 75 per cent need to be met from food grains, 3.4 per cent from fats and oils and 21.6 per cent from other sources. Out of the needed 51 gm of protein per head per day, 43 gm can be met from plant sources, eight gm from animal source, while fat requirements are of the order of 24 gm a-day. However, different criteria have been fixed to determine poverty level by different organisations. Some use the criteria: one dollar a-day, others assume $2 a-day, while the Pakistan government assumes 2,350 calories per head a-day. On this basis the estimates showed that about one-third of the population was below the poverty line although some question this figure and think it is much more. It is controversial to say as to what exactly is the percentage of population that has suffered because of the recent food shortage. The World Food Programme has, through a recent survey, revealed that about half of the population may have been affected by the escalation of food shortage and rise in prices. Other factors are also important for food security, for example infrastructure of road, transport facilities to reach remote areas, and so on. The question then arises as to what steps should be taken to face the daunting food security problems of the country. It can go into a long list, but only few of the priority areas are mentioned below, which are both short and long-term measures: There is an urgent need that the government announces an agriculture- friendly policy. The data collection of production of crops should be improved. Siimilarly, the demand projections need improvement. These are the basic essential elements for food security. The productivity of crops be enhanced by subsidising the cost of inputs, particularly of fertiliser, seed, diesel, etc; regular and timely announcement of support price policy of (selected) crops and its vigorous implementation for which political backing is a must to enable farmers to get lucrative prices to act as an incentive for raising productivity and production. The government should not hesitate in subsidising such a programme. The Agriculture Policy Institute (API) should be made independent and strengthened by appointing competent staff. The API should work out different cropping patterns for different zones/areas keeping in view the local factors like soil, climate, irrigation water supply etc. High-yielding varieties, with less water requirement, should be evolved. Water-saving techniques in the use of water in furrows rather than flow irrigation, particularly at the field level, should be given priority. For this purpose practical programmes like laser land leveling, sprinkler and drip irrigation be worked out and should be subsidised, as it will give dividends in the short run. Food grain storage capacity needs to be enlarged, not only in capacity but also in quality both in the producing and consuming areas. There is a pressure for the adoption of gene technology, but some risks are involved. These may include marketing of unapproved varieties, threat of any GMO which may pose threat to non-GMO crop, and so on. Use of agricultural land around cities for house-building and industries should be banned as fertile agriculture lands are being used for this purpose. Dry areas, as in Balochistan, offer high potential for agriculture, which should be given due emphasis. In the past agriculture sector has remained neglected and has not received adequate investment. Big investment should be made in this sector to alleviate poverty among the rural masses. It would also help in stabilising food security in the country. The writer is the former advisor to the Chief Executive of Pakistan on Food and Agriculture and Founder-Chairman, Agricultural Prices Commission (Apcom). (By M. Shafi Niaz, Dawn-Economic & Business Review, Page-III, 05/05/2008)

Unemployment in rural Sindh

Unemployment in rural areas is the most daunting challenge being faced by the new Sindh government. The rural areas are fast losing their agriculture-based employment potential due to persistent shortage of water and land degradation. Almost 14 million people in rural Sindh directly depend on agriculture as their major source of livelihood. However, this source of livelihood and employment is under severe pressure due to variety of reasons. Drought, faulty water distribution mechanism, poor management of water resources, land degradation, lack of research and inept market policies are the few among the long list of reasons taking toll of agriculture economy.

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The situation can be gauged from the following table showing the the decline in area under cultivation. The table shows the decline in area sown under important crops from 1995-96 to 2004-05 Declining produce has a direct bearing on rural poverty and employment. A World Bank report, Securing Sindhs FutureThe Prospects and Challenges Ahead paints a very grim picture of unemployment in Sindh. It reveals that due to growing population, rise in literacy and migration, nearly 600,000 additional people would be entering in job market each year in Sindh. This is in contrast with the long-term annual job creation rate of 350,000 in the province. Over the recent decade, Sindh has been frequently denied its due share in water distribution. Growers have been complaining that water shortage in canals and distributaries of Sindh has become a perennial problem. The new government would have to tackle this issue through effective representation in IRSA and Wapda . Only judicious share and efficient use of water can improve agriculture-related employment in rural Sindh. However, climate change effect is likely to increase in the coming years and availability of water in river system would continue to be a question mark. To manage this risk, there is a need to diversify employment opportunities both in rural as well as urban areas of the province. The Sindh government needs to explore non-conventional avenues to create employment opportunities apart from revitalising its agriculture sector. Agro-based industry could provide some relief but incentives are required to attract investment in rural areas. Poor law and order conditions and weak infrastructure have also been a barrier to growth of agro-based industry. The industry in Sindh is mainly concentrated in Karachi except handful of units in Hyderabad, Kotri and Sukkur. Presently, about 11,500 small and large industrial units are located in four major industrial areas of Karachi, providing employment to over 2.5 million people. Since rural Sindh has predominantly agriculture based economy, human resource required for industrial sector has not been developed there. No significant investment was made in infrastructure required for promoting rural industry. Due to lack of demand and poor administration, institutes of vocational training and job skills are also in bad shape in rural areas. Presently, 45 polytechnic and mono-technical institutes are operating in Sindh having about 18,000 registered students. However only 8,000 of them studied in institutions located outside Karachi. Likewise, the Directorate of Manpower and Training is operating about 33 training centres including technical, apprenticeship and youth vocational training centres. Most of such centres in rural areas are dysfunctional due to various reasons. Proper training through revamped institutions could open doors of urban- based employment for rural youth. Quality education institutes in the rural areas also deserve attention for creating human resource with advanced degrees. Public sector universities in rural Sindh are victims of lack of resources, quality faculty and infrastructure. Graduates from these universities cannot compete with graduates from urban-based private sector institutions. This is resulting in frustration among qualified rural youth. Quality education institutions are mostly centred in Karachi, which are too expensive for lower and middle class families of rural areas. Presently, there are 25 HEC recognised degree awarding private sector institutes in Sindh; 23 of them are located in Karachi and remaining two in Hyderabad. From 2001/02 to 2005/06 these institutions produced over 36,000 graduates, all from Karachi except 900 from Hyderabad. Information technology is a promising sector offering wide spectrum of jobs nationally and internationally. However, rural areas are deprived from any significant benefit from this sector. According to a research report of Pakistan Software Export Board (PSEB), this sector is providing jobs to about 138,000 employees and the number of job opportunities is expected to be around 235,000 in 2009-10. Rural areas are far from the scene. PESB website shows 1,161 registered IT companies in the country. This includes 412 in Karachi, 331 in Islamabad, 418 in Lahore and remaining in other cities/towns. In Sindh, some 25 institutions offer degree courses in IT sector; 23 of which are in Karachi alone and one each in Hyderabad and Tando Allahyar. Due to such gap of access to IT education, rural youth have very limited opportunities to benefit from this fast growing job market. It is time that quality education centres in IT should be established in all district headquarters to create more job opportunities for educated youth from rural areas. The Sindh government should devise a comprehensive strategy to tackle the challenge of unemployment specially in rural areas. It would be advisable set up a human resource development and employment authority to execute long-term strategies for creating job opportunities for rural and urban youth to reach out to national and international job markets. To create a socio-economic balance in urban and urban areas, there is a dire need to provide basic educational training facilities and employment opportunities across the province. (By Naseer Memon, Dawn-Economic & Business Review, Page-IV, 05/05/2008)

Surge in food prices may undo gains of a decade

MADRID, May 4: Soaring food prices may throw millions of people back into poverty in Asia and undo gains of a decade, regional leaders said on Sunday while calling for increased agricultural production to meet rising demand. Asia --- home to two thirds of the worlds poor --- faces growing social unrest as a doubling of wheat and rice prices in the last year has hurt people spending more than half their income on food, Japanese Finance Minister Fukushiro Nukaga said during the Asian Development Banks annual meeting. If food prices rise 20 per cent, 100 million poor people across Asia

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could be forced back into extreme poverty, warned Indian Finance Secretary D. Subba Rao. In many countries that will mean the undoing of gains in poverty reduction achieved in the past decade of growth, Rao told the ADBs meeting in Madrid. A 43 per cent rise in global food prices in the year to March sparked violent protests in Cameroon and Burkina Faso as well as rallies in Indonesia following reports of starvation deaths. Many governments have introduced food subsidies or export restrictions to counter rising costs, but they have only exacerbated price rises on global markets, Nukaga said. Those hardest hit are the poorest segments of the population, especially the urban poor, he told delegates. It will have a negative impact on their living standards and their nutrition, a situation that may lead to social unrest and distrust, he added. The ADB estimates the very poorest people in the Asia Pacific region spend 60 per cent of their income on food and a further 15 per cent on fuel --- the key basic commodities of life which have seen their prices rise relentlessly in the last year. Japan is one of 67 ADB member economies gathered in Spain to discuss measures to counter severe weather and rising demand that have ended decades of cheap food in developing nations.The Asia-Pacific has three times the population of Europe --- around 1.5 billion people --- living on less than $2 a day. Rice is a staple food in most Asian nations and any shortage threatens instability, making governments extremely sensitive to its price. High inflation, driven by food and raw material costs, has topped the agenda of the ADBs annual meeting. The bank on Saturday called for immediate action from global governments to combat soaring food prices and twinned it with a pledge of fresh financial aid to help feed the Asia Pacific regions poorest nations. (Dawn-12, 05/05/2008)

The economic crisis

LIKE a mirage, Pervez Musharrafs much-vaunted economic miracle has come and gone. Shaukat Azizs claim that he doubled per capita income from $400 to $800 in four years may go down as one of historys shortest-lived boasts. For that statement to be credible, per capita income would have to grow at roughly 25 per cent per year and national income would have to grow at that rate plus the rate of growth of population of some two per cent. A growth rate of 27 per cent per year in national income would be hard to visualise, even allowing for the significant inflow of foreign remittances that took place after 9/11. For a moment, let us assume that Azizs comparison was meant to be in nominal dollars. Subtracting an average inflation rate of seven per cent per year still leaves us with a growth rate of 20 per cent per year, much too high a number since it is double what China achieved during the past two decades. Even if we throw in the one-time mysterious upward adjustment in GDP of 30 per cent that reportedly took place during the Musharraf administration, we come up short. The economic and financial advisors in the new government will have to work hard to unravel these and other myths of the period. It is true that million-dollar homes and Porsche cars first appeared on the scene during that period. But such vapid developments simply conveyed to the world that some people had become very rich. They did nothing to enhance the wellbeing of the common man. The biggest disappointment is that the structure of the economy did not change much during the past eight years. The problems that plagued the economy in October 1999 are still very much there in May 2008. Thus, the new government has to tackle multiple economic crises, not just one. First and foremost, there are the nearterm crises related to the twin deficits in the fiscal and trade accounts and to the accelerating inflation rate. Secondly, there are the medium-term crises related to the chronically low domestic savings rates, an undiversified source of foreign direct investment which largely consists of money from expatriates (and the US government) and a chronically low income tax base. Finally, there are the long-term crises related to rising income inequalities, a stubborn poverty rate and a rate of population growth that ranks among the worlds highest for well-populated nations like Pakistan. A few of these stand out and are worthy of comment. The budget deficit is expected to come in higher than six per cent during the current fiscal year, 50 per cent higher than the threshold deemed safe by international lending institutions. Subsidies for food and energy products account for a good portion of the deficit but chronically high spending on defence, some of which is published in the budget and some of which is hidden under other categories, continues to exacerbate the problem. The trade deficit during the first nine-months of the current fiscal year has come in at $14.5bn, up 44 per cent over the corresponding year-ago period. At this pace, the deficit will hit $19bn by the end of the fiscal year, setting an all-time record. The deficit is being driven by rising imports of consumer goods, such as mobile phones, luxury vehicles including bullet-proof cars, perfumes and cosmetics. Not one of these purchases is going to enhance the productive capacity of the economy. In fact, by their conspicuous nature, they will heighten the tensions between the proverbial haves and have-nots and further inflame inter-class tensions.

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The Economist Intelligence Unit (EIU) estimates that trade deficit will continue to be about eight per cent of GDP during the next five years, up from six per cent in 2007. This will put further pressure on the value of the rupee and deplete foreign exchange reserves. Inflation is making serious inroads into consumer pocketbooks. While some of it is undoubtedly due to the rising world price of oil, much of it is due to a lax domestic monetary policy which has financed the budget deficits. According to the State Bank, inflation may reach nine per cent during the fiscal year ending in June, almost a third higher than the target rate of 6.5 per cent. And it is the inflation trend that is even more disconcerting. In February, inflation crossed over into double-digit territory, coming in at 11.3 per cent. Shortages of key food items, such as flour, have affected the population in both urban and rural areas. It is clear that a strategy of economic growth premised largely on American military and economic aid has failed. The domestic savings rates remain low, leading to an investment rate of about 18 per cent. To achieve growth in the seven to eight per cent range, this rate would have to rise by 10 percentage points. The Musharraf government had predicted an annual growth rate of seven per cent for the current fiscal year but the actual number may come in below six per cent. EIU estimates that the annual economic growth through 2012 will average around five per cent, attributing the slowdown in growth to tepid investment rates. The international credit rating agency, Standard & Poors, downgraded the outlook on Pakistan last November when Musharraf suspended the Constitution and imposed emergency rule. It has given a B+ foreign currency rating on Pakistani debt, four levels below investment grade. This makes it very expensive to borrow money on world markets and further worsens the budget deficit. The population of Pakistan continues to grow much faster than that of any other country in South Asia. In 1971, East Pakistan accounted for some 55 per cent of the population of Pakistan. Today, Bangladesh accounts for only 45 per cent of the combined population of Pakistan and Bangladesh. If current trends continue, by the year 2050, Pakistan will become the fourth most populous nation in the world. This is not a cause for celebration but alarm, since it will slow the growth in per capita income, raise poverty rates and heighten income inequalities. This demographic bomb poses a bigger threat to regional security than the nuclear bomb. Finance Minister Ishaq Dar needs to come through with a new approach that will stop the economy from melting down, an event that will have horrible political consequences. (By Ahmed Faruqui, Dawn-7, 05/05/2008)

Why the crises will go on?

The world leaders are at it. The world leaders who probably have never had a salary less than eight digits or even nine digits and have never been hungry are championing the cause of the worlds poor. They belong to the exclusive club that tries its utmost to confuse issues. President Bush got into the act and defended his sick policy of bio-fuel where the farmers have been encouraged to sell to companies specially formed for the purpose of converting corn into green fuel. He bemoaned that the enemies are not willing to sell oil to the USA and that these enemies were to be sorted out. In sorting out Iraq, and now Iran not to mention Hugo Chavez he found that he had instead of getting oil had got a lot of flak and made enemies. When an individual or a country makes conceited efforts to selfishly acquire assets that belong to another individual and or country by any means, this comes out as an unintended consequence. In New York, the worlds self-appointed consciences are advocating what is required to meet the current crises. As often happens the facts revolve around the current crises and not how to get rid of the problems. The symptoms are attacked rather than the causes. The World Bank with all its reforms is nothing but a body doing the bidding of their masters. The WB and the leading countries would be responsible for this kind of mess-up. They are all very worried. They want to pledge money to ensure that the food gets to the hungry on a one-time basis and to put money into the pockets of the farmers so that the fertilisers-chemical- are purchased by the farmers. When they ought to be aware that the chemical fertilisers have lost out and the soils have become toxic and cannot provide that kind of productivity increases. Each year, the prices have gone up and in the case of Pakistan these have on from the initial price of Rs7 per bag to last known price of Rs4000+ per bag of 50 kg. The raw material is with the fossil fuel companies and they have posted a three month profit of $16billion thanks to the involvement of the US administration. Since the oil cartel is very much the cartel of the rich and the members of the exclusive club, they are doing what they are doing. They talk of free markets. When did any one agree to a free market that is mean and repressive. Go back to the last crises in the late sixties when Barbara Ward headed a committee of enlightened individuals and our Sartaj Aziz was also there. They came to the conclusion that something drastic has to be done for the productivity of lands in third world to be encouraged. The committees recommendations would be dealt with separately but let me give you the consequences of not following her and the committees advice. The committee had suggested that the food security institute should be created and that it should be superior body to the current Security Council. Wise advice and she had also suggested that a new organization now called the International Fund for Agricultural development [IFAD] should be set up which should be headed by a third world individual. This happened in 1973 and by 1999 the first world had ganged up together to highjack the organisation. A Swede heads it and Sweden is not a third world country. There is this fetish that only those who give money to a cause are responsible to head every world institution. An American heads the World Food Program from the beginning and this is for the purpose of ensuring that the grain farmers of mid-west are looked after. Sartaj Aziz was one of the first vice-

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presidents of the body. It has lost its way now. The US was adamant that it would look after the food security of the world. The recommendations of the committee were slashed and changed and what were accepted were the recommendations that would be in line with and suitable to the USA. Sooner or later all this was to come to a head. Borlaug also came along at that time. He suggested this chemical route. Countries lapped it up and allowed the fertiliser cartel to develop. Examine its production arrangements and the international fertiliser organization is at Atlanta. The current UN Secretary- General is still green on these matters and seeks solutions to the problems of the third world through the UN agencies and these meetings are called at the desires of the powerful or the crises that then requires patch work to repair the difficulties created by the likes of Geoffery Sachs, Kofi Annans advisor on poverty reduction and how to tell odd things with a straight face. His book The End of Poverty I ordered from Canada and I could not believe how he eliminated poverty [save it for another day]. The food crises will go on because the diagnosis is incorrect and because the prescription is incorrect. It is not as if the stomach is selective and wants food on a one time or a one season basis. It is a recurring requirement. Let me repeat that it is a recurring requirement. So? The policies that have to be followed are to enhance the productivity of the farmers. Not to use this for political ends. It also means taking stock of the free markets and the perversions that have been brought in through the WTO. So the resource base has to be tackled? What is Pakistan up to? It has lost three million hectares of its lands to urbanization not to help the poor but to get the rich to speculate on the lands and then to ensure that they pay no taxed for the capital gains that have been made. With population increasing and the resource base decreasing and productivity stagnant how are you going to meet the future demands? Ashfaq may have an answer, Shaukat Aziz certainly has it and he will suggest that either Dedi or Arif Habibs or Kalias have an answer. Throw some money at them. What the country and the people require is different. Each countrys requirements are different and the way out is to get into policy matters that require thoughtful actions [as against activities at UN where I could have told you what the speeches would be]. The resource base has to go. The collective policies have a collective impact on the economy and very cancerous growth has to be removed. Elections remove these cancerous beginnings. That is the beauty of the system. There is an automatic cure. So, it is with the economic system. (By Dr. Zafar Altaf, Dawn-Economic & Business Review, Page-III, 05/05/2008)

Gravel-lifting kills agriculture in Malir

Fruit vendors in the city still auction guavas from Malir even though the area that was once famous for its orchards no longer produces the fruit. Gravel-lifting from the Malir River and adjoining areas has forced underground water to reach alarming levels, causing the destruction of the agriculture and orchards of the area. Agricultural production in Malir district, which once used to cater to the vegetable and wheat needs of Karachi, is today in steep decline. Even the locals, once landowners, are now compelled to buy vegetables from the market. We never thought it would come to this. We feel ashamed buying such produce from the market now, says Maula Bux Baloch, a social worker of Bin Qasim Town. Baloch is one of those engaged in the campaign to stop the widespread practise of gravel-lifting. Once he was arrested in a fake case for not surrendering to the mafia who were annoyed by his protests. Cultivation of land in Malir district was traditionally done through rainwater and the lifting of water through wells. The gravel kept the water level up and it took less arduous labour and fewer resources to gain access to the water for irrigation purposes. The lifting of gravel caused the water level to gradually go down to 500 feet, when originally it stood at around the 40- to 50-feet level, says Khuda Dino Shah, a grower and former caretaker Nazim of Bin Qasim Town. There was no law to control lifting of gravel from the Malir River and the smaller surrounding rivers. The area magistrate used to impose Section 144 to prevent lifting but the law never got implemented. The police remained a party in a long chain of interest groups in this lucrative business. Even though normal activity in the area comes to a virtual halt after 8 p.m, but as night falls the roads become as busy as MA Jinnah road during the rush hour. Nearly 500 containers full of gravel taken from the Malir River and surrounding lands can be seen moving on these roads. The gravel is stored at Sohrab Goth and Madina Market in Malir City, which is sold during the day. The areas from which gravel is removed have also changed over the years. Most of the gravel has been lifted from the Malir River and there is not much left to pilfer. But since the gravel of the area is particularly rich, it is now being taken from the adjoining lands.The locals are helpless in the face of this onslaught. As the cost of power soared, it became increasingly difficult for the growers to pay the electricity bills for tubewells. Thus they agreed to destroy their own land considered like a mother by the locals with their own hands.The land which catered to their needs for centuries is now being used for residential and industrial purposes only. The mafias lifting gravel have grown stronger over the years with the support of the state machinery. The lives of locals who opposed this practise are at risk all the times. They have threatened me several times, says Khuda Dino Shah. Besides local influentials and the police there are now two more recent entrants among the shareholders: the Frontier Works Organisation (FWO) and the Sindh mines and minerals department, said Shah. The latter has allowed the FWO to carry out unlimited gravel-lifting from the area.The gravel is being used for the construction of the Lyari Expressway, Karachi Northern Bypass and other projects. During the tenure of former chief minister Arbab Ghulam Rahim, the Sindh Assembly passed a bill completely banning

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the lifting of gravel. However, the job is now done under another name. The lifters now call it boro material and thus their lifting becomes legalised with a share going into the pockets of the mines department officials, locals allege. The lifting of gravel from smaller rivers started as early as 1954-55 with the influx of refugees into Karachi after Partition. But heavy lifting from the Malir started in the early 60s. Before the 90s, the lifting of gravel was awarded through auction, but sensitive areas were kept safe. Lifting was not allowed in areas near electricity poles, gas and water installation, the cantonment areas, Steel Mills, port areas and the green belt. Till the late 70s lifting of gravel, as well as commercial and residential construction, was not allowed in the green belt area on both banks of the Malir, Sukhan and Thadho rivers. Almost 80 per cent of the total land of the Malir district was once under cultivation. Now it has been reduced to hardly 10 per cent. Ghulam Murtaza Baloch, Town Nazim Gadap, Told The News that the mafia has continued its lifting despite all efforts of the town administration. The activity takes place at a small scale in the daytime but gets into full swing at night, he said. According to him, cultivable land in Malir has been reduced to below 25,000 acres from more than 125,000 acres in the past. As the area was dependent on rainwater or wells for agriculture, there were no large landowners here. The Jokhias and Gabols were the major landholders and the largest holdings were no more than 300 acres for a family. Khuda Dino Shah told The News that Pakistans founder Mohammad Ali Jinnah, as well as other Muslim League leaders, also owned land here, but now even the local landowners, whose livelihood depends on agriculture, have been moving to other districts such as Thatta, Badin and Mirpurkhas.He said once a local land owner, Pir Mahfooz, requested Jinnah to bring Australian potato to Pakistan, which later became more successful in Malir than in its native Australia. Guava, bananas, mangoes and papaya were the most celebrated fruits of the area. It was not just martial law regimes that wreaked havoc on the area. Political governments also ignored the protests of the locals against the destruction of their land. Our protest does succeed sometimes, says Maula Bux Baloch. The lifting of gravel stops for a month or so but eventually it starts again. Baloch was a local leader of the Sindh National Front of Mumtaz Bhutto and protested against the lifting of gravel for 13 years. When Mumtaz Bhutto became acting chief minister of Sindh in 1996, Baloch continued his protest and held a meeting with Bhutto. Rather than stopping the illegal business, Baloch alleges that Bhutto ordered his arrest. Baloch left the Sindh National Front but continued raising his voice against the mafias. All the powerful forces, including the police, local influentials and the state have joined hands to promote this destructive trade despite unending protests, says Baloch bitterly. The locals have now become desperate. Khuda Dino Shah is equally pessimisstic: Gravel lifting will end only with the death of the Malir River. (By Shahid Shah, The News-20, 05/05/2008)

Voices of dissent against new ADB loan

The US$300 million Asian Development Bank (ADB) loan obtained on Saturday by the Sindh government for infrastructure development in the cities has drawn plenty of flak from various quarters. For starters, the Chief Justice of Pakistan, Justice Abdul Hameed Dogar, while speaking at a seminar in the city, expressed concern over the non-utilisation of previous funds of the ADB-funded Access to Justice Programme, amounting to around US$382 million. The top judge said that funds were not being properly utilised to begin with, thus putting a question mark over the need for such loans. Amber Alibhai of Shehri-Citizens for a Better Environment (Shehri-CBE) also questioned the need for such loans. She said that over 50 per cent of the problems of the cities can be solved if the government shows the political will to address small things. She said that by removing encroachments, collecting garbage, providing parking space and improving roads, the government can resolve many problems to a large extent. Instead, trees are being cut and parks are being encroached. Multi-storied buildings are being constructed on gutter lines with the connivance of officials concerned, she lamented. She said that laws for such matters did exist and the implementation of the same did not require foreign loans. Perveen Rehman of Orangi Pilot Project (OPP) said that past practices have showed that this money will be wasted. She said that the ADB had launched a Rs700m sewerage project in Baldia Town in 1996 but it could not benefit the population as only five per cent of the people had connections. Similarly, the banks water supply project worth Rs700800m was launched in Orangi Town to provide drinking water to around 12-13 settlements (now located in UCs 5,6 and 7), she said, adding that the pipelines were laid in 1996 and when water supply was started in 2003, those lines had already been destroyed or disappeared, resulting in sheer wastage of money. Rehman mentioned that the ADB was also giving around $125 million for granting leases to Katchi Abadis and providing amenities there. She feared that this money will be spent on the consultants only. Katchi Abadis Development Authority has already developed a plan for the uplift of slum areas, whose implementation needs honest officers. In the presence of this plan, the banks loan is not needed, she added. Prof. Muhammad Nauman of NED University said that the cities need services but the prerequisite was to come up with master plans. Cities lack master plans. Since the local governments are entitled to prepare master plans, such projects should be consulted by local representatives, experts and citizens, he said. Referring to Sindh governments admission that among 1,700 water supply and drainage schemes executed in various parts of the province with the assistance of ADB, around 700 of them appeared to be non-functional, Prof. Nauman said the fate of this $300 million dollar loan would not be any different. Its fate would also be similar to the recently completed/executed projects of Sindh Rural Development and Sindh Devolved Social Services, he said. Present rulers are apparently following the policies of Pervez Musharraf by launching projects without consultation and involvement of local people and experts from the planning to the execution stage, he added. The provincial government intends to set up the Sindh Urban Services Corporation whose structure has not been disclosed, he said and feared that only officials would be included in it. Prof. Nauman further said that ADBs interest rates were 30 times higher than the local funds. He observed that the beneficiaries would be foreigners, consultants,

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contractors and bureaucrats and the lions share would be going to international financial institutions. Only the Pakistani people will be the losers, having to pay back the loans which have increased from $32 billion to $46 billion during the era of Musharraf, he added. Zulfiqar Shah, a researcher at Piler, quoted an ADB report that over 50 per cent projects executed in Pakistan did not meet their objectives. He said that the infrastructure development should be made part of the devolution plan and the local government should be strengthened. The LGs are the only way to develop infrastructure as they are led by elected representatives, ensuring participation of local people in the projects, he said, adding that perceived flaws in the local body system should be removed in this regard. (By Imtiaz Ali, The News-19, 06/05/2008)

Govt cancels 400 officials extensions

KARACHI: The Sindh government cancelled on Tuesday the extensions of over 400 employees. This includes over a 100 grades 16 to 22 officers, the majority of who were given extensions after their retirement during the last PML-MQM coalition government. It is at the chief ministers discretion to re-employ any of these officials. The list of officials whose extensions were cancelled includes: former Education minister Anita Ghulam Ali, Malir Development Authority Project Director Shafiqur Rehman Paracha, Law Secretary Syed Ghulam Nabi Shah, former Sindh election commissioner, the brother of former Sindh caretaker CM Ahmed Ali Halepota, former ombudsman Yousaf Jamal, former DIG Investigations Manzoor Mughal, media coordinators of former Sindh CM Dr Arbab Ghulam Rahim the PML Secretary General Syed Mushahid Hussain. Others include Dr S.M. Qureshi, a grade-22 officer, posted as the Education Charter Inspection and Evaluation Committee chairman, former Secretary Forest and Wildlife Shamsul Haq Memon, Sindh Services Tribunal Chairman Ghulam Nabi Soomro, Governors Secretariat Consultant Yousaf Jamal, Disaster Management Authority Board of Revenue Director-General Maj. Gen (retd) Khalid Naeem and Sindh Civil Servants Housing Foundation MD Syed Faisal Saud, have also been removed. The grade-20 officers: Lyari Development Authority Project Director Shafiqur Rehman Paracha, Mines and Mineral former Secretary Abdul Hameed Akhund, Malir Development Authority DG Amirzada Kohati, Chief Ministers Monitoring Team Chairman Muhammad Raza, Planning and Development Secretary Muhammad Yahya Waliullah, Provincial LG Commission Member (Technical) Ahmed Ali Halepoto, Services and General Administration Consultant Amir Ali Behan and the Fishery Department Additional Secretary, Baz Muhammad Junejo, have had their extensions cancelled. The grade-19 officers include CMs Inspection Team members Syed Ansar Ali Zaidi and Manzoor Ali Awan, S&GAD Additional Secretaries Dhani Bux Memon and Mehtab Ahmed, Sindh Land Utilization Additional Secretary Abdul Qadir Memon, Umerkot EDO (Revenue) Shamsuddin Sanjrani, Civil Hospital and Lyari General Hospital Board of Governors Director Finance Ali Akbar Qureshi, Sindhi Adabi Board Secretary Aijaz Mangi, Environment Protection DG Maj. (retd) Saghir Ahmed Siddiqui, Labour and Industries Additional Secretary Murli A. Ganga Ramani. The grade-18 officers include Governors Secretariat Deputy Secretary Muhammad Riaz, Finance Deputy Secretary Muhammad Zamir Katpar and the OSD to CM Dr Badar Channa. The grade-17 officers are Law Department Section Officer Bin Yamin, CM Secretariat Section Officer Sher Muhammad Baloch, labour and S&GAD Section Officers Maqsood Ali Khan and Abdullah, Works and the Services Department Assistant Engineer, Abdul Majeed Mangrio. The grade-16 officers include Information Consultant Madad Ali Sindhi, Karachi ADIG Manzoor Ahmed Mughal and DSP Nazir Muhammad Tanoli. (By Razzak Abro, DailyTimes-B1, 07/05/2008)

Spiralling prices linked to rise in suicides

KARACHI, May 7: With no quick fix available to stem the spiralling prices of everyday food items, the worsening situation in which the common citizen finds himself is being cited as the main reason behind the rising cases of suicide in the country. According to Edhi Foundation spokesperson Anwar Kazmi, four to five cases of suicide are now being reported across the country every day, as opposed to a daily average of two or three last year. As compared to people living in rural areas, urbanites have been hit much harder by joblessness and inflation, and the number of suicide cases has seen a sharp rise in the past two and a half months, he told Dawn. Most of these unfortunate individuals belonged to the 25- to 40-year age group and all of them were from very low income brackets. Their reasons can be attributed to growing unemployment and the rising prices of essential food items. Mr Kazmi pointed out, moreover, that these figures represented merely the tip of the iceberg since they were based on police reports and hospitals records. About 60 to 70 per cent of the deaths which are actually suicide go unrecorded in police records, he said. The actual number of suicides would come to at least ten people a day across the country. For example, I remember that some 40 young people took their own lives in just Karachi during February 2004 alone. A survey conducted by Dawn showed that due to the rising prices of food essentials between Jan 2006 and May 2008, the average citizens cost of living has nearly doubled. The issue spiked last year as the earlier governments claims of poverty alleviation and economic progress remained largely unmaterialised. A critical difference Talking to people working in various fields, it became clear that the majority are deeply alarmed about meeting their families daily food needs since rising prices are nullifying or rendering insignificant any increases in salaries. Most people approached by Dawn said that they could not see any immediate help coming from the newly-installed government since it was embroiled in the judiciary crisis and had put the issue of rising prices into cold storage. It cannot be denied that the issue is of pressing concern. Virtually every day, my colleagues discuss that fact that the

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annual 15 per cent increase in our salaries cannot match the far more rapidly rising prices of essential commodities, said Arshad Mustafa, a grade-11 government employee. With four kids to feed, the 15 per cent increase feels like peanuts given that prices increase almost every week. The government simply does not see this. In a similar vein Munir Ahmed, who works in a grocery store, pointed out that he must now spend at least Rs3,500 a month on purchasing essential foods such as pulses, flour sugar, milk or tea, to say nothing of other necessary goods such as soap. My finances are stretched to their limit and we are just barely meeting our daily needs, he said. Just a couple of years ago, in January 2006, I was managing to get the same commodities in the same quantities for between Rs1,500 and Rs1,800. When ones total expenditure is calculated by adding school fees, transportation costs and utility bills, etc, then the monthly bill crosses Rs15,000. Referring to the deep frustration being felt by ordinary citizens, the general secretary of the Karachi Retail Grocers Group (KRGG), Mohammed Farid Qureishi, told Dawn that customers literally shout at shopkeepers when they visit after a few days and find that prices have risen again. According to Mr Qureishi, customers now tend to buy only the essentials they need for their immediate consumption over eight to ten days, rather than purchasing in bulk for a month. In the first ten days of the month, business is thin in the shops, he said. In view of the speed at which prices are rising, customers cannot even resort to panic-buying since they literally cannot afford large quantities of essential goods. The issue is not restricted to relatively low-income households. For instance Mohammed Rehan, who earns over Rs50,000 in a multinational telecom company, told Dawn that his monthly grocery bill now adds up to Rs12,000 for necessary goods such as flour, rice, cooking oil, bread, tea, eggs, milk, soap and toothpaste. Two and a half years ago, these items only totalled to about Rs7,000 a month, he said. The difference is critical seeing that I have a wife and three children, and also support my mother and brother. We live in a rented flat. And the Rs12,000 grocery bill does not even include other essential expenditures such as meat and fish or fruit and vegetables, as well as school fees and utility bills. Nowhere to turn For citizens with limited budgets, the most shocking impact has come in the shape of ghee and cooking oil prices. In Jan 2006, a five-litre tin of Dalda cooking oil was for Rs395, which has now increased to Rs750. Ghee saw a similar increase, with the five-litre tin going from Rs395 to Rs730. Similarly, Basmati rice went from Rs36 per kilogramme to Rs85-90 during the same period, while kernel rice went from Rs50 per kg to Rs105. Basmati tota has gone from Rs22 per kg to Rs54-60, while Irri 9 is tagged at Rs65 as opposed to Rs16 per kg in Jan 2006. In flour varieties, Chakki atta, fine atta and atta no.2.5 now sell at Rs25-26, Rs26 and Rs22 per kg as compared to Rs16, 15 and Rs14 per kg at the beginning of 2006. Meanwhile, gram pulse is currently selling at Rs65 per kg as compared to Rs30 per kg earlier, while masur price hit a record peak of Rs100 per kg as opposed to the earlier price of Rs38 per kg. A 200-gram pack of Yellow Label tea now sells at Rs70 although it was Rs52 earlier, while a one-kilo bag of Nido has gone from being priced at Rs250 to Rs310. Everyday is now selling at Rs298 as compared to Rs228 in January 2006, when one litre of tetra pack milk was available at Rs29 as compared to the current price of Rs 48. Shockingly, minced red chillies are now priced at Rs220 as compared to Rs 55 per kg in Jan 2006, while whole coriander sells at Rs180 although it was Rs55 per kg earlier. As these woes are compounded by other factors such as the energy crisis and the global increase in oil prices, millions of citizens are now on the brink of slipping below the poverty line and failing to make ends meet. The rising the number of suicides in the country stands testimony to the fact that for too many individuals and families, it is already too late. (By Aamir Shafaat Khan, Dawn-17, 08/05/2008)

No beef available today

KARACHI: As livestock traders continued their strike for the fourth day, no animals were slaughtered on Wednesday and it is expected that there will be no beef from today. An estimated 5,000 animals are brought to the city daily but because of the strike, there is a shortage of 20,000. The strike was launched against the City District Government Karachis (CDGK) policy of charging Rs 200 on the arrival of big animals in the city. Talking to Daily Times, Live Stock Traders Welfare Association (LSTWA) General Secretary Lateef Qureshi said that the CDGK is illegally charging a fee for which it had established four check posts at the citys entrances - Super Highway, National Highway, RCD Highway and the Northern Bypass. The CDGK staff charges Rs 150 as tax and another 50 rupees for the medical examination of the animal, which is never conducted. Qureshi said that traders already pay Rs 50 per animal to the town administration after their animals are settled in the cattle market. The total cost of bringing an animal for slaughtering purposes into the city has now gone up to Rs 300. The receipts issued against the Rs 200 fee mention that the fee is collected for fresh animals (animals for milking purpose), thus the fee collection does not legally apply to animals being brought for slaughter. The CDGK veterinary staff also receives Rs 50 per animal for the medical examination of animals at the time these animals are taken to the slaughterhouse. Qureshi added that the strike will continue until the CDGK removes the illegal check posts. The paucity of fresh beef in city will be because of the CDGK. If the check posts are not removed, a sit-in protest will be held in front of the Bilawal House. Meanwhile, a delegation of LSTWA and Meat Merchants Association has called on the acting city nazim, Nasreen Jalil, to settle the issue. (DailyTimes-B1, 08/05/2008)

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Abuse of domestic workers

A REPORT in this paper about the mysterious deaths of three housemaids in Islamabad is a sad commentary on the absence of legal safeguards for one of the most vulnerable sections of the labour force. The International Labour Organisation may still be in the process of formulating a convention that exclusively protects the rights of domestic workers, but there is no reason why Pakistan should not immediately get down to devising a law that does the same. For decades, domestic help, particularly women and children, have suffered physical and mental torture at the hands of brutish employers. The latter have felt safe in the knowledge that they would not be held accountable for their actions as there is no mechanism in place to oversee the welfare of domestic workers. Thus long working hours, poor salaries, taunts and beatings, sexual abuse, even murder, have made life a living hell for domestic servants. With no forum to turn to for help and with little awareness of their rights as individuals and workers, domestic helpers continue to suffer in silence. Sadly, the absence of viable job alternatives has left them with little option but to remain with their employers. With the induction of a democratic government that includes a large number of women legislators who would probably find it easier to understand the problems of underprivileged women and child workers than their male colleagues one hopes for action. Not only is legislation required, a sea change in attitudes is also needed if there is to be an improvement in the current situation of domestic workers who must be apprised of their rights. As a first step, it would be a good idea to start a model project to disseminate information about labour rights and to install forums that workers with grievances can easily approach, thus making it difficult for employers to evade accountability. (Dawn-7, 09/05/2008)

Govt sacks 93 re-employed officials

KARACHI, May 8: The Sindh Government Services, General Administration and Coordination Department on Thursday issued a notification terminating the services of as many as 93 officials belonging to different pay scales who were reemployed on a contract basis after their retirement. The notification has been issued in pursuance of the Sindh cabinets decision taken at a meeting held on April 29 recommending the termination of services of all officials re-employed after their retirement with immediate effect in lieu of one month salary. It was, however, decided that the existing contracts of the re-employed officials pertaining to Grade-11 and below would be allowed to complete one year. The strength of such employees is said to be 300. Following are the details of the officials of different grades whose services stand terminated with the issuance of the governments notification. BPS-22: Dr S.M. Qureshi, chairman, Inspection and Evaluation Committee, Education and Literacy Department; Abdul Quadir Junejo, chairman, Sindhi Language Authority, Culture and Tourism Department. BPS-21: Shamsul Haque Memon, consultant, Coastal Development Authority, Planning and Development Department; Buxial Khan Gudaro, consultant, law department; Aftab Ahmad Qureshi, consultant, SGA & CD; Ms Umme Kulsoom, consultant, planning and development department; Retired Maj-General Khalid Naeem, director-general, Disaster Management Authority Board of Revenue. BPS-20: Syed Ghulam Nabi Shah, secretary, law department; Dr Baz Mohammad Junejo, additional secretary (technical), agriculture department; Retired Brigadier Abdul Haque, project coordinator for Project, Coordination and Monitoring Unit Under Sindh Water Sector Improvement Project, Planning and Development Department. Mohammad Nawaz Memon, awaiting posting in SGA &CD; Amir Zada Kohati, director-general, Malir Development Authority; Prof Anita Ghulam Ali, managing director, Sindh Education Foundation; Dr Rahim Bux Bhatti, medical superintendent, Gambat Institute of Medical Sciences, Health Department. Mohammad Raza, chairman, chief ministers inspection enquiries and implementation team, Sindh adviser (water distribution cell), irrigation and power department; Dr Mohammad Kalim Butt, medical superintendent, Civil Hospital Karachi, health department; Syed Sarfraz Ali Shah, project director, Hyderabad Development Package, Local Government, Katchi Abadis and Spatial Development Department. Nazeer Ali Khoja, project director, Development Scheme Sindh Police, Home Department; Mohammad Aslam Turk, professor, Govt Polytechnic College Hyderabad, Education & Literacy Department, Ms Fakhrun Nisa, principal, Govt College for Women, Shahrah-i-Liaquat, Karachi; Syed Hasan Shah Bukhari, member, Sindh Service Tribunal, Karachi. Retired Brigadier Tariq Ali Khan, director-general, Bureau of Supply and Prices, Agriculture Department; Shafiqur Rehman Paracha, project director, Lyari Development Project, Karachi; Abdul Hameed Akhund, consultant, SGA & CD, Mohammad Yahya Waliullah, secretary, Planning & Development Department. Retired Lt-Colonel Shahid Qureshi, DIGP/ T and T, CPO, Home Department, Karachi; Hakim Dino Tunio, special secretary, Planning & Development. BPS-19: Mohammad Siddique Vehro, Mohammad Saleh Jumani, Madad Ali Sindhi, Retired Colonle Muneer Ahmad, Syed Ansar Ali Zaidi, Aijaz Ahmed Mangi, Naseem Nighat Seema, S.M. Saeed Naqvi, Dur Mohammad Kamal, Ghulam Akbar Chachar, Jalauddin Chohan, Mrs Nighat Perveen, Mrs Aftab Ahsan Qureshi, Ali Dinao, retired Lt-Col Mohammad Usman, Jamaluddin Domki, Mrs Naseeba Hussain Solangi, Manzoor Ali Awan, Mrs Razia Subhan Qureshi, Eng Veer Kumar, Murli A. Gangaramani, Dhani Bux Memon, Mehtab Ahmed, Abdul Qadir Memon, Shamsuddin Sakhirani, retired Colonel M.A. Wahid Khan, Manzoor Ahmad Mughal, Dr Haji Rahoo and Dr Vishan Das. Besides services of nine officials of BPS-18, 18 employees of BPS-17, six belonging to BPS-16, two in BPS-7 and only one in BPS-2 have been terminated.

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(Dawn-19, 09/05/2008)

Dollar inflicts heavy blow on rupee

KARACHI, May 9: The oil-pegged US dollar cut the size of the rupee by another 3.5 per cent on Friday, the largest cut in a single day, pushing it down to close to Rs70. Meanwhile, the State Bank stopped exchange companies from taking the UK pound, euro and UAE dirham out of the country. It also asked commercial banks to sell the dollar in the inter-bank in the second session of the market. The steps helped the rupee to recover sharply against the dollar to Rs66, but the recovery was short-lived and the rupee again started sliding, said currency dealers. They said that before the State Bank intervened, the dollar had touched Rs69.45 and it was in demand at this rate. Some importers have succeeded in booking the dollar at Rs68 for Monday, they said. Both importers and exporters fear trading will be badly hit by a sharp devaluation of the rupee against the dollar -- 13 per cent since January. The costly import will bring another wave of inflation in country already under the grip of 13-year high inflation, said a dry milk importer. Exporters are equally worried and dispel a perception that a devaluation of the local currency brings boom for them. They said that over 35 per cent imported constituents were used to produce exportable goods. The costly import makes their products expensive, resulting in loss of market. The main reason for the outflow of dollars from the country is record oil prices which touched over $125 per barrel in the international market. The huge oil bill has affected the government and the private sector. The day-to-day erosion of the rupee value panicked even household savers. Open market dealers are buying dollars but not selling them. An SBP circular issued to the exchange Companies on Friday said it had been decided that all permissible inflows and outflows of exchange companies were to be routed only through FCY accounts maintained with commercial banks in Pakistan. It said: All exchange companies are, therefore, required to close all their existing Nostro accounts with banks abroad and bring back the balances held in those accounts into their FCY A/Cs in Pakistan latest by May 31, 2008. Further, with a view to focussing exchange companies on their primary function of promoting home remittances, it has also been decided that with immediate effect an exchange company will be allowed to effect outwards remittances on behalf of bona fide customers for permissible transactions only to the extent of 75 per cent of the home remittances mobilised by the company during the preceding month. All exchange companies will report by 5th of every month. The SBP warned that failure to comply with the instructions would attract severe regulatory action. (By Shahid Iqbal, Dawn-1, 10/05/2008)

Prices of some essential items surge to record levels

Different grocery items have registered massive surge during the last four months and in some cases the prices touched all time high level, which is unprecedented in the history of Pakistan. Particularly, the price of Kernal rice shot up by Rs 50 per kg within five months. Besides, many food items have gone beyond the reach of common citizens. Some financial experts link this surge with high global inflation level while a few stakeholders blame hoarding, smuggling and export of food items for the current price hike. The intensity of high inflation level in food items could be gauged from the fact that gram pulse, which was available at Rs48 per kg in retail a week ago, is now being sold at Rs 65 per kg. Likewise, Tota Basmati registered Rs 8 per kg surge and it is being sold at Rs 54 per kg now. It was available in the market at Rs46 just a week ago. Interestingly, this rice is not considered an exportable commodity and being mostly consumed locally. Noted economist Kaisar Bengali exemplifies the current price hike in food items with two factors. While describing first factor, he says that inflationary expectation may cause surge in prices. A person will withhold something as he would be expecting increase in the price of that item which he has withheld. And naturally the supply of that item would be affected when everyone would be lured to do so. Secondly, he says, sympathetic inflation also causes increase in prices. A shoe maker will also increase the price of his product when the price of bread is increased to meet those expenses which he has to pay extra for purchasing bread. Bengali is optimistic that the government will take measures to control inflation in the forthcoming fiscal budget. I dont know exactly what steps would be taken to contain high inflation level but I know well that the government is very concerned about this phenomenon, he added. Generally, higher prices of petroleum products have also become a cause of high inflation.

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He said that the rise in petroleum products prices is a worldwide phenomenon which could not be avoided. However, he added, higher inflation level could be controlled by curbing non-development expenses. Food inflation is also affecting European countries and America as well. =Thailand is a major rice exporting country but their rice crop was badly damaged. To meet worldwide demand Pakistan is also exporting rice, he said. Chairman Consumer Association of Pakistan Kokab Iqbal said that people had high expectations from the new regime and they were waiting for some relief package. He, however, added that increase in prices of petroleum products and other factors were multiplying the problems of common citizens. According to him, wheat, rice and other commodities are being stocked in godowns, thus badly affecting the supply of these essential commodities. These essential items are being stored in a number of godowns located at Hub, Mauripur, Pipri, near Gharo and around Steel Mills, he mentioned. He said that the government should check the purchase data of wheat and other commodities and take strict action against those who are minting money from the consumers. Kokab Iqbal also stressed the need for blocking all the sources of smuggling commodities. I wonder how smuggling is going on when our forces are deployed at borders and they keep strict vigil on lawbreakers, he said. People like me highly appreciate the government decision of fixing Rs 6,000 as minimum wage, but is it possible for anybody to maintain his family with this wage. We would love to keep him lifelong finance minister who can make a budget for six-member family within Rs 6,000 per month earning, he said. Kokab Iqbal demanded for banning the export of essential commodities in order to bring down the prevailing inflation level in food items. I feel embarrassed when I apprehend that the pulse which is being sold at Rs60 now would be sold at Rs160 in future, he said. General Secretary Karachi Retail Grocers Group Fareed Qureshi, while referring to the rise in gram pulse price, said that owing to the ban on wheat purchase, the hoarders have started stocking gram pulse in their godowns. There is no doubt that the prevailing prices of some essential commodities have shot up to all time high level, he said.

Price Chart
Prices quoted in January, 2008 1. Pulses i) Masoor pulse (Red) ii) Masoor pulse (Sabit) iii) Moong pulse iv) Moong pulse (Chhilka) v) Mash pulse (Washed) vi) Arhar pulse vii) Gram pulse 2. Chickpeas i) Kabuli Chickpeas ii) Black Chickpeas 3. Rice i) Rice (Kernal) ii) Rice (Saila) iii) Rice (Tota Basmati) 4. Flour 5. Sugar 6. Basin 7. Sooji 8. Ghee (By Qadeer Tanoli, The News-13, 10/05/2008) Rs73/kg Rs62/kg Rs48/kg Rs44/kg Rs60/kg Rs77/kg Rs44/kg Rs60/kg Rs38/kg Rs85/kg Rs70/kg Rs44/kg Rs16-18/kg Rs25/kg Rs45/kg Rs25/kg Rs114/kg Current prices Rs90/kg Rs80/kg Rs50/kg Rs42/kg Rs62/kg Rs82/kg Rs65/kg Rs75/kg Rs60/kg Rs135/kg Rs100/kg Rs54/kg Rs22/kg Rs27/kg Rs60/kg Rs25/kg Rs130-145/kg

Ghee goes up Rs 37, flour Rs 20 in 2 weeks

KARACHI: The government has cut subsidies on three major and essential commodities being sold at Utility Stores across Pakistan. The prices of 1kg ghee and oil have been steadily on the increase. A month ago prices were Rs 67, a fortnight earlier the prices went up to Rs 80 and from Friday the prices have been set to Rs 100. The price of second rate flour (dhai rate atta) was Rs 130 per 10 kg, but last week it was increased by 10 rupees, and now the price has jumped to Rs 150. A well-placed officer, who chose to remain anonymous, told Daily Times that the government planned to increase prices and bring them to the retail level until the subsidy will be cut altogether for these commodities. Utility Stores Corporation (USC) Regional Manager, Kamal Mustafa told Daily Times that the prices of ghee, oil, rice and pulses have been skyrocketing in the open market leading to a huge gap between USC and open market prices. Since the fuel prices have hiked at its apex the government had increased the prices of these commodities. The prices of rice are presently Rs 65 at the utility stores while in the open market they are between Rs 110 and Rs 150, the prices of rice will also be increased to Rs100 at the utility stores, said Mustafa.

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He said that people have also been exploiting the facility and members belonging to the same family have been buying the stock of ghee and oil separately. He said that the crisis of food prices was an international problem and the United States of America has also adopted a scheme to handle the crisis under which, the US government has issued ration cards to its citizens. He also spoke of the role of the media and said that the media should not only report price hikes but should also analyze the reasons behind them. The increases in prices of ghee, oil and flour have left the poor in bewilderment and dismay. There were elderly men and women waiting for the arrival of ghee, oil and flour at various utility stores since early morning, the supply was seen arriving at 3 p.m. Many consumers left without buying anything when they were told about the new prices. A resident of North Nazimabad, Amjad said that he had to pay dues to the driver of school van, but he came to the store to buy ghee instead. Adding that he was disappointed to hear that the prices had increased again. He said that the increasing prices of essential commodities would not allow him to feed his family with dignity. The in charge of a utility store told Daily Times that his monthly salary was Rs 4000 while he spends Rs 50 for lunch and Rs 30 for traveling every day so he was in a very conflicted situation, whether to feed his family or use all of his salary on himself. He said that the availability of ghee, oil and flour at utility stores at subsidized rates had helped him and millions of others but now buying things at a subsidized rate was going to be over soon. A widow, Hajira, said that she was just waiting for a call from above, meaning death, due to insults of poverty. She said that it was time to wait the fast-reaching thunder from heaven. No shortage of meat, says Nasreen: APP reported that Acting Nazim Nasreen Jalil has said that there was no shortage of slaughtered meat in the city and that 200 animals were slaughtered in the Bew Karachi Slaughterhouse and another 655 in the Landhi Slaughterhouse on Saturday. She was talking to Chairman Arif Bhatti and members of the Agriculture Committee and others at her office on Saturday. She pointed out that the Karachi DCO has set up a committee to consider the objections of livestock traders. It will submit its recommendations to the nazim. (DailyTimes-B1, 11/05/2008)

Funds alone are not enough

AS budget time draws close, our policymakers appear to be rediscovering the virtues of education. Chairing a meeting of the Higher Education Commission in Islamabad on Monday, the prime minister said that the governments top priority is the provision of quality education to the masses. He also spoke of empowering people with knowledge and utilising their skills for the socio-economic development of the country. The same day as Mr Gilani was extolling the merits of university education, the Hyderabad district nazim was speaking about the city governments foresight in allocating the lions share of its funds to ensure the availability of quality school education to the people. The following day at a seminar on prebudget dialogue on education, speakers blamed low education spending and its inappropriate use for poor academic performance in the country. A random look at the profusion of statements on education now emanating from various quarters gives the impression that every sub-sector is out to grab the maximum with no well-planned policy guiding and coordinating the different sectors. The conventional myth is still prevalent that the more money is pumped even indiscriminately into the education sector the better its standards will become. True it is a fact that Pakistan has traditionally been tight-fisted when it came to spending on education because our policymakers failed to perceive this as productive investment. It has only been in the last few decades that education has attracted more funds with a lot of these coming from abroad. Yet many of the problems in education have been attributed to the paucity of financial resources. As the flow of investment in this area improved, no planning went into enhancing its utilisation capacity. Awash with money and lacking a judicious strategy to use it meaningfully, some subsectors in education have failed to make the impact they could have given the quantum of funds available to them. It is time our planners concentrated on formulating an education policy drafts are already available and putting the funds to wise use. If this is not done, the corruption that has seeped into this sector of late will gnaw into its vitals and undermine public-sector education even further. The decisive factor which will determine the success or failure of the present government in achieving its education goals is the policy it adopts, the strategy it draws up and how effectively this is implemented. (Dawn-7, 15/05/2008)

Banks openly violate SBP policy,SHC direction while recovering loans

The Karachiites have appreciated the decision of the Sindh High Court (SHC), in which it has directed the State Bank of Pakistan (SBP) to submit the lists of loan defaulters. According to the decision, the list of people borrowing loans worth more than Rs50 million and other borrowers whose loans had been written off by the bank authorities will be submitted to the court. The court has also directed the heads of the private banks to explain why their employees are raiding defaulters houses and why it has given such an authority to their recovery teams to violate human rights and go beyond the law. An official at the SBP head office told The News that the SBP had previously restricted all the banks from violating any rules while recovering their money from the defaulters. However, the private banks never followed the SBP policy and their recovery teams are still raiding the defaulters places despite the SHCs decision. The number of such raids has reduced after the decision of the court. But on the other hand the clients have started feeling vulnerable after the suicide of Muhammad Tufail and they fear unexpected raids by their respective banks recovery staff, the source added. It is important to mention that the SBP has designed the Electronic Credit Information Bureau to periodically check the status of loan of any person. Similarly Data Check is an independent agency, which monthly sends the financial reports of every person to the SBP, in order to monitor the current status of the borrowers. According to the banking policy, a

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person has an ultimatum of 60 days for paying the instalment of his loan but, in case of failure, he will be included in the 30 days bracket. Then if the person fails to pay his instalment in 90 days, he will be included in the 60 days bracket. In case if he still fails to pay his instalment in the next 120 days he will be included in the 90 days bracket whereas, if, a person fails to pay his instalment in 150 days, then he will be included in the 120 days bracket this is the maximum limit, after which the person will be marked as a defaulter, and will be blacklisted for any kind of bank loan(s), till he repays it. As per the banking policy, the staff of the recovery team cannot visit the defaulters house but can remind him/her about the loan through telephone. On an average, it was observed that, 30 to 40 days after the deadline of the loan payment, the recovery team would visit the clients houses. One of the borrowers revealed to The News that there is only one supervisor in the bank recovery department, who is an employee of the bank while the rest of the recovery team is hired on a commission basis. Furthermore, the borrower claimed that mostly political party activists are preferred in the recovery department because they can recover the money using strong-arm tactics on the basis of influence. All the recovery personnel in the banks are hired through a contractor and these employees work on a third party contract. This is the reason why the banks remain unaffected. Moreover, a large number of clients revealed that the recovery staff personnel usually visited the clients residents on Sundays or holidays and at odd timings. In case the client is not available, the recovery personnel threaten the family members so that the clients would make the payments at the earliest. Besides this, the recovery staff personnel use vulgar and abusive language with family members, especially females, the clients complained. Also, the recovery department personnel forcibly try to recover the money as they have to earn maximum amounts of commission from the bank, they added. However, several bank officials revealed that their recovery staff works on a contractual basis and not on commission basis as they have good salary package. The personnel of the recovery team do not earn more than a commission of Rs5, 000 on a recovery of Rs0.1 million. If the staff is hired on a contract through a third party, then commission is offered to them. The recovery staff does not harass the clients for a commission as the amount is not much, officials elaborated. The actual reason to pursue the client is that the contract of a person with the bank depends upon recovering the targets otherwise the authorities will terminate the contracts, they explained. Furthermore, the bank officials mentioned that if a client is not paying the dues and is avoiding banks enquiry then the recovery department assigns the task of recovering amount from the defaulter to the most experienced staff member. They further clarified that the bank authorities have given the guidelines to their recovery teams but often the clients complain about inappropriate attitude of the recovery teams to the bank managers or high-ups. Some of the clients believe that the bank authorities pay no heed to their complaints, which is why the recovery team often behaves badly with them. (By M. Zeeshan Azmat, The News-19, 15/05/2008)

Women handicapped by commercialism

Aisha, 40, a poverty-stricken fisherwoman, is among many who are fighting inflation by adopting alternate means of earning. Sitting on a tattered mat in an open courtyard near the seashore, Aisha can be found busy weaving prayer mats. Hundreds of fisherwomen, who were traditionally engaged in net manufacturing, supply of water to boats and going to the open sea for drying fish at isolated islands long ago, are now jobless due to the introduction of commercialism in the fishing sector. Now, not many of the community women have skills other than fishing, which has left them helpless when it comes to the survival of their families. Making mats and other items is now the main pastime of the fisherwomen living at the 350-kilometre-long Sindh coast from Keti Bunder to Karachi. They make mats, prayer mats, brooms, baskets, plates for meals and other decorative items from vegetation and sell them to the neighbouring localities. Some women have found jobs in the citys posh neighbourhoods and go there daily while others work in nearby garment factories, as helpers for packing. Several experienced fisherwomen, now run their own shops and tea stalls at their residences, especially in the Ibrahim Hyderi and Rehri villages. Born in a fishing village near the Keti Bunder, Thatta district, Aisha is presently residing in the fishermen locality Dabla, Bin Qasim Town. She has learnt mat-making from her mother and mother-in-law. She can also make rallis with tattered rags and old clothes and is capable of embroidery work at her make-shift home. Aisha earns little through this and uses the money for her family affairs. Rasti Dablo, an old fisherwoman, while talking about making rallis, says that earlier they stitched tattered rags to prepare the covers of razai (cotton-stuffed blankets) by using the matching colourful rags for ralli. However, now they do not have more old clothes to use for the purpose, as the acute poverty has forced them to continue wearing old clothes. Minor children with half-wet clothes can be seen playing in filth, sea-mud and picking crabs from mangroves near their homes, while the women remain busy from sunrise to sunset in the locality. The young girls of the community are less interested in the skill; therefore, passing this particular expertise on to the new generation may prove difficult. However, the old fisherwomen fear that this talent may die sooner or later in these coastal localities. Besides this the fisherwomen usually help their men with their catch. Along with the cooking meals, washing clothes and taking care of children and domestic animals, they also supply water to boats, load ration and repair fishing nets in their courtyards. Fishermen in these poorly established localities build their makeshift homes themselves. They collect timber from mangroves and their women prepare mats for cover. They renew their makeshift homes once a year. They mostly use mats and waste plastic sheets as roofs, which need to be changed every year because of the rains and the scorching

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heat. Now the trend of building makeshift homes through mats and timber seems to be declining, however, the poor people do not have any other options. The skilled females mostly take orders with size from neighbouring people to make floor mats and roof sheets. They buy leaves from Rehri village, where sellers bring it from Keti Bunder, Garho, Sakro and other coastal towns in Thatta district. These vegetations grow on water canals near the coastal areas and people use it for the purpose. Local people sell a single bundle of vegetation to traders at Rs150 and they (traders) sell the same at Rs200 to Rs500 each in Karachi and other towns. While the fisherwomen, living in Thatta coastal areas, buy a bundle of the same vegetation at Rs80-Rs90 each. A single woman can prepare one or two mats daily but it is up to the demand of customers. If a woman remains busy at home for taking care of children and performing domestic work, are unable to produce the same amount. Rasti says that they also work jointly, making more mats daily and earn sufficient amount. Fishermen use the same mats for sitting at the seashore and as floor covering for their boats and landing sites near their localities. Some mats they use for roofs and others for floor. Its guarantee is one to two years. Again it is up to its usage and protection, because scorching heat and rains can damage it. Small mat they sell for up to Rs60-Rs70 each while the cost of the larger ones depends on the size. Residents of Dabla village, which comprises mainly makeshift homes, do not enjoy basic facilities like potable water, gas and electricity. Hardly few people have electricity connections and illuminate their shelters while others use kerosene oil lamps. Otherwise, they spend starry nights and moonlights in their open courtyards. Middlemen have their own interests, who exploit these illiterate women. Hence, they have yet to find an attractive market to sell their hand-made products to earn more. Recalling the blissful days of the past they spent in the Indus Deltaic region, these women reminisce about it as it was a good time. Prosperity was every where. People were happy, as there were more fish stocks in the sea and the fishermen used to return with more catch. However, now there is no more fish and the males have to take the risk of going to open sea for a catch. However, neither are these illiterate families fully aware about the labour laws and government subsidies nor have they ever claimed their rights. They are satisfied with what little allows them to survive. The seashore village residents have become familiar with high tides and low tides. Despite being vulnerable to sea storms and disasters they never pay heed to government calls for migrating to safer places in emergencies during the monsoons and possible cyclone threats. (By Jan Khaskheli, The News-20, 16/05/2008)

Govt mulls accountability drive against paper NGOs

KARACHI, May 18: Though non-governmental organizations (NGOs) are no substitutes for institutions of the state that are unable or unwilling to do their jobs, in many so-called third world countries like Pakistan, NGOs play crucial roles in plugging the various holes created by a lack of or weak infrastructure. However, Sindh Social Welfare Minister Nargis N.D. Khans recent statement that 70 per cent of the provinces 7,000 registered NGOs were non-functional, should come as a wake-up call to all stakeholders as by all standards, this is a mind-boggling figure. The minister made this statement at a seminar in Karachi on May 6. Talking to Dawn, Ms Khan said efforts were afoot to streamline the process of registration and monitoring of NGOs so that bogus set-ups could be weeded out. We need to establish checks and balances. I was told by the provincial coordinator that about 80 per cent of NGOs were dormant. It should be unearthed why previous governments neglected this sector. It will be systemized. A committee has been formed. We will also amend the (related) act, said the minister. She added that there had been some concern voiced by certain organizations, but genuine NGOs did not need to worry about the pending accountability process. No fear of accountability Some people have complained. I think its a case of chore machay shore. If an organisation is working smoothly, there should be no fear of accountability. Nobody is sacred. You should learn from criticism. This should not be taken in a negative light. If there is no monitoring, it goes out of control. Giving details about the proposed accountability, she said there will be a three-year certification. There will also be performance reports, utilization reports and an audit. We have also proposed renewal fees. This will ensure that NGOs remain alert. Yes, they are non-governmental organizations, but I believe joint efforts are needed between public and private sector organizations to achieve progress. Yusuf Khattak, coordinator of an NGO, the Child and Labour Rights Organisation, agreed with the figure quoted by the minister and said that certain people set up NGOs purely for personal gain. This figure (7,000) is correct. Not a lot of NGOs are functional. Some people are involved in field work and mobilization, but unfortunately, real people dont often get funding. Others get hefty salary packages, sometimes touching Rs150,000 a month, including such benefits as house rent, car, fuel etc. About 3,000 organizations are properly registered. But it is my belief that even out of these around 60 per cent are inactive. Individuals get them registered. It is very easy to form an NGO. As for the source of NGOs funding, Mr Khattak said: Some have local and some have foreign donors such as the European Union and others. The NGOs do have internal audits conducted by chartered accountants, and there have been some objections raised even with a few major NGOs that are active in the field, though some audits are not genuine.

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However, Zohra Yusuf, Vice-Chairperson of the Human Rights Commission of Pakistan, one of the countrys most wellrecognized NGOs, sounded wary about government intervention and cautioned that not all of the dormant organizations were working with ulterior motives. I have no idea as far as the numbers go. I would agree that a large number are on paper. That doesnt mean that the government should get involved. NGOs have to report annually. There is a process of monitoring that should be taken care of. Sometimes people come together over an issue with a lot of enthusiasm. But due to a lack of commitment and funding, (the organizations) fizzle out. The inactive ones are not always dishonest. Yousuf Khattak agrees that though there are some black sheep, what the system really requires is improvement. There are advantages to NGOs, such as a rise in awareness as well as employment for a lot of people. There are negatives and positives. The system needs improvement. When Qurban Ali Memon, Provincial Coordinator of Sindhs Social Welfare Department, was approached by Dawn for his comments on the figure and explanation of the process of registering a NGO, he said he had no exact figures. All 23 districts (of Sindh) have different figures. They come under the administration of the district coordination officers. There is no fee for registration, he told this reporter. NGO culture Commenting on the history and mushroom growth of NGOs, Mr Khattak said it was during Gen Ziaul Haqs 11-year martial law regime that these organizations really took off, resulting in the creation of a NGO culture. The Zia martial law fuelled the growth of the NGO culture. Many people from the middle class fled to Europe and other foreign countries and developed links and were influenced by the nationals of these countries. When they returned, they brought this mindset with them and this aided in the creation of the NGO culture. Before and even during Zias martial law, the begums and daughters of generals used to run organizations. With the middle class, there were local welfare societies in the mohallas, where people pooled in resources. Nargis N.D. Khan observed that perhaps a change in the modus operandi of NGOs was the need of the hour. Seminars in five-star hotels wont help anyone. This is not enough. They could use this money in the field. We are inviting proposals and suggestions from NGOs. There are 7,000 registered NGOs. If each of them even adopts one union council (in the province) as a project, so much can be achieved. There are health, education and employment issues that need to be addressed. (By Qasim A. Moini, Dawn-13, 19/05/2008)

Updating poverty estimates

The Centre for Poverty Reduction and Social Policy Development (CPRSPD), an affiliate of the Planning Commission of Pakistan, is processing the economic and other relevant data for the fiscal 2006 for an estimation of the incidence of poverty during that year. The Federal Bureau of Statistics (FBS) has provided the CPRSPD the relevant data for estimating poverty incidence. The centre is processing the data and we expect to finalise the poverty estimates for fiscal 2006 in another month or so, a senior Planning Commission of Pakistan official tells Dawn. The last time the government had estimated incidence of poverty was in 2005, a year when the Gross Domestic Product (GDP) had peaked to above nine per cent and the country had harvested record food and other crops. The results produced by the centre showed a reduction in overall poverty by 10.6 to 23.94 per cent in 2005 from 34.94 per cent in 2001. In urban areas, the poverty incidence was claimed to have declined to 14.94 per cent during the same period. it dropped to 28.1 per cent to 28.1 in the financial year 2005 from 39.26 per cent in 2001. The new poverty estimates were however immediately challenged by the World Bank for using Consumer Price Index (CPI) for inflating 2001 poverty line instead of using the survey-based prices index, Tornqvist - TPI. On the basis of that the World Bank said poverty had dropped by 5.2 per cent between the year 2001 and 2005. The decline in poverty in 2005 afforded the previous government an opportunity to show off the success of its economic and growth policies. The fiscal 2006 too was not a bad year with regard to overall economic growth and food prices, the Planning Commission official says, implying that the results for the year would not be much different from 2005. He acknowledges that the poverty incidence needed to be estimated immediately after the end of a fiscal year in order to adjust the governments socio-economic policies and priorities accordingly. But, he argues, the FBS did not have enough funds to make poverty estimation a regular annual feature. The exercise is carried out only when the FBS has money for this purpose, he says. Another official admits that the gains made during the period 2001 and 2005 on the front of poverty alleviation have largely been wiped out in the first 10 months of this financial year due to huge increase in food and commodity prices. Poverty is extremely sensitive to food and energy price fluctuations and general economic conditions. The incidence of poverty changes each year, depending upon the economic conditions prevalent in a given year, he says Some 35 to 40 per cent people of the total population are estimated to be living slightly below or above the poverty line. This segment immediately gets affected even by the slightest change in the economic conditions, particularly food and energy prices and performance of the agriculture sector. Poverty is sensitive to year-to-year economic conditions. That is why the incidence of poverty during a given year differs from another year. If and when the prices go up and agriculture underperforms, the number of people below the poverty

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line rises. Similarly, if and when the prices fall and agriculture performs well, we see a reduction in the number of the poor, says an economist, who also asked not to be named because is working for the Planning Commission as a consultant. The exorbitant spike in the food and energy prices in the last several months means a hefty increase in the number of people living below the poverty line. The rule of thumb is that one per cent increase in the food prices means a half per cent rise in poverty, says the federal government consultant. But, he says, the poverty estimates could not be built upon the rise or fall in the food and energy prices or the performance or lack of it of the agriculture sector alone. The increase or decrease in poverty is also dependent on several other factors like the overall economic growth or lack of it, quantum of overseas remittances, government expenditure (on development and other projects), etc. These factors always have a discouraging impact on poverty. If the economy is growing and the size of remittances rising and the government is spending more on development, it means that these factors would offset the impact of higher food and energy prices or drop in crop output. That is why we cannot calculate the net effect of the food and energy price spike on the incidence of poverty without analysing the economic data for the entire year, he says. Yet, he adds quickly, it is safe to assume that poverty has gone up during the last six to nine months due to the poorer performance of the national economy as compared to the last financial year. He says the soaring food prices during this fiscal must have affected the urban poor more than the rural poor. In the rural areas, we have evidence to suggest that a good number of landless farmers - who get affected by the consumer price inflation more than the rest of the rural population, have diversified into livestock and other agriculture sectors in the recent years. Thus, they are economically more stable than they were in the past years. Look at the milk prices, which have risen to Rs48 per litre from Rs44 just 15 days back. This increase in milk prices should have helped transfer some income to this segment of the rural population. The sharp increase in the wheat prices should also have made similar, positive impact on those who have land and (grain) surplus to sell in the market. These developments could be said to have impacted positively on the lives of those living on a subsistence level, he argues. However, he says, the increase in rural income also brings up the issue of its equitable distribution. The rise in commodity prices does not affect everyone in the rural economy equally. When the commodity prices soar, only those who have larger landholdings and can produce for the market benefit. Since an overwhelming majority of the rural population - 93 per cent, according to some estimates - comprises landless tenants or small landholders, increase in commodity prices results in skewed, inequitable income distribution in the rural areas in favour of the bigger landholders, the economist says. The increasing incidence of poverty has also generated a debate as to the effectiveness of huge indirect subsidies allowed to protect the poor from the price shocks. Most economists argue that the mechanism of giving indirect, cross subsidies to mitigate the impact of the rising food and energy prices on the poor is not effective. A larger part of these subsidies - such as the one on domestic oil and power prices, is pocketed by those who do not need them or who are not the target group of these subsidies. The better way, these economic experts insist, would be to withdraw all the indirect subsidies and supplant them with direct cash subsidies to the targeted segments - 15 per cent chronic poor at the bottom. However, an economist teaching at a private university, maintains that a middle way consisting of a mix of cash and food subsidies needs to be found out. There is no perfect mechanism to ensure that the subsidies actually reach targeted groups without any leakages. If the present mechanism of indirect, price subsidies is fraught with leakages, who can say that the cash subsidy would have no leakage and reach those for whom it is intended? Every intervention on behalf of the poor has leakages, he says. He says different kinds of interventions are needed to be implemented for different target groups - urban and rural poor. All such interventions should be well planned and involve minimum leakages, he says. But that would require authentic poverty surveys showing the near exact depth and severity of the problem. Unless this can be achieved, there is little hope for any pro poor intervention to succeed. (By Nasir Jamal, Dawn-Economic & Business Review, Page-V, 19/05/2008)

World economic map in 2050

ECONOMISTS tend to divide the world in terms of economic development or growth potential. We have a group of G-7 countries, which are the most industrialised and the richest. Also, there is a group of OECD countries as well as a cluster of emerging economies. There is, however, another set of countries which have been further differentiated from the emerging economies and called BRICs. Goldman Sachs, an international consulting group, in its 2003 paper coined this acronym. BRICs stands for Brazil, Russia, India and China. Because of their development potential, recent growth trajectories and equally, if not more importantly, geographic and demographic size, these are the countries which, it is suggested, have the capacity to make a global impact and be a major force in the world economy. If everything goes smoothly, and there is no economic miracle either, then the authors project China could become the largest economy in the world by 2041, India the third largest by 2035, and the combined BRICs GDP could exceed that of G-6 (G-7 minus Canada) by 2041.In its December 2005 paper, the same consulting group extended this concept even further and discussed the probability of the Next Eleven economies catching up with and becoming like BRICs. Pakistan is also included in this group of the famous Next Eleven, bracketed with countries like Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, the Philippines, South Korea, Turkey and Vietnam. Before examining Pakistans potential to be a tour de force in the global economy, it would be appropriate to look at the

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factors that have been taken into account to declare a country a potential BRICs. The first and foremost, to our surprise, is demographic profile. According to the authors, without a sizable population, even economic miracles like Hong Kong and Singapore cannot have a global impact in spite of their high levels of income and living standards. The authors also developed a Growth Environment Score (GES) to rank each of 170 countries for their performance under closely inter-linked performance categories. Stable macroeconomic policies ensure low inflation, tight monetary policy and reduction in fiscal deficit.Openness to trade and foreign investment is a prerequisite for rapid economic development, and one of the many important signs of healthy macroeconomic conditions. This provides greater access to better investment rates, modern technology, larger markets and greater employment opportunities. There is also a positive correlation between openness and profits, productivity and output at the micro level. Another factor that constitutes part of GES is technological capabilities. These relate to penetration of PCs, phones and the Internet. These signify the presence of an educated workforce as well as their linkage with the global world. Quality of human capital is also a core determinant of the GES. There is hardly any doubt now regarding a close and statistically strong association between education and economic growth. According to one estimate, one additional year of schooling leads to 0.3 per cent faster annual growth over a 30-year period. Political stability and rule of law depend on institutions which include legal systems, functioning markets, health and education systems, financial institutions and government bureaucracy. Their quality is crucial to the promotion of trade and investment in the country. Institutional capacity is needed to introduce efficiency in the system and execute stable macroeconomic policies in the country. Though all the BRICs countries (Brazil, Russia, India and China) score differently on these criteria, as a whole they come in the top half of the rankings for developing countries and above the developing country mean. China ranks most high (16th), followed by Russia (44th), while Brazil and India are further behind at 58th and 60th respectively. Had this been the only criteria, some other countries such as South Korea would have been part of BRICs, but it is their bigger size that lends them greater weight. The GES individual scores highlight where there is room for improvement. Brazil scores relatively well on measures of political stability, life expectancy and technology adoption, but quite poorly on investment, education levels, openness to trade and government deficit. Historically, the performance of Brazil on the macroeconomic front has been pretty poor and it seems to carry this baggage along.Russia also scores well in terms of education, fiscal position, external debt position, openness to trade, technology adoption and life expectancy, but is placed at less than an ideal position in terms of political measures (political stability, corruption), investment rates and inflation. India scores relatively well in terms of rule of law, external debt and inflation, but quite poorly in terms of levels of secondary education, technology adoption and fiscal position. It, along with Brazil, also lags behind in terms of the openness of its economy.China ranks well above the mean on macroeconomic stability, investment, openness to trade and human capital. Its rankings on technology adoption are more mixed (PC usage is still quite low) and corruption measures are also a little worse than the mean. The GES scores are likely to be based on data provided by individual countries (for example World Bank Indicators) and surveys which are based on individual perceptions of businessmen working in those countries. The latter are likely to be subjective and biased. However, there is still some general truth in the analysis which merits our attention. (By Dr. Iram Khan, Dawn-7, 19/05/2008)

75pc of Rs54 bn loans waived, SC told

ISLAMABAD: The Supreme Court was informed on Monday that bank defaulters were extended maximum facilitation and almost 75 per cent loans were waived off, including one of Rs 970 million. Senior lawyer of the Supreme Court Abdul Hafiz Pirzada informed a three-member bench of the court, headed by Justice Muhammad Nawaz Abbasi hearing a suo moto notice taken on a news report that appeared in Daily The News Rawalpindi on October 23, 2007 about huge loans write-off scam of Rs54 billion. Abdul Hafiz Pirzada while representing a private entity contended that loans can be written-off in specific condition like natural disaster however, he submitted that in this case some people were extended maximum facilitation. He said that loans of almost 75 per cent people were waived-off which include one who succeeded in getting his loan of Rs970 million written-off. At this, Justice Muhammad Nawaz Abbasi while giving his observation said that those who take loans on limited scale not only have to pay high rate of interest but they are also handed over to the National Accountability Bureau (NAB) for not returning their loans. The court adjourned hearing in the case for date in office as one of the judges who was earlier a member of the said bench, was not available for the hearing. Quoting an official secret report, The News report had revealed that the previous government in its five-year term had written-off Rs 53.499 billion bank loans granted to big shots of Pakistan on the basis of a decision taken by the financial team of Gen (retd) Pervez Musharraf in December 2002. According to the news report, the disclosure was made in a secret report submitted before the Public Accounts Committee (PAC) of the National Assembly, which had been requested to take up the issue at the earliest to know the reasons behind such a massive loss to the public exchequer facilitating the privileged of the government. The report showed that a total of 50,000 people, including politicians, civil and military business concerns and business tycoons of Karachi, Lahore and other areas were the direct beneficiaries of this massive favour. Two of the then chief ministers of the provinces and their families having big business concerns and stakes were also beneficiaries of these written-off loans whose details would have to be discussed in the committee meeting, The News had reported, adding this was the first time that the total written-off amount had come to surface. (By Sohail Khan, The News-3, 20/05/2008)

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GDP growth misses revised target of 6.5pc

ISLAMABAD: The gross domestic product (GDP) grew by 5.78 per cent in the outgoing fiscal year against the revised envisaged target of 6.5 per cent, owing to the low agriculture and industrial output in 2007-08. The neglected agriculture sector became a major victim and witnessed steep decline by achieving only 1.49 per cent growth in the financial year 2007-08 against the envisaged target of over 4 per cent. Pakistan has missed its envisaged overall GDP growth target of 7.2 per cent, as it is estimated to achieve only 5.78 per cent growth in accordance with the findings of the National Accounts Committee. The government had claimed to achieve five per cent agriculture growth during the previous financial year in accordance with its initial estimates, which were later on lowered to 3.66 per cent when figures were finalised. The government adjusted results of the official survey on livestock sector that resulted in respectable growth of 3.78 per cent in the outgoing financial year 2007-08. If the livestock had not achieved this growth figure, Pakistan might have witnessed a negative agriculture growth again, as the country had achieved negative growth in this sector during the severe drought that hit the country in 2000-01. The services, financial and insurance, construction and public administration and defence sectors growth estimates performed well and enabled the government to achieve the gross domestic product (GDP) growth rate of 5.78 per cent in 2007-08. The National Accounts Committee (NAC) meeting was held here on Monday in which growth figures of various sectors were finalised. The meeting was attended by high-ups of the ministries concerned, State Bank and representatives of four provincial governments. Official sources, who participated in the NAC meeting, told The News that the State Bank inserted the latest figures about the financial sector in the working paper for finalising the GDP growth figure, which resulted into the GDP growth rate reaching 5.78 per cent. When Statistics Division Secretary Asad Elahi was contacted for comments, he explained that no controversy erupted over these figures in the meeting as basically the SBP provided the data related to the financial sector for first six months (July-Dec) period of the current fiscal. The bank provided us the data related to the third quarter (Jan-March) of the current fiscal year on Sunday so ultimately it was inserted into the working paper. Pakistan had envisaged 7.2 per cent GDP growth target for the current fiscal year, which was revised downward to 6.5 per cent because of continued political turmoil as well as severe load shedding. The estimates of overall industrial growth also witnessed major decline in the outgoing financial year as it stood at 4.63 per cent by 2007-08 against over 8 per cent growth achieved in the previous financial year, mainly owing to severe energy shortages. The services sector projection has rescued the government by achieving growth rate of 8.16 per cent during the outgoing financial year against 7.96 per cent in 2006-07. Within the industrial growth, the large scale manufacturing (LSM) growth witnessed massive decline in the current fiscal year and achieved only 4.84 per cent growth against 8.8 per cent growth in the previous financial year. The small scale manufacturing grew by 7.51 percent in 2007-08 against 7.7 per cent in 2006-07. The construction sector achieved higher growth of 15.16 per cent during the current financial year but it lowered a little bit from the previous years growth rate of 17.2 per cent in 2006-07. The transport and communication sector is estimated to have a growth rate of 4.42 per cent during the current fiscal year 2007-08 against the growth of 5.8 per cent in the previous fiscal year. The wholesale and retail trade achieved 6.37 per cent growth in the current financial year against 7.1 per cent in the last fiscal year. The financial and insurance sector again achieved higher growth in the outgoing fiscal year as it stood at 17.04 per cent in 2007-08 against 18 per cent in the previous financial year. The public administration and defence achieved higher growth trajectory, which stood at 10.8 per cent for the current fiscal year 2007-08 against 6.9 per cent growth achieved in the previous financial year. The social services grew by 9.4 per cent in the current financial year against 8.5 per cent in the previous fiscal year 2006-07. (By Mehtab Haider, The News-1, 20/05/2008)

Pakistan likely to miss revised GDP growth target of 6pc

ISLAMABAD: Pakistan is likely to miss the downwards-revised growth target of gross domestic product (GDP), with estimates suggesting that the GDP growth will remain less than 6 percent in the current fiscal year 2007-08, official sources told Daily Times on Monday. The National Accounts Committee, which met to finalise the growth estimates for the current fiscal year, was informed about the performance of various economic sectors, said an official privy to the meeting. After a detailed review of the performance of the each economic sector during the period from July to March, the committee estimated the GDP growth at 5.5 percent. However, the meeting decided that the latest performance figures of services sector provided by the State Bank of Pakistan would be also be included in the review. Keeping in view the central banks request, GDP estimates for the current fiscal year would be finalised on Tuesday (today), which are expected to be around 5.7-5.9 percent, the official added. Actual GDP growth target for the current

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fiscal year was 7.2 percent, which was lowered to 6 percent because of the poor performance of agricultural and industrial sectors. Agricultural growth: The agricultural sector has registered an overall growth of 1.7 percent against the target set at 4.8 percent. Major crops registered a negative growth of 1.7 percent, while minor crops made a negative growth of 2.4 percent in the outgoing fiscal year. Industrial growth: Industrial production also showed less than the projected growth. Large-scale manufacturing (LSM) grew at a meagre rate of 4.8 percent against the annual growth target of 12.5 percent. Foreign direct investment also witnessed a negative trend of over 30 percent during the current fiscal year, the official said. Commodity producing sectors were also not able to maintain their growth momentum and recorded a 3.7 percent growth rate against the annual target of 7.4 percent. However, the services sector again projected a growth of 7.4 percent against the target of 7.1 percent mainly because of the good performance of the banking, insurance and telecommunication services sectors, the official added. The official said that growth in services sector suited to mature economies, but not the emerging economies like Pakistan. Although the growth in services sector during the last few years helped the government to show handsome growth, it also resulted in increasing demands and high inflation because of negative trend in commodity sectors, he added. The official said that an emerging economy like Pakistan could only sustain itself through continuous growth in the agricultural and manufacturing sectors, which ensure food security and help the country enhance its exports for foreign exchange earnings. He believed that the government would not be able to project a higher GDP growth target for the next fiscal year 2008-09 because of low GDP growth this year. (By Sajid Chaudhry, DailyTimes-A1, 20/05/2008)

Interest rate increased by 1.5pc SBPs move to curb inflation

KARACHI, May 22: The State Bank has increased the benchmark interest rate by 1.5 per cent to 12 per cent in an attempt to curtail the rising inflation which has caused huge deficits and high unemployment. At a hurriedly-called press conference on Thursday, SBP Governor Dr Shamshad Akhtar also announced five major steps to bring correction to the economy. She admitted that she had been unable to stop the government from inflating the economy by borrowing from the SBP which was the main reason of economic instability. This rate increase has been necessitated by the persistent and excessive government borrowing from the SBP, Dr Akhtar said. She proposed for limited government borrowing from the next fiscal which had already reached Rs544 billion up to May 19 from July 1, 2007. If the stock of treasury bills is included, it will reach about Rs950 billion, which is 9.4 per cent of the GDP. Interestingly, this huge debt, equally 9.4 per cent of GDP, is not shown in the total domestic debt. The governor proposed that expected foreign exchange inflows should be used to retire the SBP debt. In FY08, it is estimated that the government had till now financed around 80 per cent of its fiscal deficit from SBP borrowings, she added. At present the government has kept borrowing from the central bank outside the legislation which has eroded the fiscal discipline and diluted the impact of the Fiscal Responsibility Act. Most central banks in the world did not allow governments to borrow from them, Dr Akhtar said. The governor said the real interest rate was less than two per cent which demanded an increase. She said the higher interest rate would not impact upon the borrowing of the private sector. The private sector borrowing, she said, was much higher than last year mainly because the real interest rate was just two per cent. The real interest rate will remain around three per cent after the 1.5 per cent hike. However, the negative impact of the decision will be felt immediately in the capital market and banks and industrial, manufacturing and trading sectors will oppose the decision as they did in February this year when the discount rate was increased by 0.5 per cent. Banks see less advances while manufacturers and traders see higher cost of production and services. An economist said the higher interest rate would reduce credit flow towards the private sector; less credit would slow down the economic activity; low economic growth would mean less revenue and more borrowing from multilateral agencies. The SBP governor said that effective June 1, 2008, all banks would be required to pay a minimum profit of five per cent on savings or PLS saving products. The saving deposits category accounts for more than 43 per cent of all bank deposits and constitutes 63 per cent of the total number of countrywide deposit accounts. At present the average return on all saving accounts is 2.1 per cent. The SBP increased the Cash Reserve Requirement (CRR) for all deposits up to one year maturity by 100bps to 9.0 per cent while keeping the CRR for deposits of over one-year maturity unchanged at zero per cent. In addition, the Statutory Liquidity Requirement (SLR) was increased by 100bps to 19 per cent of the total time and demand liabilities. Effective May 23, the L/C margin on all imports, except for oil and selective food imports, is being imposed at 35 per cent, the governor said. (By Shahid Iqbal, Dawn-1, 23/05/2008)

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SBP raises discount rate to 12 per cent

The State Bank of Pakistan on Thursday raised the key discount rate to 12 per cent and took other measures in an attempt to ease inflationary pressures on economy. The State Bank has enhanced the key discount rate by 150 basis points to 12 per cent with effect from May 23, from 10.5 per cent, said SBP Governor Dr Shamshad Akhtar at a press briefing. Excessive government borrowing from the SBP for budgetary support is the main factor behind inflation which is at its peak, she said and added so far the government had borrowed Rs 946 billion from the central bank, which was almost 9.4 per cent of the Gross Domestic Product. This is the highest-ever government borrowing in history from the central bank and more than double last years level of Rs 452.1 billion, she disclosed. The further tightening of monetary policy, she hoped, would reduce the inflationary pressures on economy and narrow the current account and trade deficits. Earlier on January 31, the SBP had raised the discount rate by 50 bps to 10.5 per cent. The headline inflation is standing at an alarming level, Shamshad said, adding that on year-on-year basis, it almost doubled in just four months; moving from 8.8 per cent in Dec 2007 to 17.2 per cent in April 2008. More disturbing was the trend of food inflation, which also doubled, spiking to 25.5 per cent from 12.2 per cent during the same period. This is our interim monetary policy measure, which has become imperative to correct the economy and defuse the demand pressure, Shamshad said, adding after reviewing the budget for 2008-09, the SBP would announce its scheduled monetary policy in July for the next six months. We were thinking that the government will not increase its borrowing from the central bank, but it did the other way and compelled the SBP to increase the repo rate to defuse the money demand pressure, she pointed out. In fiscal year 2007-08, it was estimated that until now the government would have financed around 80 per cent of its fiscal deficit from the SBP borrowings, she underlined. Among other measures to counter the inflationary pressures, the SBP increased the Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR) by 100 basis points each to nine per cent and 19 per cent respectively. Thirdly, the SBP made it obligatory for all banks to enhance minimum profit rate on savings and PLS savings products to five per cent. This is being implemented with effect from June 1, she clarified. Fourthly, the central bank imposed a 35 per cent margin on Letter of Credit (L/C) with effect from May 23. However, this margin would not be applied to oil and selective food imports. The government is well advised to sterilise the expected foreign inflows by using foreign resources to settle its obligations with the SBP. Rather than using fresh foreign inflows to finance new expenditures, the retirement of market-related treasury bills will help reduce reserve money pressures, the SBP governor said. The government is being further advised to amend the Fiscal Responsibility and Debt Limitation Act 2005 to incorporate appropriate provisions to restrict debt monetisation. Most countries have disallowed the government from borrowing from the central bank to allow a smooth monetary transmission, while averting the inflationary consequence of debt monetisation. Currently, the government has kept borrowings from the central bank outside this legislation, which has eroded fiscal discipline and diluted the impact of the Fiscal Responsibility Act. The real economic costs of the central bank borrowings cause enormous inflationary pressures, whose burden falls on businesses, industry and the public at large. So the government is best advised to launch a programme of scaling down the SBP borrowings by reducing its stock of borrowings from the central bank over the next few years, while not relying any more on the central bank financing, she stressed. It does not mean that the government is denied any more money from the SBP. But it should go to the private sector for this purpose, she made it clear. (By Salman Siddiqui, The News-1, 23/05/2008)

Serving whose interests

Foreign direct investment (FDI) is made in new or existing facilities, involving control of an overseas enterprise. While foreign portfolio investment, as in stocks and shares, is considered to be volatile, FDI involves a long-term commitment. The latter, therefore, is widely seen as the most important source of foreign financing. It helps creates jobs and increased output. For developing countries, FDI is also necessary to bridge the gap between domestic savings and the desired level of investment. That is why they currently are in a race to attract more and more FDI. The decision to invest in a foreign country, like other business decisions, is based on a cost-and-benefit analysis. Speaking generally, FDI is made in a country if perceived benefits outweigh perceived costs. However, speaking specifically, there are many factors in the host country that encourage or discourage FDI. These may be categorised under the heads of 'regulatory regime', 'economic factors' and 'socio-political factors'. For example, the host country must put in place strong legal regulatory regime for the protection of investment. Since no multilateral investment treaty exists currently, countries enter into bilateral investment treaties to ensure that their investors are not discriminated against investors from other countries, as well as those from the host country, and are also immune from arbitrary change in policies of the host government. Economic factors include the level of demand in the host country, the growth of the economy and human capital, and the absence or presence of assets. Socio-political factors include political stability and predictability, continuity of policies, law and order situation and cultural tolerance.

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Before we discuss these factors in detail with special reference to Pakistan, let us look at FDI inflows into the country in the last decade! FDI inflows The total FDI inflows into Pakistan from 1997-98 to 2006-2007 stood at $14.28 billion or about $1.43 billion a year. This, of course, was far below the desired level. In 1995-96, Pakistan attracted the (then) record $1.1 billion FDI, which was due mainly to agreements with independent power producers (IPPs). However, the next year, FDI registered a sharp decline because the next government repudiated agreements with the IPPs. That started a row between the government and the IPPs, which severely affected foreign investors' confidence in Pakistan. Pakistan's decision to conduct nuclear tests in 1998 prompted several countries to impose economic restrictions, which also reduced FDI inflows into the country. The sudden freezing of foreign currency accounts following the nuclear tests increased the risk of doing business in Pakistan and severely affected FDI. The level of FDI, however, has improved in the last five years. In 2005-06, FDI inflows into Pakistan were registered at $3.52 billion. However, the source of nearly half of the FDI was proceeds from the privatisation of state enterprises. FDI inflows increased to $5.14 billion in 2006-07. In the first nine months of the current financial year (July 2007-March 2006), however, FDI inflows into Pakistan decreased again they stood at only $3.03 billion, 23 percent less than that in the corresponding period of the preceding financial year. As regards the direction of FDI, financial, telecommunications, and oil and gas sectors have been the major beneficiaries. On the other hand, the manufacturing sector, especially the all-important textile sector, has received meager FDI inflows. For instance, of the total FDI inflows into Pakistan from 2002-03 to 2006-07, the share of the telecommunications sector was 38 percent, followed by the financial sector (16.6 percent), and the oil and gas sector (9.57 percent). On the other hand, the share of the textile sector was only 1.73 percent. This implies that Pakistan received very little export-oriented FDI, thus limiting its role as a tool of export promotion. In the first nine months of the current financial year, telecommunications and financial sectors have received 30.37 percent and 22.55 percent, respectively, of the total FDI inflows into Pakistan. Regulatory regime Let's move on the FDI regime in Pakistan! We begin with the regulatory regime. In the last decade or so, Pakistan's economy has been opened through privatisation and deregulation, and currently it has a very liberal FDI regulatory regime. The regulatory framework for FDI revolves around three laws: Foreign Private Investment (Promotion and Protection) Act 1976, Furtherance and Protection of Economic Reforms Act 1992, and Foreign Currency Accounts (Protection) Ordinance 2001. These laws collectively protect FDI because: 1) there is freedom to bring, hold and take out foreign currency from Pakistan in any form; 2) fiscal incentives provided by the government cannot be altered to the disadvantage of the investor; 3) the privatisation of an enterprise is fully protected; 4) no foreign enterprise can be taken over by the government; 5) original foreign investment as well as profits earned can be repatriated to the country of origin; 6) same treatment is meted out to a foreign investor and local investor in terms of import and export of goods; 7) FDI is not subject to taxes in addition to those levied on domestic investment; and 8) foreign currency accounts are fully protected and they cannot be freezed. As regards the investment policy, all economic sectors -- including the services sector -- are open to FDI. Foreign equity up to 100 percent is allowed. No government sanction is required for setting up an industry in terms of field of activity, location and size, except in four sectors. Under the deregulation policy, government controls on business activity are being relaxed. To avoid double taxation on income earned by foreign investors, Pakistan has concluded agreements with 51 countries, mostly developed economies. However, one area in the regulatory regime that needs a lot of improvement is the protection of intellectual property rights (IPRs), particularly copyrights. Despite bringing copyright legislation in the country in conformity with the international copyright laws, including the World Trade Organisation's (WTO's) Agreement on Trade Related Intellectual Property Rights, the government has not been able to curb piracy. This increases the cost of doing business in Pakistan. Economic factors The level of demand in the host country depends mainly on two factors: the purchasing power of the consumer and the size of the market. Consumer purchasing power is measured by income. Ceteris paribus, countries with higher per capita income are more attractive markets for foreign investment than countries with low per capita income. In Pakistan's case, the high inflation rate has offset potential benefits of economic growth, leading to stagnation of -- if not decrease in -- the real per capita income. Unlike India and China, Pakistan is not large enough a market to hold much attraction for foreign investors, except in a couple of sectors, such as telecommunications. However, even in this sector, price competition has intensified, which has already forced a couple of players to quit the market. Workers are widely regarded as the principal asset of a firm and the capital source of its competitive advantage. That is why there is so much emphasis in developed countries on human resource development. In Pakistan, however development, of human capital has been given a short shrift, which is the major cause of low worker productivity. While making investment decisions, multi-national corporations (MNCs) take into account both worker productivity and wages. In Pakistan wages of workers are much lower than in developed countries, but so is their productivity. Infrastructure -- including rail, road and telecommunication network -- and price and availability of utilities is another area that needs a lot of improvement. The cost of water and power for business consumers in Pakistan is higher than those in other neighbouring countries, such as India and China. The available infrastructure is also substandard. Poor infrastructure and high cost of utilities increase the cost of doing business, and make a country a less attractive for FDI. The recent power crisis also has negative implications for FDI. Socio-political factors

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Let's take political uncertainty first! It has been endemic in Pakistan. In the 1990s, four governments and parliaments were dismissed and three general elections held. Towards the end of the decade, the civilian setup was replaced with a military regime. Moreover, whenever a civilian government was in power, speculations of its sacking were ripe. Political uncertainty increased the risk of doing business in Pakistan and decreased its attractiveness as a market for investment. After a few years of relative political stability -- in which FDI inflows into the country registered a drastic increase -Pakistan once again is in the grip of political instability and uncertainty, which increases the risk of doing business in the country. Another important factor is the law and order situation. In the last decade, Pakistan has been subject to twin menaces of religious extremism and ethnicity, which have taken a heavy toll on our economy. The recent spate of suicide attacks has enormously increased the risk of doing business in Pakistan. Last but not the least is the cultural factor. An overwhelming majority of existing or potential MNCs in Pakistan are western. The people of the West have a lifestyle different from that of ours and they want to stick to it while living here. On the other hand, certain self-righteous people want to impose their own values on foreigners and, thus, meddle in their private lives. Nothing irks these foreign investors and managers more than meddling in their personal lives. In short, to increase FDI, besides creating an investor-friendly regulatory regime, the government will have to improve the law and order situation. Similarly, political stability, human resource development and cultural tolerance are very important as far as attracting FDI is concerned. (By Hussain H. Zaidi, The News-43, 25/05/2008)

No growth spillover in poorer districts

When it comes to poverty, governments and their economic managers and planners prefer to talk about absolute numbers - national averages or national poverty estimates. Any reference to regional disparities or poverty variations at the sub-national or even at the sub-provincial levels is carefully avoided. This reluctance on the part of the governments to avoid the mention of provincial and district poverty variations has everything to do with politics than with anything else, says an Islamabad based economist, who does not want to be identified because of his association with a government funded programme. Poverty mapping at the provincial or sub-provincial levels has always had political consequences for any sitting government. That is precisely why the government has so far not released the provincial poverty estimates for the last poverty survey for the fiscal year 2004-05 or the previous one done in 2001-02, he said. The regional poverty variations are no secret. These have always existed across the provinces as well as within the provinces. But what is more baffling than regional differentials in poverty incidence pertains to exceedingly wide variations in district poverty estimates. A recent research study by Ali Cheema, an economist who teaches at the Lahore University of Management Sciences, on The Geography and the Lives of Poor: Evidence from Punjab brings to surface the widening poverty differential at the regional as well as sub-regional levels. The study shows that high poverty in Punjab is mostly clustered in the 14 districts of the southern and western regions of the province. These two regions have been dubbed as crescent of endemic poverty by Cheema. The Multiple Indicator Cluster Survey (MICS) of 2003-04, the only effort ever made by the provincial government to map poverty at the district level, illustrates that 52.1 per ent population of the seven western districts - Mianwali, Khushab, Bhakkar, Layyah, Muzaffargarh, Dera Ghazi Khan and Rajanpur - is poor. The incidence of poverty in the seven districts of the South Punjab - Rahimyar Khan, Bahawalpur, Bahawalnagar, Multan, Lodhran, Khanewal and Vehari, is calculated to be just below 51 per cent. Compared to these two poor regions, the percentage of the poor living in the four districts - Rawalpindi, Chakwal, Jhelum and Attock, in the Northern Punjab is lowest or just above 21 per cent. In the rest of 17 districts of the central Punjab slightly less than 29 per cent people are poor. We always talk about absolute poverty national averages - but never try to look at the variations at the district or the village level, critical for economic planning and effort to reduce deprivation, Cheema told Dawn. The poverty differentials between the districts are baffling. On the one hand, we have Sialkot in the central Punjab with just below 19 per cent poor. On the other hand, we have Rajanpur in the west with its over 68 per cent population living in abject poverty, he says. His work also points out that even within the comparatively richer central Punjab, we have centres of poverty like Kasur and Okara with more than half of their populations being poor. There are tremendous variations of opportunity even within the districts. We must take these variations seriously, argued Cheema. There are numerous factors responsible for the increasing regional and district poverty variations, economists say. The regional disparities and poverty differentials in Punjab are partly attributed to certain historical endowments - feudal stranglehold in the poorer regions, low public sector spending and investment in infrastructure, dependence on agrarian economy, etc. The central Punjab largely owes its prosperity to the establishment of canal colonies and irrigation network laid out by the British colonialists, Cheema said. Moreover, the economies of the central and northern regions also diversified into industry and service sectors.

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The poorer south-west regions lagged behind because they continued to depend on agriculture and failed to diversify into other sectors of the economy, the Islamabad based economist said. The increase in poverty incidence in the south-west regions in the recent years is largely due to declining access of the people to land, both as owners and tenants. This factor is producing a large number of daily wagers with low levels of mobility and falling wages. This labour cannot be absorbed by the local economies and is reluctant to migrate to other job markets, Cheema says. He said we find different opportunities for labour mobility in different areas. Labour markets, occupational structure, and local economies are different in different districts. In the northern and central regions the landless workers find employment in industry, services sector and other areas of the economy. Government jobs also come handy in the central and northern parts of the province. In south we dont have a very strong industrial base or services sector to absorb surplus labour in the agrarian economy and hence both the opportunities of the employment and returns on employment are very low, contributing to increasing poverty there, he said. This also means that the probability of remaining in poverty trap is quite high for the kind of labour produced in the southern Punjab. The state should invest in education, health, etc and help diversify agriculture, farm and non-farm sectors to create job opportunities. The state has to do a lot more than equalisation to address poverty in the lagging regions and districts. The revenue distribution formula under the Provincial Finance Commission needs to be revisited in order to address regional inequalities between districts. It has to give incentives to the private sector to invest in the lagging regions both for improving human resource as well as for job creation, argues Cheema. Massive investment in social sector and infrastructure is needed in the poorer districts. There have to be dedicated programmes for development, which should move away from projects, he adds. The lack of poverty mapping at the regional and district levels is one major reason underlined by economists for successive governments failure to target poverty in the lagging areas through state interventions. This has encouraged bureaucracy and government planners to believe that the greater investment in the better off areas and regions would lead to growth spillover in the poorer regions. That represents a skewed, short-sighted thinking and needs to be radically changed. If the lagging areas have to be developed and poverty reduced, the state shall have to create development there. The spillover theory did not work in the past and there is little or no chance of it working in the future either, he said. (By Nasir Jamal, Dawn-Economic & Business Review, Page-VI, 26/05/2008)

The messy battle against inflation

FOR months the Indian government has been battling the phantom of inflation, launching a series of measures including trying to suck liquidity out of the system by raising the cash reserve ratio (CRR), jacking interest rates, curbing forward trading in several commodities and forcing steelmakers to cut-back on price hikes moves that, however, failed to tame inflation. Despite unveiling a series of measures, inflation has been rising steadily; Indias headline inflation rate as measured by the wholesale price index (WPI) rose to a record high of 7.83 per cent for the week ended May 3. And now, in the midst of this messy battle, actual inflation (as against fears of inflation and scare mongering) is finally raising its ugly head, leaving the government bereft of crucial weapons, already spent fighting the phantom. Last week, when international oil prices topped the $135-mark (for a barrel), saw one of the most formidable threats on the price front: the Indian rupee breached the 43 (to the dollar) mark for the first time in 13 months, plunging to 43.21. The currency has in recent weeks abruptly reversed its year-long northward journey, and started tumbling against the dollar. The weakening Indian currency threatens to upset the governments plans and could trigger off a nasty round of sharp price hikes. Analysts worry that inflation will soon touch the eight per cent mark, and there could be the possibility of it touching double-digits later this year. For the United Progressive Alliance (UPA) government, which has just completed four years in office, nothing could be more tragic. Elections to several important states including Madhya Pradesh, Rajasthan, Delhi and Chhattisgarh will he held over the coming weeks and general elections are less than a year away. The Reserve Bank of India (RBI), the countrys central bank, under pressure from the government, has been raising interest rates over the past two years, tightening liquidity, though prices were ruling modestly. Now with wholesale and consumer prices heading northwards, the limitations of fiscal measures are becoming apparent. The UPA government has also stubbornly refused to raise the retail price of petrol, diesel, kerosene and LPG (liquefied petroleum gas), for fear of alienating the electorate and triggering off inflation. But now with oil prices topping $135, the state-owned oil marketing companies are in dire straits. If they are not allowed to raise the retail price over the next few months, the oil companies have warned the government, the country may have to go in for drastic measures, including rationing of petroleum products. But with crucial elections staring it in the face, the last thing the government would want to do now is to raise petroleum prices. Bankers expect the RBI to further tighten liquidity, by going for a 25 to 50 basis points hike in the CRR. ***** WITH international oil prices showing no signs of cooling, the rupee will continue to remain under acute pressure. According to market analysts, if oil prices touch $150 a barrel, the rupee will fall to 44 against the dollar. Combined with the spurt in international food and commodity prices, the currency is set to lose all the gains of the previous year. The Indian rupee gained 12 per cent against the dollar in 2007, hurting Indian exporters. But it has already

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lost nearly nine per cent against the dollar this year it fell by six per cent in May and has emerged as the secondworst performing currency in Asia after the South Korean won. The Indian currency peaked in November, touching 39 to the dollar, as foreign institutional investors (FIIs) poured money into the stock markets. Last year, FIIs net investments into the stock markets added up to a record $17.4 billion. But this year, with hardening interest rates in the US, many FIIs have been pulling out funds from India. They have so far sold a net $3 billion this year, adding to the plight of the rupee. The RBI has for over two years maintained a hands-off policy in the foreign exchange market; it has not intervened significantly by selling dollars to ease pressures on the rupee. Indias foreign exchange reserves add up to nearly $313 billion; more than $100 billion were added to the kitty in 2007 alone. The biggest buyers of dollars in the market are oil companies, who use it to fund their crude acquisitions. India imported nearly $72 billion of oil last year, which was about 25 per cent more than in the previous year. The country imports 70 per cent of its oil requirements. The escalating oil bill is widening the trade deficit, which has already jumped from $59 billion in 2006-07 to $80 billion in 2007-08. The current account deficit also widened to $5.4 billion for the October-December quarter, from $4.7 billion in the previous quarter. With oil prices having shot up by 40 per cent so far in 2008, the current account deficit will balloon further. Soaring international prices for fuel, food and fertilisers means that the deficit will continue to grow. The government pays international market prices for fuel, food and fertiliser, but populist policies and pressures from its Leftist supporters prevent it from realising the same from consumers back home. The result: the deficit keeps widening and threatens to upset the governments finances. According to estimates, a one per cent fall in the value of the rupee adds Rs70 billion (about 0.15 per cent of the GDP) to the governments fiscal deficit, as it is forced to sell expensive imported oil, food grains and fertilisers at ridiculously low prices to consumers and farmers. Rising inflation and a weakening rupee will discourage FII inflows. The Indian economy is also expected to slow down this fiscal to around eight to 8.5 per cent. For the financial year ended March 31, 2008, gross domestic product (GDP) grew by 8.7 per cent, as against 9.6 per cent in the previous year. ***** THE RBI is expected to ease restrictions on overseas corporate borrowings, to lessen the burden on the rupee. These restrictions were imposed when the rupee was gaining strength against the dollar. Companies that went in for overseas borrowings of more than $20 million could not repatriate it to India, while those borrowing less than that sum had to get the central banks permission. With domestic interest rates on the rise last year, many companies were borrowing cheap abroad and repatriating the funds. This resulted in increased forex flows, adding to the kitty, but not helping the economy in any way. But the sharp about-turn in the direction of the rupee has taken most exporters and corporates by surprise. Many companies had hedged their foreign exchange cash flows for periods ranging from 12 months to 18 months, and the falling rupee has caught them unawares. Jewellery exporters had hedged raw materials such as diamonds and gold at Rs40-40.5 to the dollar, expecting the rupee to strengthen to 38. But with the weakening currency, they are having to book losses. Some exporters had taken pre-shipment dollar-loans, attracted by the lower interest rates, and converted them into rupees. Now they will have to pay more for the dollars needed to repay their loans. The RBI, in a bid to prevent corporates from shifting to other centres like the Dubai Gold and Commodities Exchange which last year launched a rupee futures contract - plans to unveil rules for exchange-traded futures for currencies and interest rates, later this month. Trading could begin later this year. Once the rules are in place, eligible exchanges will be allowed to deal in currency futures. Importers, exporters and companies with forex exposures can buy hedges through exchanges. The currency future will allow the participant to buy or sell a currency at a future date on the basis of an exchange rate fixed on the last trading day. Exchange-traded currency futures will hopefully bring greater transparency in the pricing of hedges, and will also help in their price discovery. The Indian rupee is a partially convertible currency. The government is keen to go in for full convertibility, but opposition from its Left supporters has prevented it from exercising this option. (By Anand Kumar, Dawn-Economic & Business Review, Page-V, 26/05/2008)

Using technology to alleviate poverty

Pogrammes like One Laptop Per Child are aimed at fighting poverty through the use of technology and have paved way for some remarkable innovations, creating ripples on the socio-economic development landscape. Such initiatives are known as Information and Communication Technology for Development (ICT4D). The phenomenon has been gaining popularity in developing countries like India, Sri Lanka and Bangladesh. Even in Pakistan, ICT4D has gained some roots. But its tremendous potential for poverty alleviation programmes have yet to be realised.. Despite claims of outstanding macroeconomic performance during the last few years, the incidence of poverty has, in fact, substantially increased. According to an estimate, close to 57 million people live below poverty line and this estimate include 11 million people pushed below the poverty line over the last three years. The situation is likely to worsen in the years to come, especially in the wake of rising food and oil prices. Under this scenario, ICT can play a critical role in pro-poor development.

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Poverty is commonly perceived in terms of population living under a certain income threshold, however, in socioeconomic context, certain other dimensions are considered critical, while defining poverty. These dimensions include availability of economic opportunities, social empowerment and access to basic amenities, such as drinking water, food, shelter and primary healthcare. The term information and communication technology encompasses a wide variety of services ranging from traditional electronic channels such as TV, radio and telephone to more recent technologies such as Internet and mobile telephony. The marriage of these two concepts ICT and poverty - have given rise to some very innovative and highly effective development models, including rural access to modern healthcare services, through telemedicine, agricultural productivity enhancement initiatives, by linking farmers to agricultural and livestock research institutes and enhanced educational programmes, through distance-learning models. In neighbouring India, projects like AGMARKNET are successfully linking hundreds of thousands of farmers to a number of agricultural produce wholesale markets, providing them up-to-date market information. This information, in turn, helps the farmers in gauging price movement in agricultural commodities, enabling them to capture maximum value for their goods and resulting in substantial income enhancement. Incorporation of ICT into governance has also shown tremendous potential in India, where projects like Bhoomi and e-Seva provide a wide range of important public services, such as payment of bills and taxes, licence renewal, etc., to citizens at their doorstep, both in urban and rural areas. Before ICT4D initiatives can be successfully implemented on a broad scale, there are a few pre-requisites that must be met. On the technological end, these pre-requisites include a well-laid out ICT infrastructure providing connectivity to the rural areas and a localised interface to overcome language barriers. In Pakistan, Universal Service Fund, a government-owned company is taking some substantial steps to provide connectivity, including both voice and data services, to un-served and under-served areas. On the localisation front, research organisations like Centre for Research in Urdu Language Processing (CRULP), based at FAST, have developed solutions for content and interface localisation, not only in Urdu but also in other regional languages. These technological advancements, however, only present one side of the picture. In order to exploit the true potential of ICT-based development initiatives, efforts must be made to ensure community response towards such projects. In countries like Pakistan, where the digital divide between urban and rural areas is fairly wide, such responsiveness must be preceded by acceptance and adoption of technology in rural communities. For instance, in Bangladesh, Grameen Telecom - a sister concern of the famous Grameen Bank - is successfully penetrating mobile telephony into rural communities, to create widespread technology use, while providing an alternative source of income. In its own words, Grameen Telecom is using telecommunication as a new weapon against poverty. Another way to ensure community responsiveness towards ICT4D programmes can be to introduce simpler ICT initiatives in the beginning, such as IT literacy training, email and web usage, etc. These initiatives can also be linked with community schools, after giving requisite training to school teachers, not only to provide enhanced educational experience to the school children but also to launch adult IT literacy training programmes. Once these initiatives take roots in rural communities, more advanced interventions can be undertaken such as developing market information systems or agricultural productivity enhancement programmes. Similarly, developing strategic linkages with other stakeholders is yet another area, critical for the success of ICT4D programmes. In case of agriculture, for example, institutes like University of Agriculture Faisalabad, or University of Veterinary and Animal Sciences, can prove to be instrumental in transferring knowledge of modern agricultural and livestock farming techniques to far-flung rural communities. On the other hand, for educational projects, there is need to develop localised syllabi for the rural population, for IT literacy programs as well as for enriching the general school curriculum. To encourage private sector support, privately owned schools can be motivated to participate in such initiatives. While most of these schools might be able to purchase a computer on their own, they would be clueless on its optimal utilisation in enhancing the educational experience. Support can therefore, be extended to such schools, not only for providing them connectivity but also by developing a centralised hub for content development and linking these satellite schools with it to create maximum impact. All over the world, there are a number of success stories, where ICT is being effectively used to alleviate multiple facets of poverty. These examples, if replicated, can greatly help in developing indigenous ICT-based poverty alleviation programmes. Implementation of these international models at the pilot level can significantly help in understanding the local constraints, facilitating in customising these models to suit the local requirements. Special focus should be given to scalability and sustainability of these programmes. While easy and efficient scalability can ensure spreading the fruits of a proven model to a wide range of population, long-term sustainability can ensure ultimately handing over these projects to the private sector or respective communities, reducing the burden on the state. ICT4D is a vast field and is likely to emerge as a key area in future development initiatives. How soon it happens is to be seen. However, to catalyse this process, the government must employ innovative solutions to create widespread response, bridging the urban-rural digital divide, and create a network of resources and stakeholders to have maximum impact. (By Hasan Khawar, Dawn-Economic & Business Review, Page-V, 26/05/2008)

Pakistan needs 159 years to catch up with industrialised world

WASHINGTON, May 26: Pakistan needs 159 years to catch up with industrialised nations, says a report by the Commission on Growth and Development, an independent body based at the World Bank headquarters in Washington. The commissions growth report, however, notes that Pakistan can reach this milestone by 2050 if it maintains an annual growth rate of 8.3 per cent and in 2100 if it maintains a growth rate of 4.9 per cent.

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Pakistan has maintained the maximum growth rate of 4.8 during the last 10 years with an average of 1.8 per year. Pakistans per capita GDP in 2006 was $2,206. The report notes that China, which in 2006 had per capita GDP of $6,621, can catch up with industrialised countries in 23 years. During the last 10 years, China has had an average growth rate of 8.3 per cent, with a maximum of 10.1 per cent. India, with per capita GDP of $3,308, can catch up with industrialised nations in 50 years. During the last 10 years, India had the maximum growth rate of 7.7 per cent, with an average of 4.9 per cent. Among the Muslim nations, Malaysia is the closest to catch up with industrialised nations. It can reach this milestone in 35 years, followed by Iran, which can reach there in 54 years. Egypt needs 118 years. The report notes that in 1960, some of the largest developing countries have put their economies on track to catch up with industrialised countries; many others have not. There are about 150 developing countries in the world. The 10 largest among them account for about 70 per cent of developing countries GDP, and the 25 largest countries for about 90 per cent. The growth performance of these 25 countries has been uneven. Because industrialised countries growth rate is about 2 per cent per capita, developing countries need to grow at much higher rates to catch up. Less than half have been able to reach this performance. Since 1960, only 6 countries have grown faster than 3 per cent in per capita terms and 10 had growth rates below 2 per cent, implying that they have fallen farther behind industrialised countries incomes.Pakistans real GDP in 2006 was 99 billion in constant 2,000 dollars. Pakistans share in total developing countries real GDP in 2006 was 1.2 per cent. Pakistans growth rate between 1980 and 2006 in real GDP was 5.1 per cent and in per capita it was 2.5 per cent. Between 1960 and 2006, the real GDP growth rate was 5.5 per cent and in per capita it was 2.7 per cent. The real GDP growth rate in 1960 was 9 per cent. In 1960, Pakistan ranked 20th among the developing nations. Differences in economic performance imply that for many developing countries, per capita incomes are lower than they were a few decades ago. Because of the consistently improving economic performance of China and India, the share of developing countries in global GDP is increasing. The corollary is that the share of the United States, Canada, Japan, and the European Union has been declining since the 1980s although these economic blocks together still account for 70 per cent of the worlds GDP. (By Anwar Iqbal, Dawn-16, 27/05/2008)

Widening income gaps

SOME of us have been worrying about the growing disparity in the distribution of incomes in Pakistan. Income inequalities have increased in several different ways. They have widened among different segments of the population. The share of total incomes being claimed by the top 10 per cent of the population has increased significantly while that of the poorest 40 per cent has declined. The income gap has also widened among different political jurisdictions. Although Pakistan does not have good data on provincial gross output and income per head of the population in the various provinces, it is my guess that the income gap between Punjab, the countrys most affluent province, and Balochistan, its poorest, has widened over the last several years. There is also a growing gap in income distribution within the provinces. Income per capita in Punjabs southern districts has lagged behind that in the provinces central districts. The same is true for Sindh. There is a yawning gap between Karachi and rural Sindh. In spite of the problems Karachi has had to deal with in recent years, the income per head of the citys citizens has increased at a rate significantly higher than that of rural Sindh. In the countrys more backward provinces the North West Frontier Province and Balochistan the capital cities have done much better than the rural districts. The income distribution trends in Pakistan are part of a global phenomenon where the well-to-do have done much better than the average citizen. An unprecedented distribution of income and wealth is occurring at this time. This involves both individuals and nations. According to David Rothkopf, who has been investigating these developments, the growth and reach of of international finance has been one of the transformational trends of our times in just over a quarter century, capital flows became massive, instantaneous and controlled by a new breed of traders representing a handful of major financial institutions from a few countries. The concentration of power has also steadily grown. The top financial institutions control almost $50 trillion in assets, roughly a third of the global total. Ten thousand hedge funds are estimated to account for 30-50 per cent of all equities trading worldwide, but the top 100 control 60 per cent of hedge fund assets.But financial rewards have not only gone to financial institutions and those who control and manage them. Corporate bosses have also done very well. Multinational chief executives 30 years ago made 35 times the wages of an average employee; today it is more than 350 times the worlds 1,100 richest people have almost twice the assets of the poorest 2.5bn. These changes have had their impact on the developing world as well, including Pakistan. In Pakistans corporate sector, top salaries are now 200 times the government-mandated minimum wage. Entry-level managers now demand and get 10 times the minimum wage. These differentials are a multiple of what was possible, say, during the time of Ayub Khan, another period in the countrys history that was marked by rapid growth and increased inequities. Then, a person entering the corporate world could expect to receive emoluments three to four times those offered to entry-level managers in the few multinationals that were then operating in the country. An individual selected for the elitist Civil Service of Pakistan (CSP) in 1960 was paid Rs350 a month while a junior executive recruited by Pakistan Tobacco

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Company, then the largest multinational, could expect to be paid Rs1200. The multiple of three that was common then has increased to six in the early 2000s. The differentials are much more pronounced at the top levels of the civil services and the private corporate world, especially when non-salary benefits are factored in. A senior government executive has a gross compensation of Rs200,000 a month; a senior corporate manager receives 10 times as much i.e. two million rupees. These differentials have two consequences, both damaging to public service. First, sharp differences encourage migrations from public to the private sector at all levels. This seriously affects the quality of the public sector. Second, it leads to corruption. Even when the private sector has begun to play a leadership role in economy, the government still wields enormous authority over private enterprises. This leads to rent-seeking behaviour among public servants. Let us now consider the redistributive feature of the emerging global economy which involves the worlds nations. In the last one decade, the Persian Gulf, Russia and China have accumulated vast amounts of financial reserves. These are the consequence of both the increase in the price of oil as well as redistribution of industrial production around the globe. The first phenomenon has transferred a significant amount of wealth from large oil-importing countries such as the United States, the European Union and Japan to Russia, Venezuela and the Gulf, the areas that continue to dominate the oil market. The second development has done the same for the new centres of industrial production in East Asia, particularly China. If oil prices remain high and Asian economic growth is strong, sovereign wealth funds, which are concentrated in these countries, are forecast to increase their accumulated assets four- to five-fold; from an estimated three trillion dollars now to $15 trillion within a few years. The top creators of great new personal fortunes are now in China, India and Russia. What are the public policy imperatives of these developments for a country such as Pakistan? Policymakers cannot ignore the distributive consequences of these developments. Their mindset must change from promoting growth to making it inclusive. They must deal with the growing gap between incomes and wealth in the public and private sector. The most effective way would be to use fiscal policy to tax the rich and to use development policy to aid the poor. There is also the need to drastically restructure public services, cutting down their size while allowing larger compensations to those who remain with the government. Another area of public policy should be to encourage sovereign wealth funds to invest in the domestic economy. This has begun to happen as the funds in the Middle East and East Asia take prominent positions in such modern services as banking and telecommunications. While this helps the economy such investments do little for the poor. It is important to get them to invest in the real sectors of the economy. Policies aimed at improving distribution must become part of the strategy to develop the economy. (By Shahid Javed Burki, Dawn-7, 27/05/2008)

Bank team charged with assault appear in court today

The NIB Bank employees accused of harassing and beating an advocate and his colleagues will appear before the District Session Jurisdiction (South) today (Tuesday) for the confirmation of their bail before arrest hearing. The employees approached the court on May 17 and the Preedy Police Station received copies of the application for the bail before arrest the following day, Inspector Jafer Baloch, the case Investigation Officer told The News. He added that Agha Zubair Ahmed, an advocate, had also applied for bail before arrest and submitted his application on May 21, 2008. Baloch, who is also Station Investigation Officer (SIO) of the Preedy Police Station, said that Agha Zubair would appear before the court on May 28, 2008, for the confirmation of his bail before arrest. Earlier, the Advocate had lodged an FIR No 294/2008 under Section 147, 148, 337A, 427, 504 and 506 against eight employees of the NIB Bank for creating a law and order situation in his office. Conversely, the NIB employees also lodged counter FIR No 295/2008 under Section 342, 392, 504, 506, 337A/34 against the lawyer and his colleagues. They claimed that the Advocate had taken them hostage at his office. The SIO, Baloch, said the NIB Bank employee told him that the Advocate mentioned himself as businessman in the form and when they approached Zubair to demand return of his money, he took the bank staff hostage. The News attempted to get NIB Bank officials version but could not succeed. This correspondent visited NIB Bank, Shaheen Complex Branch. The authorities asked him to visit the Head Office for an official version but no one entertained him and asked him to come later in the evening. However, when this correspondent made telephonic calls to the Head Office, the Bank personnel just transferred the call from one department to another. The calls were diverted to the Operations Department, then to Collection Department, and to Auto Finance Department, who advised the correspondent to talk to Human Resource (HR) Department. The spokesperson and Personal Assistant to Shakeel Pal, Head of Human Resources, told The News that Shakeel was in a meeting and could not talk. Furthermore, she said that the senior bank officials were busy till May 28, 2008, with some internal issues. Agha Zubair Ahmed told The News that the Bank employees got his signatures on the original forms and did not show them after completing them. They told me to just put my name as the signatures where required. The rest of work would be carried out by their staff, Zubair said. The staff personally visited my office and I had provided them my personal information and bank account, adding, he said, I had closed my business in 90s and did not provide any information regarding it. Zubair said that he would file Public Important Litigation a constitutional petition at Sindh High Court against the high handedness of the bank staff. He added that eight employees came to his office and beat up the staff present in the office, including him.

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The NIB team were alleged to have been involved in harassing, beating the staff and destroying the office equipment. Imtiaz Hussain Mallah, Special Assistant to Chief Minister (CM), Sindh for Complaints Cell directed the concerned police station to look into the matter and report to the CMs House within seven days. Rasheed A Razvi, President, Sindh High Court Bar Association asked the Provincial Police Officer/IGP, Sidh to inquire of the policemen present at the scene discreetly and restrain the bank employees from their crude behaviour. (By M. Zeeshan Azmat, The News-14, 27/05/2008)

Consumers to bear brunt of price hike Subsidy on oil to go, govt assures WB
ISLAMABAD, May 27: Pakistans newly elected government has, in the midst of budget preparation, told the World Bank that it plans to eliminate subsidies on imported oil in the new financial year in a landmark, but politically challenging, step to return to a previous regime of passing oil prices to consumers. The promise to pass on oil prices came in a meeting between Finance Minister Naveed Qamar and Praful Patel, the vicepresident of the World Bank for South Asia, who is on a farewell visit to Pakistan before his retirement. The decision to pass on oil prices to consumers is central to the new governments future steps in tackling an otherwise fast rising budget deficit which was projected to rise to a staggering 9.5 per cent of gross domestic product in the financial year which ends next month. The government has already announced undertaking a series of measures to slash expenditures which it hopes will drastically reduce the deficit to about 6.5 per cent of GDP sharply in excess of a target of about 4.5 per cent earlier this year. The finance minister has told us that in the next fiscal year, they will pass on prices increase of commodities, especially oil, to consumers, said Mr Patel during a meeting with a group of journalists in Islamabad on Tuesday. In a late-night statement, Mr Naveed Qamar clarified that there was no outside pressure to eliminate subsidy. This is our own decision, he said, adding that the prices of petroleum products would be raised gradually to bring them on a par with the international market price. Pakistans government under former prime minister Shaukat Aziz from May 2006 practically abandoned its promise to keep domestic oil prices in line with global trends. The former government was primarily driven by concerns over a significant oil price increase leading to a slowdown in economic growth. But critics have said a timely increase of oil prices even from a year ago would have kept the budget deficit close to the previous governments target. The deficit issue is a serious dark cloud, said Mr Patel. An international economist based in Islamabad said the government might have to consider raising oil prices on average by up to 75 per cent to meet the global trend of over $130 a barrel. In practical terms, this may translate into a significantly higher price increase for petroleum users as opposed to diesel-driven vehicles and kerosene which is used for cooking by low-income families. Independent economists believe the move to correct the wrong done by the previous government of inducting political factor in the pricing system may prove to be a huge challenge for the new government. The elimination of subsidy, resulting in substantial increase in petroleum prices, and its impact on other commodities, may result in a political backlash, unless the governments economic team convincingly presents its case on the state of countrys economy before the public. However, Mr Patels view was that inaction was no more a realistic choice for Pakistans economic managers as they prepare to finalise the budget for the next financial year, which is due to be presented on June 7. But from what we are hearing about measures to be taken, there is hope, he said, without elaborating on the specific measures that he discussed with Pakistan leaders and members of the countrys economic team. (Dawn-1, 28/05/2008)

Rs 26m in ambulances rusting at Civic Centre

KARACHI: The Health Department of the City District Government Karachi made plans for but has yet to set up an emergency response center for which nine imported ambulances are lying unused in the open air at Civic Center just behind the City Nazims office, Daily Times learnt on Tuesday. The city government had bought these nine modified ambulances worth Rs 2.9 million each equipped with all the necessary emergency equipment about two months ago. The customized Mercedes-Benz ambulances have a stretcher, wheel-chair, spine board, oxygen, ambu-bag, critical care machine, fire extinguisher, blood pressure kit among other equipment. District Officer Administration Dr (Capt) Ghafoor told Daily Times that these ambulances will be moved to the emergency response and diagnostic center after its construction is completed. He was reluctant to say when it would be ready. The city nazim had announced plans for a chest pain and emergency response center where citizens would be given first aid before the ambulances would transport them to nearby hospitals. Vacant sites under the Gulshan-e-Iqbal flyover near Nipa and Liaquatabad flyovers near Karimabad were set aside for the centres but over the last six months not much development has taken place. Most of these spots, including the vacant sites under the Baloch Colony bridge, Quaidabad bridge, North Nazimabad bridge, have been given to private firms to set up charged parking. (DailyTimes-B1, 28/05/2008)

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JI women protest inflation

KARACHI: The Jamaat-e-Islami (JI) women wing held a protest demonstration in front of the Karachi Press Club against poverty, unemployment and increasing prices of basic commodities on Wednesday. Dozens of women chanted slogans, carrying the banners of Hukumranoo Ayashiyan Band Karo, Mehangai Namanzoor, Roti Kapra aur Makan Ka Wada Pura Karo and Atta Do Bijli Do. President Musharraf has imposed poverty, inflation and unemployment on the masses in the last nine years, the present government wants to sweep away these problems within 90 days, but the powers still rest with Musharraf, said JI Pakistan Naib Amir, Prof. Ghafoor Ahmed. He added that inflation has compelled the people to commit suicide and the government is keeping people busy with different issues instead of the real ones. Ahmed demanded that the government should reduce its lavish expenditures and change its economic policies, which will decrease inflation, poverty and unemployment. (DailyTimes-B1, 29/05/2008)

KPT finishes its part of the Karachi Package

KARACHI: The Karachi Port Trust (KPT) has concluded the Karachi Package, and is now looking forward to bringing a revolutionary change in the city, said KPT chairman vice Admiral (retd) Ahmed Hayat, while talking to Daily Times. Now KPT is offering to establish a 1,947 feet high Port Tower, which is a joint venture project. The tower is planned at the Clifton shoreline over an area of 350 acres. Another project is a Port Shopping District. KPT envisages a complete state-of-the-art shopping district. This project has high potential for investment and is located on prime land of 20 acres adjacent to the Sailing Club in Clifton. The letter of intent was issued to the Al-Habtoor Group of UAE in a joint venture. Another KPT project is a Food Street, Port Grand (Food Court), at the Natives Jetty Bridge and its adjoining area, within the rotary of Jinnah Bridge on a BOT basis for 21 years. The project will be completed in June 2008. KPT is also constructing an office tower, KPT -77 Kolachi Enclave, in the near vicinity of the KPT Office. The tower shall be 77 storeys high and shall offer 4 million sq. ft. of space, its estimated cost is US$400 million. KPT is also constructing a 15-storey apartment building at Bath Island with 400-sq.yard apartments on each floor, which will cost them Rs 197 million to construct. According to Hayat, seaports everywhere in the world are naturally assigned to develop the city in which they are located. The resident ports develop airports and luxury hotels all around the world, so KPT has to endow its capabilities and capital to make the city a modern one. In the near future, the city will become a hub of international economic activities at par, said Hayat. While sharing details about future developmental projects the KPT has delineated, KPT general manager planning and development, Brig. (Retd) Syed Jamshed Zaidi told daily Times that the Karachi International Container Terminal (KICT) was already operational at the West Wharf. According to Zaidi the KICT over the years has developed in several phases. PhaseI was the only one functional, with a terminal area of 135,122 sq.m. It had an annual capacity of 350,000 TEU, with 3 modern Gantry Cranes, 6 RTGs and many other associated equipment. In the second phase the KICT has added a ship to shore gantry crane, 4 rubber tyre gantries and other equipment, increasing the terminal capacity to 525,000 TEUs. The Cost of Phase I & II is USD 65 million. For phase-III, the terminal shall have an additional area of 126,000 sq.m with an investment of USD 55 million. Terminal capacity shall be increased to 700,000 TEUs. The 973 m long berths of the terminal will be deepened to cater for 14meter draught container ship. Phase-III was launched on May 2005 and its completion is in May of this year. KPT awarded a second Container Terminal, Pakistan International Container Terminal (PICT) on BOT basis in June 2002. The Pakistan Deep Water Container Port (PDWCP) shall be carried out in phases with a public private partnership costing USD 1.6 billion A recent concept being used all over the world is a Cargo Village and Industrial Park (CVIP) Off Dock Facility, which includes setting up of a satellite facility in the vicinity of the Port, enveloping all the port requirements. A study conducted in 2005 by M/s Louis Berger, USA recommended the setting up of a Cargo Village.1, 500 acres of land is proposed for the project with individual areas catering for containers, general and bulk cargo, processing plants, customs and other related facilities. (By Irfan Aligi, DailyTimes-B1, 30/05/2008)

Suicide over KSE loss

KARACHI: A man Thursday committed suicide by shooting himself with his own TT pistol, within the premises of his shop, in the jurisdiction of Jamshed Quarter police station. Deceased Mohammad Abid Memon, 48, was a resident of Garden East. He ran a general store close to his house. Quoting relatives, SHO Fawad Akhwan said, due to poverty, Memon invested some money in the stock exchange but he lost the money. Later he asked for money for further investment in the stock exchange, but his wife refused. Thats why

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he was disheartened and committed suicide. His body was taken to Civil Hospital, Karachi where his family took the body away without completing legal formalities. The deceaseds family was engaged in the funeral process and the police was waiting till after the funeral to record statements from the family. (DailyTimes-B1, 30/05/2008)

City suburbs providing 35 percent of vegetables, fruits

KARACHI: Karachi has the potential to produce vegetables and fruits matching demand and the citys suburbs have manifested that potential recently by producing 35 percent of all vegetables and fruits supplied to the city, but the fact that prices are still high is because of profiteers influence, EDO Agriculture Shabbir Bhurt told Daily Times. Malir, Gadap and Bin Qasim Towns have rich agricultural land but lack water. The lack of water reservoirs has caused wells in these areas to dry up and in response, the federal government initiated an extended program, the National Program for the Improvement of Water Courses (NPIW) in 2004, Bhurt said. Under the NPIW, 50,000 acres of barren land has been rendered capable of yielding cash crop. The program was to be completed by 2008 but has now been extended till 2010, he added. The agriculture department completed a total of 971 water courses by early 2008, of which 37 were completed in 200405, 175 in 2005-06, 283 in 2006-07 and 476 in early 2008, while another 1,000 water courses have been completed as at mid-2008. The remaining 1,500 water courses will be completed by 2010. As yet, 50,000 acres of barren land has been rendered productive, Bhurt said. The NPIW saved 40 percent water from being wasted and it is expected that by the completion of the project in 2010, another 50,000 acres of barren land will be rendered productive. Each water course costs around Rs 200,000 to improve and now farmers in Malir, Gadap and Bin Qasim are benefiting from this work and have once again started contributing their share of fresh vegetables and fruits, he claimed. Giving details on the crops, Bhurt said that presently, these areas are producing onions, garlic, tomatoes, cauliflower, cabbages, carrots, radishes, turnips, pumpkins, beets, spinach, mustard, green chilies, peas, green coriander, green onion, gourd, and bitter gourd. Fruit crops include bananas, pomegranates, strawberries, guavas, papayas, petha, cheekoo, falsa, raw mangoes, amla, watermelons and melons. These areas are also suitable for wheat production and the Sindh food department procures wheat from these areas as well. Live stock breeding farms are also under consideration, as are fish farms set for a later point in time, but there should be at least one small dam in the area because current progress has only been so because of heavy rains last year that increased the underground water level, he pointed out. (By Irfan Aligi, DailyTimes-B1, 31/05/2008)

JUNE
Economic growth to hit five-year low
KARACHI: Pakistans economic growth will slow down to a five-year low in the outgoing fiscal year, dragged down by a poor wheat harvest and slump in manufacturing output, the State Bank of Pakistan (SBP) has forecast. Real GDP growth in fiscal 2007-08 has been estimated lower between 5.5 and 6 per cent against the budgeted target of 7.2 per cent while an all-time high current account deficit of 7.3-7.8 per cent is projected in the quarterly report for January-March period released on Saturday. Food inflation, which leaves a disproportionately high impact on poor, has remained in double digits during the third quarter and future outlook is dismal in view of the increase in food transportation cost after upward revision in fuel prices. There is a need to take necessary administrative measures to protect low-income households by providing targeted subsidy to them through ration cards, utility stores or through students of public schools, the central bank said. Full year fiscal deficit at a high of 6.5 - 7 percent threatens to further fuel inflation if government did not divert its borrowing sources away from central bank, SBP has again cautioned. Though exports grew by 10.2 percent during JulyApril 2007-08, countrys trade deficit has swelled to record $16.8 billion due to huge import bill. Most of the export growth came during the third quarter on back of non-textile products as Pakistani rice and sugar fetched higher values from international markets. Massive imports led by high petroleum product cost nullified export growth and further strained the current account. The financial and current account surplus also declined during nine months as foreign portfolio investment plunged to $118 million from $1.76 billion in corresponding period of previous year. Unlike slow performing agriculture and large scale manufacturing sectors, services sector is poised to achieve the annual targeted growth, SBP says. The main contributors to this performance are wholesale and retail trade, transport and storage and communication as well as public administration and defence sub-sectors.

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About improvement in agricultural output, the bank has proposed that government ensures a farmer get benefits of increase in food prices. Moreover, there is need for enhancing investment in agriculture-sector infrastructure like farm-tomarket roads, it added. The manufacturing sector suffered at hands of a severe energy crises and political unrest, which gripped the country after assassination of former Prime Minister Benazir Bhutto. SBP says that conduct of monetary policy has become challenging as inflationary pressures fed by unprecedented hike in global food and energy prices persist and government continues to rely on it for meeting the budgetary deficit. Maintaining a tight monetary policy is imperative to control the expected continuation of high inflation, it suggested and called for governments support in shape of fiscal prudence. Nevertheless, credit demand is strong despite a slowdown in growth to consumers mainly because of rise in working capital requirements due to higher input costs and payments to oil companies and IPPs under the head of price differential claims. (By Saad Hasan, The News-15, 01/06/2008)

95pc people for cut in defence budget: survey

ISLAMABAD, June 1: About 95 per cent of the people want the government to cut defence expenditure and give less importance to the defence spending while making budget for the year 2008-09, a survey soliciting proposals for upcoming budget reveals. About 50 per cent of them give top priority to health and education sector, while 31 per cent say agriculture sector should be given priority for overall economic growth in the country, and 14 per cent give priority to infrastructure. The survey was conducted by the Human Development and Rights section of the Sungi Development Foundation, a civil society organisation. Those interviewed during the survey were also invited at a pre-budget seminar organised by the Sungi. Speaking on the occasion, they stressed that the budget 2008-9 needed to be formulated on the principles of justice, equality and democracy if it was to have any real meaning. They recommended that unnecessary ministries should be abolished to reduce the expenses and defence budget must be brought under the purview of the Parliament. They were of the view that an integrated development plan was required at the national level to address all the development-related issues. The participants at the pre-budget seminar were stakeholders including the Sungis community partners from the Hazara division and Azad Kashmir, elected and non-elected local government representatives, parliamentarians and representatives of trade unions, and media and concerned citizens were among the respondents. Other recommendations put forwarded at the seminar included installation of water treatment plants at community level to provide safe drinking water, involvement of youth in sports and cultural activities, provision of quality education to the masses so that they can take part in the socio-economic development of the country. And they also included considerable cut in the defence budget and allocation of more funds for social sector development, making policies to address the issue of unemployment, reconstruction and rehabilitation of earthquake affected area, taxes cut in coming budget and avoiding imposition of any new taxes, substantial salary increase for government employees, balancing the taxation by bringing in more tax payers, developing a website showing budget details at the national, provincial and district level and structural land reforms to end the poverty. The recommendations focus on reducing growing inflation rate to benefit the poor and salaried class and bigger allocation of funds for women. The participants at the seminar severely criticised the district governments for allocating meagre funds for the development of social sectors. Chief guest of the seminar, district nazim Haripur, Yousaf Ayub Khan also sought more budget allocations to bridge a huge gap between development and non- development expenditures. A majority of the participants underlined the need to allocate at least 15 to 20 per cent funds for the development sector. Most of the participants were of the view that the term Maximum relief for the poor was just a political slogan. Policy makers and decision makers prepare budgets for the rich and the poor get in the quagmire of insecurity, they noted. They were of the view that food and energy crisis had been created to keep peoples attention away from the real democratic issues. (Dawn-2, 02/06/2008)

Food shortage and commodity futures

NOW that the food prices are likely to stay high for at least another three years, (World Bank and White House concur on that) the West is over-reacting to the crisis situation and has started attacking the developing countries for taking measures to shield their populations against any eventualities or famine-like conditions. They are behaving irrationally, the Washington Post says, which can only worsen the food crisis. The World Food Programme has accused Pakistan of refusing to sell wheat to it which it needs badly to help the needy states. The WFP says it had sought to buy food from countries with surpluses, such as Pakistan, to ship to desperate neighbours such as Afghanistan. But Pakistan drags its feet about selling. Pakistan maintains a buffer stock of around 0.5 million tonnes. Any changing

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consumption pattern or increased demand would call for an increase in this buffer stock to the tune of around two million tonnes for ensuring the food security. The Washington Post has, in a biased gesture, gone to the extent of calling the timely act of stockpiling food for future security by more than 40 countries a nationalised hoarding. An editorial in the newspaper on May 11 delivered a neoliberal sermon to these countries urging them to free their food by ending bans or curbs on the export of their staple food commodities. But the poor countries know what a havoc the free market can play with their economies at this difficult hour. The blame game against the developing world took an amusing turn when President Bush accused India of being responsible for the food shortages and high prices across the globe. According to him, the ever-growing 300 million Indian middle class is consuming too much food, meat and poultry because it, along with its counterpart in China, has now more money to spend and is, therefore, causing shortages of grain elsewhere. In a rebuttal, India blamed the IMF-World Bank duo for creating the crisis situation by their faulty policies. The problem is not per capita consumption in the developing countries but excessive consumption in the developed countries. It is strange, it said, during the last two years, the demand for oil rose by one per cent only but its price in dollar shot up by 90 per cent. It meant the world is actually suffering from food crisis because of the weak dollar. Now a consensus is emerging among economic analysts about the causes of the current food crisis. New Statesman, the prestigious British magazine, in a recent report said, increases in global population and the switch to bio-fuels are important factors in the rise of food prices. But they are not the real reasons. It is the credit crisis. It argues: the reason for food shortages is speculation in commodity futures which expedited following the collapse of the financial derivatives markets. Desperate for quick returns, dealers have been taking trillions of dollars out of equities and mortgage bonds and putting them into food and raw materials. It is called the commodities super-cycle on Wall Street, and it is likely to cause starvation on an epic scale. World prices for basic commodities such as cereals, cooking oil and milk have risen steadily since 2000, but have escalated dramatically since the financial crisis in the US began to bite in 2006. Since then, the average world price for rice has risen by 217 per cent, wheat by 136 per cent, corn by 125 per cent and soybeans by 107 per cent. Under conditions of growing debt defaults arising from the US sub-prime crisis, the magazine says, speculators and hedge fund groups have increasingly switched their investments from high-risk bundled securities into so-called stores of value, which include gold and oil at one end of the spectrum and soft commodities such as corn, cocoa and cattle at the other. The speculators are even placing bets on water prices. It concludes: Just like the boom in house prices, commodity price inflation feeds on itself. The more prices rise, and big profits are made, the more others invest, hoping for big returns ... The trouble is that if you are one of the 2.8 billion people who live on less than $2 a day, you may pay for these profits with your life. According to Bloomberg, Wall Streets commodity-index funds control a record 4.51 billion bushels of corn, wheat and soybeans through Chicago Board of Trade futures, equal to half the amount held in US silos on March 1. The holdings jumped 29 per cent in the past year as investors bought grain contracts seeking better returns than stocks or bonds. The buying sent crop prices to record high and boosted the cost for growers and processors to manage risk. As an American farmer put it, Its the best of times for somebody speculating on grain prices, but its not the best of times for farmers. So, commodity investors now control more US crops than ever before, competing with governments and consumers for dwindling food supplies. In Chicago market, the Index-fund investment in corn, soybeans and wheat has increased by 66 per cent to the equivalent of 902,105 futures contracts, a record, since January 2006. Each contract represents 5,000 bushels. Investments in grain and livestock futures have more than doubled to about $65 billion from $25 billion in November. The purchase of crop futures alone is about half the combined value of the corn, soybeans and wheat grown in the US, which happens to be the worlds largest exporter of all three commodities. Crops and raw materials have become an asset class that institutions use to an increasing extent, billionaire George Soros said on April 17. On top of that, you have specific factors that create the relative shortage of oil and, now, also food. A US government commission is investigating claims that big investors who buy large quantities for future trading are largely responsible for the current unprecedented hike in food prices across the world. The commission is trying to determine if supply and demand factors justify current prices, and if not, what other factors may be in play. Meanwhile, India, which suspended trading in futures of rice, wheat and two pulses a year ago, plans to bring under suspension more commodities as many believe that commodities futures trading is contributing to a speculation-driven rise in prices. Communist allies of the ruling Congress coalition want a ban on futures trading in cooking oil, sugar and other commodities, saying speculators are driving up prices and fanning inflation. But trade and industry have not taken kindly to the restrictions imposed by the government. However, wheat prices at Chicago market are likely to rise on speculation that importers will increase purchases of US supplies that are 42 per cent cheaper than the record high reached in February. Importers including India and Pakistan will buy grain when prices are low this year to avoid shortages. Wheat for July delivery rose 3.25 cents, or 0.4 per cent, to $7.8125 a bushel on May 22. Still, wheat has dropped 12 per cent this year as farmers worldwide seeded more of the grain to capitalise on higher prices. (By Ashfak Bokhari, Dawn-Economic & Business Review, Page-VI, 02/06/2008)

Tax load on property

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FOUR parties from Lahore, including a private school chain, have approached the Securities and Exchange Commission of Pakistan (SECP) for securing licences for setting up the Real Estate Investment Trust (Reit). But, insiders say the commission may take a few months to issue the first-ever licence to a Reit Management Company (RMC). The general business attitude is that of wait and see. Political uncertainty is one of the reasons behind the reluctance of investors to venture at the moment into the domain of Reits that requires a real estate with a minimum value of Rs5 billion. Other hurdles include property laws and taxes. The Reits are designed to provide a structure for investment in real estate similar to mutual funds which offer for investment in stocks. A Reit is a security that sells like a stock. Its rules allow indirect investment in real estate that are expected to yield, in most of the cases, 90 per cent of its profit in the shape of dividends to shareholders. Head of the SECPs Speacialised Company Division (SCD) Salman Ali Shaikh told Dawn that the Reits process was naturally time-consuming keeping in view the big amount of money involved in this business. In Malaysia, he said, there were only 22 Reits so far, in Europe, the Middle East and Africa (EMEA) the number of Reits was just 102. He said that despite several legal and tax-related issues at the provincial and federal levels, there was still a good Reits market potential. He said there were several organisations that owned real estate and were best suited for launching RMCs i.e. the Pakistan Railways, hotel and school chains, shopping malls and owners of commercial buildings. Reits are for the time being close-ended and can be set up in Karachi, Lahore, Peshawar, Quetta and Islamabad. It took Malaysia more than seven years to register 22 Reits. I think it will be a success if SECP registers five to seven Reits in the first year of its launching, Mr Salman observed. With reference to global trend, he said the number of Reits in North America declined from 253 in 2006 to 195 last year. But, Asia was still a booming market for Reits. Globally the size of Reits investment was around $1.273 trillion in 2007 -a 26 per cent increase over the previous year. He said to promote this product certain legislations were required and some others were needed to be removed and amended at the provincial level. Now, the SECP is faced with an uphill task of making this new product a success. At present, there is no method of price discovery in the real estate sector. Only a handful of properties are with transparent leases. Real estate is a vehicle for turning their black money into white. A report of the SECP experts, who have investigated the prospects for Reits , have found up to 900 pc of differential between the real price and recorded price of real estate in Karachi. Another issue is the tax load that is as high as 28 per cent. According to the SECP, the cost of eight kanal of land in Lahore is around Rs1 billion these days, while a plot of similar size and location is priced at Rs1.2 billion in Karachi. The registration fee for eight kanal is Rs10 million or one per cent of the total value of the land each in Lahore and Karachi. The stamp duty on this much land is Rs20 million (two per cent of the total land value) in Lahore and Rs36million (three per cent of the total land value) in Karachi. Buyers have to pay Rs10 million as transfer fee on eight kanal in Lahore and Rs10 million in Karachi. Commercialisation fee of this land in Lahore is Rs200 million (20 pc of the land value). In Karachi, commercialisation fee is Rs8,000 per square yard that can take the commercialisation fee amount to Rs32 million. Moreover, the government has imposed two per cent Capital Value Tax (CVT). The overall tax load on registration and commercialisation of eight kanal is 28 per cent i.e. Rs290 million in Lahore and Rs166 million in Karachi. The experts also found that the land value in Islamabad can be higher than land in Southern Europe. Now, the SECP has recommended the federal government to abolish CVT. It is of the view that CVT should have not been imposed by the federal government in the first place as it was a provincial matter. The commission also seeks abrogation of rent control law in Islamabad. The central government has already provided exemption from tax to sellers of property to Reits till 2010 and reduced the tax on rental income to five per cent, which are positive signs. But, some vital recommendations of the SECPs for the provinces are yet to be accepted that is likely to adversely impact Reits in its initial phase. The commission has sought abrogation of the provincial rent control laws and development of a new law (condominium law). It has also proposed reduction in transaction costs stamp duties, registration and commercialisation fees and other levies. The Punjabs new draft Rental Law suffers from the same lacunas. The existing 10pc annual rent increase needs to be abolished as it imposes unnecessary hurdle in supply of rentable properties. Due to very high property tax rates and commercialisation fee, rental Reits are not feasible in Lahore. The development of rental Reits are more likely to emerge in those areas of Lahore, which do not fall in the jurisdiction of the Lahore Development Authority (LDA). The existing laws in Quetta and Peshawar are not favourable at all. The SECP is now asking the government that the total tax load on real estate transaction should not exceed 4-5 per cent, which is in line with international best practices and may discourage under-valuation of property. It has also proposed changes in the method of calculation of commercialisation fees/property taxes to a covered area formula with zero tax for aesthetics (e.g. parks, fountains) and utilities (car parks, toilets). (By Sher Baz Khan, Dawn-Economic & Business Review, Page-VI, 02/06/2008)

Tumbling growth, surging inflation

Signals emanating from the economy lend weightage to cries from some quarters that the country has already arrived in a worrisome and difficult zone called stagflation by the economists. It is a state when the economic growth becomes stagnant and high inflation more stubborn.

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While the economic growth has declined from the targeted 7.2 per cent to close to 5.8 per cent, the unabated double-digit inflation continues to haunt the policy makers. Critics say that the tightening of the monetary policy may not tame inflation in the short-term but may retard economic growth. The business sentiments about investment prospects seem to be creating a negative effect in the economy. The high cost of doing business and depressed demand in export markets are not Pakistan-specific. However, Asian economies including those of China and India driven by better growth models have so far not shown signs of any major dent in their growth momentum. Over the last five years, the economy despite all its severe problems like weak institutional and physical infrastructure and growing imbalances has also been posting six to seven per cent growth. The share of agriculture in GDP has declined and manufacturing growth has been slower as compared to the expansion in the services sector. There are two questions that need to be asked before moving on towards a strategy to break out of this situation of slowing economic growth and high inflation. One: what has exactly changed for the engine of growth that has been services sector? Two: is the business sentiment all-pervasive or limited to big business, multinationals or big mercantile groups? Nothing worth mentioning has changed for the services sector. The situation has become more challenging for the manufacturing amidst growing uncertainty and rising costs Khawaja Shahab, federal secretary ministry of industries told Dawn over phone from Islamabad. The secretary agreed that the political government should consider out of box options to deal with the challenges on the economic front. In my view, the suggestion to evolve a business-led team comprising the nominees of coalition partners for full five-year term should be considered seriously. This is very much possible and could lend stability and revive investors confidence in the economy. All you need is a political will to address the challenges without politicising the economic decision-making process, he said. An analyst, however, saw nervousness engineered by principal beneficiaries of the last regime who have yet to develop dependable links in the new set-up. Everyone knows that the government needs to generate more resources. They are creating noises to pressurise the government to design the budget in a way that does not hurt them in any way, he said on promise of anonymity. Big business is weary of expanding scope of military enterprise but because of its dominant positioning it co-opted in a working relationship with it. The announcement by the government that it is considering to increase duties on certain luxury items has infuriated the trading lobby that might not be able to sell same volumes of imports at increased rates in the domestic market when the level of value of disposable income is shrinking, he said. A report on the economy produced by reputable economists, many of them with a World Bank background, did not get the attention it deserved. The report-a publication of the Institute of Public Policy- State of economy: challenges and opportunities, in a systematic manner reflects in the words of its chairman Shahid Javed Burki, all three sets of issues: sustainability and inclusiveness of growth; institutional development; decentralisation; short-run macroeconomic adjustment to bring down inflation; and the twin budget and current account deficits. The main contributors of the report include; Sartaj Aziz, Shahid Javed Burki, Aisha Ghaus Pasha, Pervez Hasan, Akmal Hussain and Hafiz Pasha. Things are still in the making, Farrukh Qayum, federal secretary finance told Dawn when his opinion about the reason of the government weak response to the economic challenge was solicited. He hoped that the growth rate will be six per cent for the current year despite the problems that the country confronted over the last one year. We are hoping to settle all outstanding liabilities and start the next fiscal afresh, he told Dawn. The finance secretary further observed: The flow of remittances is good. There are favourable symptoms of fresh flow of foreign direct investment in a number of sectors. So the situation is not as bad as some rent seeking elements made it out to be. Let the stability return and private investor will hopefully step in to capitalise on huge business opportunities. All said, the biggest challenge is to divert the liquidity towards productive avenues so as to fight recessionary and inflationary trends. (By Afshan Subohi, Dawn-Economic & Business Review, Page-1, 02/06/2008)

Why rapid growth is necessary

FINDING the right way to bring a country out of economic, political and social backwardness and to help its people out of despair and poverty remains an enterprise that continues to engage many great minds. Over the last 60 years or so, starting from the time when millions of people in Asia and Africa were able to cast off the yoke of colonialism and take responsibility for their lives and for their future, development experts have continued to come up with recipes that would help release nations from poverty. Some countries, most notably those in East Asia, succeeded. Some failed and continue to fail. Most of those who are still struggling are in the region known as Sub-Saharan Africa. Pakistans own record has not been dismal. Not given much of a chance of success, it has clocked a fairly impressive record of growth over the last six decades. The gross domestic product has grown, averaging at more than four per cent a year over this period. There are only a score or so countries around the globe that can claim to have sustained such a record of growth over such an extended period. During the same period, the population has increased five and a half times, from only 30m in 1947, the year of the countrys birth, to an estimated 165m, 61 years later. The proportion of people living in absolute poverty has declined from about 60 per cent in 1947 to around 30 per cent

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now. The size of the urban population has increased twelve-fold, from five million at the time of independence to around 60m in 2008. The structure of the economy has changed as well. At the time of its birth, Pakistan was an agricultural economy with no industry of any significance. More than half the gross domestic product was contributed by agriculture. Now the share of agriculture in GDP has declined to a bit over 20 per cent. Instead of agriculture, the service sector both traditional and modern has become the largest contributor to GDP. The trajectory of growth Pakistan has followed over the last 60 years was not smooth and even. There were at least three periods of rapid economic progress and modernisation in the 1960s, in the 1980s and in the early 2000s. Each of these periods ended in economic and political chaos. Why was the path to relative progress such a halting one? Why has Pakistan experienced so many jerks and jolts in its economic life? These questions are not easily answered and are better left to be dealt with by historians who investigate and write about these matters. What concerns me today is another important question: what should the policymakers do now at a time of another halt to progress, another jerk in the move forward? The fact that Pakistan is currently faced with an extremely serious economic crisis does not need repeating. The fact that the countrys new political masters need to quickly develop an approach for dealing with the stresses and strains under which the economy is operating at this time does not need to be repeated either. But what should policymakers do to address the problems the economy faces? Economic theory is attempting to find an answer to this question at a time where the entire world not just a few developing countries such as Pakistan is having to deal with a sudden turn in the wheel of fortune. One group of development experts who recently contemplated this issue was led by the Nobel Prize-winning economist Michael Spence. It recently issued its report to the public. Spence and his colleagues argue that the Washington Consensus that became the guiding economic philosophy in the late 1980s and the 1990s is now dead. The Consensus was built on three pillars: stabilisation, privatisation and liberalisation. These are the pillars on which the economic team recruited by President Pervez Musharraf built the countrys economic structure. Prodded by the IMF, to which the Musharraf team turned in the first three years of military rule, Islamabad emphasised stability over growth, privatisation over state control and liberalisation over state management. There were two problems with the way this structure was built, it neglected growth for the time when the economy was being stabilised and it made no attempt to develop a medium-term strategy for ensuring uninterrupted growth. It is not surprising that the structure the team built came crumbling down. What does the Spence group advocate for a country in Pakistans situation. No single recipe will ensure sustainable and rapid economic growth. Each country must devise its own strategy, given its own circumstances. However, one ingredient must always be present in the strategy: an active government that strategises. Governments are sometimes clumsy and sometimes errant but active, pragmatic governments are indispensable, say the authors of the report. Pragmatism means dispensing with ideology and focusing on what the situation demands at any given time. This is one of the salient features of the Spence groups report. The other is the emphasis it places on growth itself. Without adequate growth in the economy and without sustaining it over time, improvements in human well-being are impossible. The report looks at the experience of 13 developing countries that have managed economic growth of seven per cent or more a year for at least 25 years. Two lessons are drawn. One, fast and sustained growth requires long-term commitment by a countrys political leaders. Two, high and sustainable growth depends on deep engagement with the global economy. Engaging with the world requires developing an understanding of where it will end, where it is going. During the Musharraf period, Pakistan had the first but not the second. There was a singular lack of understanding about the structure and evolution of the global economy among the policymakers. What about the role of the state that was downgraded by the Washington Consensus? Spence and colleagues argue that no country was able to achieve rapid economic growth without high rates of investment in infrastructure, education and health. They also emphasise that growth strategies cannot succeed without a commitment to equality of opportunity. Once again, Islamabad during the Musharraf period failed this test. The Spence Commissions findings come at an opportune time for Pakistan where a new political order is taking shape. As the new leadership begins to look at what the economy needs it would do well to study the findings of Spence and his colleagues and build them into a strategy for adjustment and growth that needs to be put quickly in place. (By Shahid Javed Burki, Dawn-6, 03/06/2008)

Residential, commercial, industrial units to pay public utility charges

The City Council, during its session on Monday, approved the imposition of public utility charges on residential, commercial and industrial units. These will be collected on a monthly basis. The resolution, approved in less than a minute by the ruling party members, amidst protest and uproar by the Opposition, states that the citizens of Karachi will have to pay between Rs100 to Rs1,000 per month as public utility charges under six categories on their residential units. Similarly, commercial units established on 200 sq. yards to 10,000 sq. yards or above will have to pay Rs500 to Rs5,000 as public utility charges. Industrial units on a covered area of 1,000 sq. yards to 5,000 sq. yards and above will have to pay Rs500 to Rs2,000 per month under the same head. In addition to this, permanent vendors and cabin holders will also have to pay the utility charges while residents of apartment buildings will contribute up to 20 percent of the total maintenance charges collected from all inhabitants of any particular apartment. The resolution for the imposition of public utility charges was approved with majority votes by the city council with

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Presiding Officer, Ahsan Ahmed Siddiqui, in the chair while the opposition members remained busy in raising slogans against the city authorities and demanding release of funds to the union councils (UCs). Earlier, when the session started at around 3:30 pm with Presiding Officer Ahsan Ahmed Siddiqui in the chair, opposition members did not let EDO Transport and Mass Transit Project, Malik Zaheer-ul-Islam, to give a briefing on mass transit project to the council and insisted on debate on issue on non-release of funds to UCs. Leader of the opposition in the city council Saeed Ghani said the people were suffering as Rs9.55 million funds earmarked in the budget for last three years were not being provided to the UCs and they were unable to carry out development works in their respective constituencies. Leader of the treasury Asif Siddiqui contended that although funds had been earmarked in the budget, it was the discretion of the Nazim whether to provide funds to the Nazims or not and added the city Nazim was spending money on more important and mega projects in the city. Another member from the treasury benches said budgets were the desires and it was not necessary to fulfil all the desires. Amid debate on the release of development funds to UCs, the PO Ahsan Siddiqui invited EDO Transport Malik Zaheer-ulIslam to deliver his presentation on mass transit but opposition members did not let him speak by creating uproar and pandemonium. At one moment, the PO had to adjourn the session for 15 minutes owing to uproar and when the session restarted, the resolution for imposition of public utility charges was presented and approved in less than a minute with majority votes amid protests from the opposition members. Later, the PO adjourned the city council session till Wednesday, June 4 at 4:30pm. (By M. Waqar Bhatti, The News-13, 03/06/2008)

Say hello to the new house tax

KARACHI: The city council has approved a new tax on residential plots, houses and flats from Rs 70 per month to Rs 800 per month for solid waste collection. The session was presided over by Convener Ahsan Siddiqui at Old KMC Building here on Monday. The House offered the Fateha for the Islamabad bomb blast victims. Haq Parast members Mirza Sajid Baig and Moeenuddin Ahmed tabled the utility charges resolution. The utility charges for B category (industrial) have been approved as Rs 500 on 200 sq yds and Rs 1,000 would be collected on those covering 500 sq yds. The utility charges for C category (indemnity plots) would Rs 500 for plots of 1,000 sq yds and Rs 2,000 for plots of more than 500 sq yds. Soon after the session started, Siddiqui said that the Karachi Mass Transit Programme (KMTP) was of vital importance for the city. He invited the CDGK Mass Transit Cell EDO Zaheerul Islam to give a briefing but opposition leaders Saeed Ghani, Rafique Ahmed and Ramzan protested and starting shouting slogans. The session had to be suspended but resumed after fifteen minutes. However, opposition leaders again prevent Islam from giving the briefing. PPI adds: Opposition leader Saeed Ghani said on a point of order said that at the last session, the naib nazim had given a ruling that it was at the city nazims discretion to release funds for union councils or otherwise. He rejected the ruling, saying that the city nazim had no discretionary powers as according to Section 32 of the SLGO he was bound to release budget funds for all union councils. He argued that the city nazim was not the king of the city, and he had no powers to issue or block funds arbitrarily. The city nazim was bound to obey rules and laws. The city nazim could not announce any mega project without the approval of the city council. Ghani regretted that the city nazim was doing this without the approval of the city council but when he was asked to release UC funds, he said he had none. Parliamentary leader of the Al-Khidmat Panel Rafique Ahmed said that despite many pledges not a signal rupee had been sanctioned for opposition union councils since the last two budgets. He said they had staged protest demonstrations outside the Karachi Press Club, raised the issue in the City Council and used other platforms but all in vain. Presiding Officer Ahsan Ahmed Siddiqui said the House should initiate discussions on public issues. He asked the members to end their discussion so that officials of the Karachi Mass Transit could give a briefing on the project. Ramzan Awan of the Opposition said that he had served as an elected member of the House four times since 1983, but this was the first time that funds of the opposition union councils were stopped. He said that when Naimatullah Khan was the city nazim, he (Ramzan Awan) was in opposition but his funds were never stopped. Arshed Qureshi of the treasury benches appreciated the performance of the present city government. He claimed the city nazim had resolved all problems via mega projects. Later, in a press conference at his chamber, opposition leader Saeed Ghani condemned the resolution on Public Utility Charges as a cruel burden on Karachi that was already badly affected by inflation and price hikes. Regarding union council funds, he said that the city nazim had also recruited 6,000 party workers to the Karachi Water and Sewerage Board and they were being paid Rs 720 million per month in salaries, but he was reluctant to release union council funds. The next session is scheduled for June 4 at 4:00 p.m. (DailyTimes-B1, 03/06/2008)

Budget for development

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THE Pakistani elite is fond of criticising the political leadership for taking populist measures, and advocates tough measures that are required to put the economy on the path of progress. It is time that economic policymakers listened to this piece of advice and took some tough measures by making the elite pay their fair share of taxes. The fundamental structure of Pakistans fiscal policy is unjust. It under-taxes the elite and does not spend enough on the needs of the poor. Pakistans fiscal expenditure with the additional fuel subsidies will probably end close to 20 per cent, which is much lower than most Asian countries spending of close to 25 per cent. No surprise that Pakistan has some of the worst social indicators even amongst its peer groups in the emerging markets. Despite this low level of expenditure, we have a fiscal deficit in excess of seven per cent of GDP this year. The reason is the exceptionally low level of revenue generation. With tax to GDP ratio at around 10 per cent and total revenue at less than 13 per cent, Pakistan is simply under-taxed. Worse still, the incidence of taxation is disproportionately higher on the lower income groups. The contribution of indirect taxes to total taxes has remained virtually unchanged over the last decade at close to two-thirds of all tax revenue. We need to make a substantive change in this fiscal structure. We need to get our expenditure up to 25 per cent of GDP of which the current expenses should be at around 15 per cent and development expenditure at 10 per cent of GDP. We should target to have a fiscal deficit of no more than four per cent. This means increasing the revenues up to 21 per cent of GDP. We should aim to achieve this transition in a five-year period starting with this budget. Within the current expenditure, there needs to be a change in composition. There should be a target to reduce the equivalent of three per cent of GDP in the non-education/health/subsidy part of the budget. This cut should be shared equally between the defence and civilian budgets. These savings should be directed towards the increased current expenditure for health and education. The level of subsidy should be maintained at the level of the current fiscal year but a change in the purpose and mode of subsidy needs to be made. The fuel subsidy should be phased out. Similarly, the subsidy on fertiliser should be gradually eliminated. In place of these subsidies, a substantive income transfer scheme should be put in place which targets the most vulnerable segments of society. In order to mitigate the impact on farmers of the higher fertiliser cost, they should be allowed to retain a higher price for their produce. Cotton and rice prices are linked to international markets and therefore the principal change will have to be in wheat prices. The targeted income transfer schemes to be put in place should provide capacity to the poor to absorb the impact of higher food and fuel prices. Development expenditure should be raised from the current approximately four per cent to 10 per cent with the bulk of this increase being devoted to improvement in the health and education expenditures. Coupled with the increase in health and education spending in current expenses, this will allow us to increase the total spending on these critical sectors many fold. The improvement in the physical infrastructure should be largely achieved through the private sector using innovative financing structures which are used for this purpose in a number of countries. On the revenue side, we need to tax large segments of the economy which are grossly under-taxed. During the last few years, tremendous wealth generation took place in the capital and real estate markets but the contribution to taxes was minimal. Similarly, with the increase in agricultural commodity prices the large land owners have more profits than ever before and need to start paying their fair share of taxes. The services sector is now the biggest part of the economy but is not contributing its full share of taxes. The beneficiaries of under-taxation in these identified segments are mostly the relatively high-income segments of society. An argument against taxing these sectors is that it will discourage investors, particularly foreign ones. This is patently false. Investors, at least the serious corporate entities, dont simply go shopping for the lowest taxes. They look at the totality of investment opportunity. Low-cost production is not the only aim of investors. The biggest exporter in the world is not a low-cost manufacturing location but Germany which has one of the most expensive workforces in the world and heavy taxes. It is the quality-adjusted cost which determines a nations competitiveness not the nominal cost of production. By under-investing in our people, we have turned our biggest potential source of competitive advantage in the global economy into a liability. A fiscal policy that helps build a skilled, educated, healthy and productive workforce will lay the foundation of an economy which can produce goods and services that are competitive in the global economy. This will make Pakistan an attractive destination for foreign investment in export-based industries as opposed to the foreign investment we have received so far which is exclusively aimed at exploiting the domestic market. Reducing the fiscal deficit to four per cent will help contain inflation and allow interest rates to come down. This will reduce current expenditure for debt servicing and create more fiscal space for development expenditure. Thus the economy would have entered a virtuous cycle of growth and investment and we would have the foundations of sustained non-inflationary growth, the fruits of which would be available to all segments of society. The development of Pakistans economy is not limited by the resources available. Its development potential is limited by the imagination of its policymakers and the lack of its elites ability to look beyond its immediate self-interest. (By Asad Umar, Dawn-7, 07/06/2008)

Price control body formed

KARACHI, June 6: The Sindh cabinet on Friday decided in principle to set up district peace committees and price control committees. The objective of the committees is to improve and sustain the law and order situation and to protect the rights of consumers by stabilising prices through monitoring supplies of goods. These decisions were announced by provincial Information Minister Shazia Marri while addressing a press conference after the cabinets meeting.

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This was the first cabinet meeting after the induction of coalition ministers of the Muttahida Qaumi Movement and the addition of the Pakistan Peoples Partys ministers in the second phase. In the meeting, presided over by Sindh Chief Minister Syed Qaim Ali Shah, two summaries pertaining to law and order and price controls were presented for decisions. The cabinet was also informed about other pressing issues like the shortage of water in lower riparian areas, position of wheat procurement and threat to the coastal areas from the brewing cyclone. The minister said the cabinet also reviewed its decision with reference to the removal of tinted glass from car windows and fancy number plates. Regarding the formation of district peace committees, the minister said that besides DCOs who would be the secretaries of the committees they would include officials concerned as members in addition to notables and elected representatives of the area. About price control committees, the minister said that in the past, the bureau of supplies and prices was merged with the food and agriculture department but now, it was being revived and would soon start functioning with the appointment of its director-general and making the necessary staff available. The minister said besides the DCO, EDO and DDO, the price committees would also have area notables up to the provincial level as without the participation of stakeholders, the committee could not be functional. She said the composition and strength of the members of the two committees were yet to be finalised. Responding to questions after the briefing, Ms Marri said the Sindh budget would be presented after the federal budget, which was going to be announced on June 11. She said the volume of Sindhs development budget would be more than what it was in the current budget. She said that in view of the brewing cyclone in the coastal areas, the departments concerned had taken necessary measures. Ms Marri said that fishermen had been asked not to go out in the open sea while the revenue minister had started preparations for relief measures. (By Habib Khan Ghori, Dawn-17, 07/06/2008)

Education and poverty

IT seems that learning may soon be relegated to a void. Where quality education is regarded the world over as the most effective tool to break the poverty wheel as it provides skills and knowledge for employment, Pakistans education is getting poorer by the day. There are schools that dont operate and there are hundreds of posts of junior, primary and secondary school staff that lie vacant. This is further aided by a rather unique visa system whereby teachers and other employees contribute part of their salaries to relevant departments in collusion with their bigwigs as a trade-off for being absent from duty. As a result, a number of teachers working abroad continue to rake it in here as well. School buildings are constructed in selected grounds for political reasons. It hardly needs to be emphasised that the government is perhaps the only body that can rescue education from its current state of abysmal decline. There is no reason for corruption in education to be treated differently from that in other social sectors. Accountability mechanisms in both private and public-sector school education have become a crying need of our times and must include stringent, structured recruitment rules with adequate compensation. These have to be supported by dire consequences for corrupt practices, and administrations must be made entirely independent and accountable with an effective system of complaints for students, parents and teachers. This is possible only if the school management committees are made effective to monitor the working of their institutions. This mechanism should help check corruption which has emerged as the bane of the education sector. Nepotism and bribery are taken to be the only avenues to success. Hence, we can expect rampant disregard for the law and for fellow humans in the future. Such a despicable state of our educational infrastructure is particularly detrimental to the poor as it makes poverty almost entirely inescapable. (Dawn-7, 09/06/2008)

Unrealistic target
The coalition government is reported to have approved a Public Sector Development Programme of Rs541 billion for fiscal 2009 that is 11.2 per cent higher than the current years allocation. The quality of the programme would come under discussion after the presentation of the budget in the National Assembly when the details of allocations are made public. Apparently, the PSDP size looks rather unrealistically large. Is this not too ambitious a target when during the current year despite record borrowing from the central bank, throwing the Fiscal Responsibility Act to winds and letting the fiscal deficit touch the dangerously high mark of 9.5 per cent of the GDP, under an authoritarian regime for a better part, the PSDP had to be curtailed? The key question is: Where will the money come from to finance the development programme keeping in view the financial constraints and pressures for sharp readjustments to attain sustainable fiscal balance gone haywire? Add to this, the signs of economic slow down and situation becomes even more challenging. It is hard to imagine an economy that failed to mobilise enough resources in a period of buoyancy, generating more internally when growth rate has lost the momentum. During all through years of high GDP growth tax to GDP ratio was under 10 per cent. It was nine per cent this fiscal. Beyond gestures of sympathy amounting to a few million dollars, the prospects of getting serious external budgetary support are not bright either in the immediate future. In a difficult political transition, the government has yet to stabilise itself. It may need some time to earn the confidence of international donors and investors as responsible stable administration capable to deliver, before getting the backing it needs from them.

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Besides, the size of foreign capital inflow is set by the pace of domestic economic growth unless global politics drives economics as it did after 9/11. At this point of time, it is the domestic compulsions that are shaping national events. The economic team was understandably busy giving final touches to the budget proposals and was not able to make itself available to grant formal comments at this juncture. Shaukat Tareen, Convener of the Economic Advisory Committee (EAC) could not be reached for his comments. Salim Reza, member EAC, who also heads Pakistan Business Council, a think tank of the private sector told Dawn over phone that the government is actively considering a number of proposals to generate additional resources both through scaling down its expenditure and broadening the tax net. The government is pondering over the restructuring of direct broad based subsidies to make them targeted and effective. There is no need for a cash-starved government to pamper segments and sectors that can sustain themselves. There are suggestions of broadening the tax net under study as well. However, with no major change in the tax regime, even if the government succeeds in improving the tax administration to check tax evasion it can generate more resources, he said. Zubyr Soomro, an ex-banker who headed Overseas Investors chamber of Commerce and Industry and American Business Council focused his comments on the need for increased development spending to address the structural issues particularly those related to physical and social infrastructure. He advocated public private partnership to share the burden of the development cost and improve efficiency. Undoubtedly we have to address the infrastructure requirements which are now getting in the way of growth. However, given the considerable rise in the international prices of food and oil and given the massive size of our poor population, we will have to prioritise spending carefully. Government spending on infrastructure is rarely efficient and we have seen little if any accountability on the quality and timeliness of projects they undertake. Taking public/private partnership approach to funding these needs would make more sense as it would not only share out the load but improve oversight and thus project quality. Soomro supported pro-poor expenditure but highlighted the need to make the government trim and slim to avoid wastage of valuable resources. Workable and effective spending on poor is critical and should receive the highest priority in our budget. To make room for this, the government should take the lead by a substantial cut in its current expenditures. We simply can not afford the luxury of an excessively large government, he insisted. A very comprehensive detailed report of Social Policy and Development Centre on fiscal policy choices in the budget 0809 was launched early last week by Dr Hafiz Pasha that claimed to have presented a civil society perspective on the budget making exercise. The report starts with the current economic situation and concludes by presenting various social safety net options. The report also presents what it calls contours of tax policy for improved resource mobilisation and redistribution. These sets of workable options offered in the SPDC report indicate the most suitable economic coarse to achieve sustainable inclusive development goals. The current sorry state of the economy after the bonanza following 9/11, show how rulers in Pakistan with the help of technocrats compromised the long-term economic interests of the country for their short-term petty interest of amassing wealth privately at the cost of the well being of the majority, commented an economists requesting anonymity. One wonders what made technocrats so concerned about economic hardships of masses. They have been in and out of the government irrespective of its composition and belonged to neo liberal, pro-World Bank, IMF school of thought that favoured structural adjustment programmes all through later eighties and nineties. These programmes required adjustments that burdened vulnerable segments of population disproportionately, commented another lady economist not so big a fan of the World Bank recipes of economic revival. All said, those with ability to pay need to be sensitised of agonising life of dispossessed classes to persuade them to be more responsible tax payers and those with resources need to be persuaded to invest in the real sector for achieving growth and development, a senior official concluded over telephone from Islamabad. (By Afshan Subohi, Dawn-Economic & Business Review, Page-1, 09/06/2008)

Fiscal highs and lows

THE annual budget of a country reflects the built-in features of its fiscal system which evolves through historical processes, precedents and practices. An efficient and equitable fiscal system is one which helps achieve the basic economic objectives defined by a country for a given period of time. These objectives generally include ensuring a sustained growth of real GDP, maintaining a high level of employment, containing inflationary pressures, improving income and assets distribution, reducing mass poverty and accumulating adequate foreign exchange reserves. When one looks critically at the fiscal system of Pakistan, one finds that its basic norms and practices both on the side of resource mobilisation as well as public spending have remained by and large unchanged for the last half century. On the other hand, the social demands and economic needs of the country have changed in a fundamental way over the last five decades, with the result that the fiscal system has been rendered out of sync with changing demands. The disconnect between budgetary practices and national needs is the outcome of numerous social, political and economic factors. Focusing only on the economic side, it is realised that one clear cause of this disconnect is related to the continuous reliance on fiscal incrementalism as the central approach of budget-making in Pakistan. Under this approach, at the time of budget formulation, the different heads of revenue (taxes and non-taxes) and the current expenditure of different state agencies are increased by a certain margin ranging from 10 to 15 percentage points while accommodating the impact of newly introduced policy changes. Since the policy changes are generally incremental in nature, the overall structure of the fiscal system continues to retain its traditional-cum-historical form.

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It is interesting to observe that most fiscal variables for the period prior to the year 1999-2000 show remarkable mapping around their historical averages. For example, total revenues on a consolidated basis (federal plus provincial) have moved around the average of 17 per cent of GDP with consolidated taxes at around 13.5 per cent and non-tax revenues of 3.5 per cent of GDP. The current expenditure has fluctuated around the average of 19 per cent and development expenditure at 4.5 per cent of GDP, giving an average of 23.5 per cent for the total expenditure. The consolidated budget deficit has varied around the average of 6.5 per cent of GDP. The base of national income accounts was changed by the Federal Bureau of Statistics from 1980-81 to 1999-2000 and the nominal GDP increased significantly from the year 1999-2000 onwards. As a result of higher GDP, the magnitudes of most fiscal variables for the years 1999-2000 onwards when measured as a ratio of GDP have decreased by a margin of two to three per cent. Therefore, all variables of the fiscal system in the post-1999-2000 period show substantive reduction. For example, the total revenues of Pakistan in the post 1999-2000 period have fluctuated around an average of 14 per cent, the tax revenues have slid downwards to an average of 10.5 per cent, total expenditure has come down to about 19 per cent of GDP, current expenditure has an average of 15.5 per cent and development expenditure has fluctuated around an average of 3.5 per cent of GDP, even through it shows a rising trend in the last four years (2003-04 to 200607). In fact, the entire budgetary system now looks further squeezed and retrenched as a consequence of the rebasing of national income accounts. Even in the absence of rebasing the national income accounts, the budgetary system of Pakistan does not show any major vacillations and historically it is caught up in an extremely low level of stabilisation. The economy of Pakistan suffers from fiscal fatigue which means that the components of the budgetary system fail to show movement to match the growing demands of national economy or to meet the external challenges of globalisation and internal challenges of poverty, unemployment and high inflation. Development expenditure during the last 25 years has continued to drift downwards. In 1980-81, development expenditure was as high as 9.3 per cent of GDP which fell to 6.4 per cent in 1990-91 and 3.3 per cent in 1998-99 and 2.1 per cent in 2000-01. The persistent decline in development spending apparently reflects the impact of what can be termed as the philosophy or approach of fiscal monolithicism under which all adjustments are made in the development expenditure to meet the specified targets of budgetary deficits. Given the inelasticity of tax revenues and the major heads of current expenditure, such as debt-servicing and defence which together account for more than 70 per cent of total current expenditure, the final burden of adjustment has to be borne by development spending. Over time, the budgetary system of Pakistan has come under increasing pressures. The system consequently has developed the syndrome of asymmetries under which the seven key fiscal variables which should be quite high have assumed a low magnitude and seven variables which should be low have actually grown disproportionately. The seven lows are tax-GDP ratio, non-tax-GDP ratio, revenue surplus, share of development expenditure in the total expenditure, spending on social and economic services in the current expenditure, spending on education, health, agriculture and industry in the Public Sector Development Programme (PSDP), and the overall size of the budget. The seven highs of the national budgetary system which have emerged over time can be identified as the share of indirect taxes in total taxes, share of withholding taxes in direct taxes, dependence on surcharges for revenue generation, share of federal taxes in the total tax revenue i.e. high vertical imbalance in resource (tax) mobilisation, share of public debt in financing budgetary deficit, level of current spending on debt-servicing and defence, and the mismatch between sectoral GDPs and tax contributions. Fiscal transformation is an urgent but a long-term task. It must focus on reversing the set of seven critical variables of the fiscal system which are very low in value and reversing the seven sensitive variables which have assumed high magnitudes in a historical perspective. The writer is chief (WTO), ministry of industries and production. The views expressed here are personal to the writer, and not of the Government of Pakistan. (By Dr. Aqdas Ali Kazmi, Dawn-7, 10/06/2008)

Nasty jolts to the economy

PAKISTANS economy received several nasty jolts in the last several months. Some were delivered by the developments over which the countrys policymakers did not have any control. These included the inexorable increase in the price of oil which has affected all oil-importing countries including Pakistan. There has also been an increase in the price of agricultural commodities Pakistan must import to meet domestic demand. These include wheat and oil seeds. There were other jolts to the economy for which policymakers must take full responsibility. These include the shortage in the generation of electric power which has resulted in load-shedding that is taking a heavy toll in terms of both lost output and great discomfort to the citizens. Most affected by this shortage are the less well-to-do segments of society who cannot afford to buy alternate sources of electric supply such as portable generators. These shortages should have been estimated by the previous administration and appropriate investments should have been made. Instead, for eight years, Pakistan did not make investments in electric power generation while the demand for electricity continued to increase at nearly seven per cent a year. This has left the country with a demand-supply gap estimated by the government at 4,000 megawatts. Compounding these problems were the decisions taken by Islamabad to spend carelessly in order to help the party in power in the elections of Feb 2008. Public expenditure was allowed to increase way beyond the resources available to the government by way of tax and other revenues. The result was a ballooning of fiscal deficit estimated at 9.5 per cent of GDP by Ishaq Dar who was the minister of finance in the first coalition government to take office after the elections.

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A significant part of this deficit was financed by borrowing from the central bank which added to the inflationary pressures already present in the economy. This produced price increases without precedence in Pakistans history. Once again it is the poor and the not-so-well-off segments of society that are suffering. Unless help arrives soon, Pakistan may begin to see political and social pressures building up. Considering the weak state of institutional development in the country, it would be hard to contain these strains. The new set of political leaders, who have come to power, is being advised to adopt adjustment measures to deal with the pressures under which the economy is labouring these days. The prescriptions being offered are the usual ones: contain government expenditures by cutting spending on both current and development parts of the government budget, raise resources by expanding the tax base, provide relief to the poor by giving them cash transfers and by creating jobs for them by starting rural and urban works programmes, take advantage of the fall in the value of the rupee by encouraging exports, and make non-essential imports more costly. In a report released by the new Lahore-based Institute of Public Policy that I chair, the government was also advised to transfer greater authority to the provinces and to the institutions of local government. This will help with the process of adjustment since it would bring economic governance closer to the people. We also advised the government to make sure that the design of adjustment policies ensured that future growth was not compromised. This was done in the 19992002 period when, following the advice of the International Monetary Fund, the then administration applied hard breaks to the economy. This, as indicated above, is the standard advice given to most governments dealing with difficult economic situations. Pakistan, however, needs to do much more than follow the standard prescription. It needs to adopt an approach and develop a strategy that lessens the grip on the economy of several powerful vested interests. Over time, the Pakistani economic elite has increased its influence on the making of public policy. The extent to which this has happened is clearly shown by some simple calculations. The latest World Development Indicators published by the World Bank provide estimates for all countries of the share in national income of various segments of the population. In Pakistan, the top 10 per cent of the population claims 26.3 per cent of the total national income while that of the bottom 10 per cent is only four per cent. This is one of the sharpest differences in the developing world: the rich receive 6.8 times the amount of national income that accrues to the poor. However, a comparison of the shares in national income does not fully reflect the amount of real inequality between different classes of people. The rich have much better access to public services than the poor; the state generally looks after their interests much more than it does for the poor. What makes these income differences even more problematic is that they are widening as a consequence of the growth model followed by the Musharraf government which favoured the rich. The sectors that flourished under President Musharraf did little for the poor while they provided large amounts of incomes and asset appreciation for the rich. The recent price increases in food commodities have added further insult to the injury inflicted by the pursuit of the growth model.The poors real income will decline significantly if food and fuel prices are allowed to eat into their disposable incomes. Not only is the price increase hurting the poor, the latter are also being affected by the various shortages that have appeared in the economy against which the rich can protect themselves but the poor are left to fend for themselves. In fact, the rich have succeeded in creating large cocoons around themselves, thus isolating themselves from the less fortunate citizenry. They have built gated communities, protected by private security companies; they send their children to expensive private schools that provide education of reasonable standards; they go out over the weekends to shop in the malls of Dubai and go for summer vacations to various watering spots in Europe.While one should not grudge this lifestyle, it cannot be sustained in the midst of great and growing poverty. And it must not be sustained at the expense of the poor. Public policy must address this problem to ensure not only sustained economic growth but also social and political stability. (By Shahid Javed Burki, Dawn-6, 10/06/2008)

Rs60bn loans written off since 1999, NA informed

ISLAMABAD, June 9: The National Assembly was informed on Monday that bank loans amounting to Rs60 billion had been written off between 1999 and 2008.Finance Minister Syed Naveed Qamar said during the question-hour session that the amount included Rs46 billion obtained by 395,157 borrowers of up to Rs500,000. He said that the material containing particulars of such individuals was voluminous and the State Bank had sought one month for completing information. He said there were 2,739 cases of loans of over Rs500,000. He replied in the negative when asked if there was any proposal to write off loans of poor farmers. Presently there is no scheme to write off agricultural loans across the board, he said. The minister said that prices of cooking oil and ghee had registered an increase of 87 and 65 per cent, respectively, over the past three years, adding that the increase was a result of rising trend of palm oil prices in the international market. Mr Qamar said the government did not give direct subsidy to companies for supplying edible oil and ghee to the Utility Stores Corporation (USC) at lower rates. The finance division is providing subsidy to the USC directly as per government decisions taken from time to time which ranges between Rs6 and Rs25 per kg, the minister said, adding that the finance division had paid Rs1,030 million between July 2007 and March 2008. He said there was no plan for an across-the-board subsidy on oil and ghee and that subsidy would be given to only poor segment of society. In reply to a question, the finance minister conceded that liquefied petroleum gas (LPG) was being smuggled from Iran. He said that new customs stations had been set up along the Pakistan-Iran border to help genuine traders and discourage illegal trade.

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Responding to another question, he said the exemption given in capital gains tax would remain in place for another two years. He said the government had no immediate plan to float sovereign exchangeable bonds in the international market to raise finance. He said that once the international market condition improved, the government might consider issuing such bonds. (Dawn-3, 10/06/2008)

Survey projects 11 per cent inflation, 5.5pc growth

ISLAMABAD, June 9: The gross domestic product (GDP) growth rate for the fiscal year 2008-09 has been projected at 5.5 per cent, with estimated contributions of 3.5, 6.1 and 6.1 per cent by agriculture, manufacturing and services sectors respectively. According to the Economic Survey, to be officially released on Tuesday, the total required investment to attain the projected growth target has been projected at Rs2,638.8 billion, 17 per cent higher than last years level. As a ratio of GDP, total investment is expected to stay around last years level (21.5 per cent of GDP). For financing the required investment, national savings as a ratio of GDP are projected to increase to 14.3 per cent in 2008-09. The inflation rate has been projected at 11 per cent. However, the inflation scenario will remain sensitive to international price movements. Exports are projected to grow by 16 per cent to $22.9 billion. Imports are projected to increase by 6.5 to $37.2 billion during the next fiscal year. Remittances have been projected at $7.7 billion and the current account deficit is estimated to be $12.7 billion or 7.7 per cent of GDP. The survey says the main objective of the fiscal policy will be to keep the deficit within a sustainable limit by furthering reforms in the tax system, broadening tax base, improving tax compliance, minimising tax evasion and allocating adequate resources for development activities. Monetary expansion will be in line with the projected GDP growth rate of 5.5 per cent and inflation of 11 per cent. It is imperative that government borrowings be limited to a safe level to keep the money supply growth rate in the vicinity of the targeted level and encourage private sector credit. This will also help in keeping the inflation rate at targeted level, the survey says. The Public Sector Development Programme (PSDP) for 2008-09 lays emphasis on maintaining momentum of growth, realisation of core MTDF objectives, especially reducing poverty and achieving the Millennium Development Goals. The size of the PSDP for 2008-09 is Rs523 billion, including foreign loans of Rs67 billion. The five major priorities of the PSDP are: a comprehensive support programme for the poor, overcoming the water and energy crises, developing Balochistan, the NWFP and special areas, reviving growth in agriculture and manufacturing and building up human resources to compete in a global economy. An amount of Rs20.3 billion has been allocated for ongoing and fresh agriculture development projects. The water sector has been given high priority with an allocation of Rs75 billion. An allocation of Rs76.2 billion, including foreign aid of Rs16.3 billion, will be allocated for the power sector in 2008-09. An amount of Rs4.6 billion has been earmarked for the manufacturing sector. The transport sector has been given Rs60.6 billion, including Rs36.5 billion for the National Highway Authority. An allocation of Rs6 billion has been made for basic and college education projects. An amount of Rs19.1 billion has been allocated for 260 ongoing development projects of universities. An amount of Rs4 billion has been allocated for science and technology and Rs5.5 billion for information and communication technology. The allocation for the health sector stands at Rs19.9 billion. (By Iftikhar A. Khan, Dawn-1, 10/06/2008)

Trade deficit at record high of $18.7bn

ISLAMABAD, June 9: Pakistans trade deficit swelled to an unprecedented $18.756 billion in the first 11 months of the current fiscal year, up 52 per cent from $12.311 billion for the same period last year. The extraordinary increase in trade deficit is the outcome of the spending on import of oil, foodstuff and consumer items like mobile phones. On import of wheat alone, Pakistan spent $770 million to overcome its shortage during the outgoing fiscal year. The oil import bill may swell to over $11 billion by the end of the current fiscal year, against over $7 billion last year, an increase of 40 per cent. Analysts said the trade deficit this year might reach $21 billion. Last year, the deficit for the whole year was $13 billion. Fall in agricultural yields also pushed the government to spend foreign exchange reserves during the current fiscal year, while bill for importing industrial raw materials and machinery declined during the period under review. The period also saw industrial output declining by four per cent. Official figures obtained by Dawn on Monday showed that the import bill had increased by 29.56 per cent to $35.943 billion in July-May 2007-08, against $27.743 billion last year. It increased by 3.883 per cent in May 2008 when it stood at $3.883 billion, against $2.750 billion in the same month last year. Unexpectedly, exports grew by 11.37 per cent to $17.186 billion in July-May 2007-08, against $15.432 billion last year.

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The export growth recorded an increase of 22.61 per cent in May 2008 when it stood at $1.946 billion, against $1.58 billion last year. The government has projected a $19.2 billion export target for 2007-08 on the assurance of the textile industry to edge up its exports to over $11 billion. The textile exports has witnessed a negative growth over the past few months and it may not cross even the $10-billion mark this year. A commerce ministry official said that the export target was likely to be achieved by end-June. The rupee depreciation and robust growth in non-textile exports would help in achieving the target, the official added. Official statistics showed that Pakistans current account deficit surged to between 7.3 and 7.8 per cent of GDP. The fiscal deficit has spiralled to close to nine per cent but the government expects to bring it down to 6.5 per cent. (By Mubarak Zeb Khan, Dawn-16, 10/06/2008)

All-round failure defines performance

ISLAMABAD, June 10: Pakistans economy grew by 5.8 per cent against original target of 7.2 per cent, according to the Economic Survey. The survey conceded that there were failures in major areas, particularly GDP growth rate, agriculture, overall manufacturing, large-scale manufacturing, inflation, fiscal policy, monetary policy, exports, imports, current account deficit and trade balance during the first 10 months of the financial year ending on June 30. Pakistan missed major economic targets set for the outgoing financial year and the responsibility for the poor performance lies with the PML-Q government, Finance Minister Syed Naveed Qamar said after releasing the survey. You start our accountability from tomorrow when we present the budget for the next year. Mr Qamar said the new government was facing dual challenges of pulling the country out of the current economic mess and removing difficulties of the common man by framing correct and viable economic policies. He expressed the hope that the government would receive considerable budgetary support from friendly countries and international donors to help it improve the economy during the next financial year. He said he believed that the government might get about $3 billion by June 30 which would enable it to achieve some of the economic objectives. He said that 2007-08 had been a challenging year as the economy experienced several unexpected political and economic events inside and outside the country. These events had an adverse impact on the economy, he added. According to the survey, real GDP grew by 5.8 per cent in 2007-08 against revised estimates of 6.8 per cent and an original target of 7.2 per cent. The agriculture sectors performance was far from satisfactory because it grew by a mere 1.5 per cent. In contrast the growth rate was 3.7 per cent last year. This was mainly on account of dismal performance of major crops such as wheat and cotton. Overall growth in the manufacturing sector, accounting for 19 per cent of GDP, recorded a modest growth of 5.4 per cent against 8.2 per cent last year. Its contribution to this years growth also declined from 22 per cent last year to 17.2 per cent. Global Inflation was high in almost every corner of the world, including Pakistan, creating extraordinary difficulties for governments all over the world. The menace is rising food and energy prices. In Pakistan, besides rising food and fuel prices, the excessive burrowing of the government from the State Bank have been responsible for the rise in inflation. The inflation rate, as measured by changes in Consumer Price Index (CPI), averaged 10.3 per cent during the first ten months (July-April) of the current fiscal year, 2007-08, as against 7.9 per cent in the comparable period of last year. Food inflation is estimated at 15.0 per cent and non-food at 6.8 per cent, against 10.2 per cent and 6.2 per cent in the corresponding period of last year. The overall fiscal deficit is estimated at Rs737.8 billion or 7.0 per cent of GDP for 2007-08 massive slippages in expenditure side on account of interest payments and subsidies are responsible for the rise in fiscal deficit. Public debt was 53.5 per cent of GDP by end-March 2008 as against 55.2 per cent in end-June 2007. However, by the year end public debt is likely to be slightly higher than last year. Large-scale manufacturing accounted for almost 70 per cent of overall manufacturing, registering a growth of 4.8 per cent in 2007-08 against the target of 12.5 per cent and last year's achievement of 8.6 per cent. The construction sector is estimated to grow by 15,2 per cent in 2007-08 as against 17.9 per cent last year. Services sector continued to maintain a solid pace of expansion at 8.2 per cent as against 7.6 per cent last year. The per capita income in dollar terms has increased from $926 in 2006-07 to $1085 in 2007-08, showing an increase of 18.4 per cent.Real private consumption expenditure grew by 8.5 per cent in 2007-08 as against 4.8 per cent last year. Total investment could not sustain its record level of 22.9 per cent of GDP of last fiscal year and declined to 21.6 per cent of GDP in 2007-08. Fixed investment has declined to 20 per cent of GDP from 21.3 per cent last year. While public sector investment remained at last years level of 5.7 per cent, private sector investment declined from 15.6 per cent to 14.2 per cent of GDP this year. National Savings at 13.9 per cent of GDP has financed 65 per cent of fixed investment in 2007-08 against 77.7 per cent last year. National savings as percentage of GDP stood at 13.9 per cent in 2007-08 far lower than last years level of 17.8 per cent. TIGHT MONETARY POLICY: During FY08, the SBP continued with a tight monetary policy stance, thrice raising the discount rate and increased the Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR).

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The money supply growth during July- May 10th 2007-08 (henceforth July-May) of the current fiscal year slowed to nine per cent compared to 14 per cent during the corresponding period of FY07. Credit to private sector grew by 14.9 per cent during July-May FY08 as against 12.2 per cent in the same period of last year. Credit to private sector as per cent of GDP is continuously rising since 2001-02. Overall exports recorded a growth of 10.2 per cent during the period under review against a growth of 3.6 per cent in the same period last year. In absolute terms, exports increased from $13.8 billion to $15.3 billion. Imports grew by 28.3 per cent to $32.1 billion on the back of an extraordinary surge in imports of petroleum products asnd food group items and other raw material. Non-oil imports were up by 22.5 per cent and non-oil and non-food imports also surged by 18.8 per cent during the same period. During the period, merchandise trade deficit worsened sharply to $17 billion against $11 billion in the same period last year because of disproportionate increase of 28.3 per cent in imports that more than offset a modest export growth 10.2 per cent. Pakistans current account deficit widened to $11.6 billion (including official transfers) during July-April FY08 against $6.6 billion in the comparable period of last year, an increase of 75.6 per cent. Even when compared to the size of national economy, the current account deficit was substantially high at 6.9 per cent of GDP during July-April FY08 against 4.6 per cent for the same period last year. Workers remittances registered considerable growth during the same period, growing by 19.5 per cent to $5.3 billion on top of 22.7 per cent growth in the corresponding period of last year. Pakistans total foreign exchange reserves stood at $12.3 billion as of end-April 2008, significantly lower than end June 2007 level of $15.6 billion. The rupee, after remaining stable for more than four years, depreciated against the US dollar, falling by 6.4 per cent during July-April 2007-08. External debt and liabilities rose to $45.9 billion from $ 40.5 billion an increase of $5.4 billion or 13.3 per cent in the first nine months (July-March) of FY 2007-08 highest increase in about a decade. During the first nine months of this fiscal year, the total increase in external liabilities amount to $5.4 billion, of which $4.2 billion is the exchange rate translation effect while net disbursement of loan was just $1.2 billion. (By Ihtasham ul Haque, Dawn-1, 11/06/2008)

Development spending outpaces defence

RAWALPINDI, June 10: Def-ence expenditure went up by 10 per cent during the current fiscal year, from Rs250 billion in 2006-07 to Rs275 billion in 2007-08, says the Pakistan Economic Survey. The survey, released on Tuesday, said the average growth of defence expenditure at constant prices had been relatively sluggish at 4.5 per cent owing to the governments consistent efforts to minimise it and increase development and social sector expenditures.Contrary to the general perception, defence spending in real terms grew at an average rate of 4.5 per cent a year as opposed to 15.2 per cent for the social sector and poverty-related expenditures and 20.8 per cent for development spending. In other words, development spending has grown at a much faster pace than the social sector and poverty-related expenditures, its pace being thrice the speed of growth in defence spending. Total real expenditure grew at an average modest pace of 7.7 per cent per annum in the 1980s owing to sharp acceleration of 10.5 per cent in real current expenditure. Development expenditure grew by a modest 2.7 per cent on average in real terms but interest payments grew by 18.1 per cent, reflecting a tremendous pace of accumulation of public debt. Interestingly, the survey said, real defence spending followed a higher growth path and grew by 8.9 per cent on average. Such a level of fiscal indiscipline forced the country to undergo a painful period of structural adjustments in the 1990s. The rate of growth of real expenditure slowed in the first half of the 1990s but at the expense of development expenditures which witnessed a contraction of 1.7 per cent, on average, to contribute 2.4 per cent growth in real expenditure in the period. Current expenditure, however, grew by 3.9 per cent, thanks to only 0.7 per cent growth in defence spending and a relatively slow growth of 4.2 per cent witnessed in interest payments. Non-defence-non-interest expenditure also grew by a modest 3.0 per cent in real terms. Even the sharp fall in real development expenditure which contracted sharply by 3.5 per cent in the second half of the 1990s could not restrict current expenditure to grow at a faster pace of 5.0 per cent, mainly because of a massive 13.7 per cent average growth in interest payments. Resultantly, total expenditure grew by 3.1 per cent per annum in the period; however, non-interest non-defence expenditure registered a negative growth of 1.2 per cent per annum. The second major item, defence spending, inched up marginally by 0.1 per cent per annum. The survey said the total revenue collected during the current year stood at Rs1,545.5 billion, higher than the targeted level of Rs1,476 billion. The increase of Rs69.5 billion from the budgeted revenues was mainly due to higher than targeted non-tax collections. Tax revenues, however, exhibited a disappointing performance. Political disturbances and a less than satisfactory law and order situation seriously hampered the revenue collection efforts of the FBR.

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The FBR may fall short of its targeted level, and the year is most likely to end with tax collection amounting to Rs1.0 trillionRs25 billion less than the original target.Notwithstanding the shortfall, the government has made an extraordinary effort to collect more resources from the non-tax revenue side. It is expected that the government may collect an additional Rs103 billion in non-tax revenues which may reach Rs483 billion. Slippages in provincial tax revenues amount to Rs8 billion. The FBR was assigned an ambitious revenue target of Rs1,025 billion for FY 2007-08, and to reach this target a reasonably high growth of 21 per cent was required over last years collection of Rs847 billion. With a booming economy, the possibility of achieving the target was bright. However, revenue collection efforts were seriously hampered due to political unrest in the country during most of 200708. The chaotic incidents of Dec 2007, accompanied with a severe energy crisis and long hours of loadshedding, adversely affected industrial production. Resultantly, the FBR suffered a revenue loss of Rs35 billion. At the end of April 2008, the net collections had reached Rs763.6 billion, higher by 16.3 per cent over the net collection of past fiscal year (PFY), but short of the assigned target of Rs787.7 billion. Thus, revenue collection has so far achieved 97.0 per cent of its target, which was Rs1,025 billion at the beginning of the year. A detailed analysis reveals that the gross and net collection increased by 12.3 per cent and 16.3 per cent, respectively. In absolute terms, the gross and net collections went up by Rs89.9 billion and Rs107.1 billion, respectively. The overall refund/rebate payments during the first ten months of the current fiscal year (CFY) amounted to Rs55.8 billion, relative to Rs73.0 billion paid back during the corresponding period of the PFY. Among the four federal taxes, the highest growth of 28.9 per cent was recorded in the case of federal excise receipts, followed by sales tax (19.5 per cent), direct taxes (12.5 per cent) and customs (11.4 per cent). (By Amin Ahmed, Dawn-4, 11/06/2008)

Fiscal deficit and the law

BUDGET-making is a taxing affair. All eyes are once again focused on Chairman Federal Board of Revenue Yusuf Abdullah, and on how he will waltz his way out of what is likely to be a totally imbalanced budget. Ishaq Dar, who was holding the portfolio of minister of finance and revenue when the budgetary process began, is at present out of the picture and will therefore not have to face the music, although the budget under preparation is not free of his imprints. There is a reported Rs40bn revenue deficit and targeted four per cent fiscal deficit this year, which according to erstwhile minister Dar, stood at five per cent of GDP according to the data released for the first nine months (July to March) of the current fiscal year. I hope that the economic managers realise that this is not just an economic problem anymore; it has become a legal problem as well. The Fiscal Responsibility and Debt Limitation Act, 2005 (FRDLA), the drafting committee which I had the privilege of heading, was enacted to provide for elimination of revenue deficit and reduction of public debt to a prudent level by effective debt management. According to this enactment, the federal government is required to pursue its policy objectives in accordance with sound fiscal and debt management principles. It is further required to take all appropriate measures to eliminate the revenue deficit, reduce total public debt and maintain it within prudent limits. The FRDLA specifically requires the government to reduce the revenue deficit to nil not later than June 30, 2008 and to thereafter maintain a revenue surplus. Not only has the government failed to adhere to this principle, it appears to be heading in the opposite direction. Instead of aiming to maintain a revenue surplus from next year, it seems resigned to live with a budget deficit by targeting a 6.5 per cent budgetary deficit this year (although the actual figure may be 9.5 per cent). Despite the governments realisation that there have been slip-ups on the tax side and its consequent lip-service to the urgency of boosting means of revenue generation, there is little evidence of any meaningful effort in this regard. While the usual fat cats in the non-productive sectors (the Stock Exchanges and real estate being prime examples) will undoubtedly continue to enjoy their tax-exempt or near tax-exempt status, the lean cats of the productive sectors such as the textile division will claim their undue share of tax benefits thereby limiting the chances of any significant revenue generation. In the end, the voiceless taxpayers will continue to bear the brunt of the ever-increasing indirect taxes to make up for the looming fiscal deficit. How have we managed to land ourselves into this economic mess despite a comprehensively regulated fiscal regime introduced by the FRDLA? It is true that certain exogenous factors, like the hike in international oil prices, are partly responsible for the deficit. However, should the government not have anticipated this and provided a contingency for it in the budget? Besides providing a much-needed legal framework, the FRDLA also establishes a structured economic policy environment. Accordingly, the government is required to place various economic policy statements before the National Assembly: (a) the medium term budgetary statement (MTBS); (b) the fiscal policy statement (FPS); and (c) the debt policy statement. The FDRLA requires that the MTBS, which sets out a three-year rolling target for economic indicators, be included in the annual budget statement required to be placed by the government before the National Assembly under Article 80 of the Constitution. The government is also required to place a FPS that contains an analysis of macroeconomic indicators, including fiscal and revenue deficits, and of all policy decisions taken by the government to meet economic indicators and targets specified in the MTBS, before the National Assembly by the end of January each year. The government is also required to explain how fiscal indicators accord with sound fiscal and debt management principles. Has the FPS ever been placed before or discussed in the National Assembly?

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The whole purpose of this exercise was to provide legislative oversight not only over the budgetary process but also to its implementation. The fact that these statements have not been placed before the National Assembly has not only undermined the transparency of the budgetary process but has also prevented the government from achieving the objectives and targets set out in the FRDLA. One of the most important targets set by the FRDLA is that the public debt of the government be reduced by not less than 2.5 per cent of the estimated GDP in each financial year. However, the social and poverty alleviation related expenditures may not be reduced below 4.5 per cent of the estimated GDP for any given year, and budgetary allocation to education and health be doubled from the existing level in terms of percentage of GDP during the next 10 years. It remains to be seen whether the government intends to adhere to these principles and targets. In a country where there is no culture of compliance with laws, it may be too much to expect the government to pay heed to the FRDLA particularly since there are no sanctions attached to it. I, nonetheless, hope that the current economic managers will try to comply with the FDRLA to ensure fiscal responsibility and reduction of budgetary deficit. In following the FRDLA, the present government would, inter alia, be able to do what no previous government has been able to do before: to scrutinise the defence budget in parliament. The FRDLA requires the government to take appropriate measures to ensure greater transparency in its fiscal operations in public interest and minimise, as far as practicable, secrecy in the preparation of the annual budget. This enables the government to take up the defence budget and trim the bloated one-line item. The charter of democracy, signed in London by the leaders of the two major coalition partners the PPP and PML (N) categorically provides that the defence budget will be placed before the Parliament for debate and approval. The PPP has also reaffirmed this commitment in its 2008 election manifesto. There is no reason, therefore, not to include the details of the defence expenditure in the budget in order to rationalise the same. This sacred cow may be our only hope for reducing the budget deficit to the ordained level. (By Dr. Tariq Hasan, Dawn-7, 11/06/2008)

Inflation may cross 11pc mark: survey

ISLAMABAD, June 10: The government is likely to miss the target of containing inflation at 6.5 per cent for 2007-08 and end the year with an average inflation rate of over 11 per cent, says the Economic Survey 2007-08. The government has taken several measures to contain the rapid increase in inflation. The monetary tightening by the Central Bank will likely continue in the next year to contain the money supply and credit to private sector. On the basis of these measures, it is expected that the inflation target for the year 2008-09 will be 11 per cent. According to the survey, high global prices of food, fuel and other commodities driven by a weaker rupee, import costs and gradual removal of fuel, food and power subsidies along with monetary overhang on account of excessive borrowing from the SBP to finance the fiscal deficit have been mainly responsible for the sharp rise in prices this year. These factors will continue to exert pressure on overall prices in the next two to three years. The longer the high inflationary pressure persists, the greater is the chance for wage-price spiral to gain firm hold. Pursuance of tight monetary will be necessary to prevent the wage-price spiral from gaining strength. However, Finance Minister Naveed Qamar said the main challenge for the government would be to attain a balance between immediate responses to protect vulnerable groups and short-term efforts to ensure that inputs and credit were available to support a supply response over the next crop cycles. Medium- to long-term efforts should be to increase supply by making agricultural land and labour more productive, thus having enough quantities of essential items to feed the country as well as for exports. The survey suggested that henceforth, inflation needed to be curbed to limit its impact on long-term growth. Economic growth may suffer in the short run but it is the price the economy must pay in order to return to its long-term high growth path. In the interim, the government can undertake targeted subsidy programmes to alleviate the impact of rising inflation on the poor segments of society. (Dawn-1, 11/06/2008)

Rich-poor gap widened, says survey

ISLAMABAD, June 10: The gap between the rich and the poor has widened during years of President Pervez Musharrafs rule. However, according to the Economic Survey 2007-08, the inequality was accompanied by a decline in absolute poverty. The previous government did not release figures relating to poverty since 2005. The ratio of the highest to the lowest quintile, which measures the gap between the rich and the poor on the basis of consumption, deteriorated from 3.76 in 2000-01 to 4.2 in 2005-06 at the national level, indicating a growing rich-poor divide. The inequality based on consumption expenditure is generally less than inequality based on income. As the gap is calculated on the basis of food intake, the unexpected surge in food price reduced the purchasing power of the people, pushing them below the poverty line. With a dramatic surge in food prices during the current fiscal year 2007-08, it will be naive for policy-makers and economic managers to ignore or downplay the likely impact of this on Pakistans poverty dynamics, the report said. The survey showed that consumption inequality was higher in urban than in rural areas. Moreover, urban inequality increased faster than the overall inequality during 2005-06.

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Finance Minister Naveed Qamar said the poverty figures had been taken from previous surveys but the formula had remained the same based on calorie numbers. He said the government would adopt a new approach for curbing poverty and not hide the real picture. No one can hide poverty through statistics. It is clearly visible in daily life. The survey said: The double-digit food inflation of more than 15 per cent during July-April 2007-08 is likely to be a major contributor to eroding the gains of poverty reduction. Whether the incidence of high inflation and the performance of key macro indicators during the current fiscal year will have any bearing (and to what extent) on the poverty profile in the country in 2007-08 will only be known once the results of latest round of Pakistan Social and Living Standard Measurement (PSLM) Survey data are available in the last quarter of 2008-09. High inflation and the performance of key macro indicators during the current fiscal year will have a far reaching impact on the poverty profile in 2007-08. The latest estimate of inflation-adjusted poverty line is Rs944.47 per adult equivalent per month, up from Rs878.64 in 2004-05. The headcount ratio percentage of population below the poverty line has fallen from 23.94 per cent in 200405 to 22.32 from previous year, an improvement of 1.62 percentage points. According to the survey, poverty in rural areas declined from 28.13 per cent to 27 per cent and in urban areas from 14.9 per cent to 13.1 per cent, respectively during the period under review. Various poverty bands extremely poor, ultra poor, poor declined between 2000-01 and 2005-06. However, the proportion of quasi non-poor increased from 35 to 36.6 per cent. (By Mubarak Zeb Khan, Dawn-16, 11/06/2008)

Tax-to-GDP ratio stands at 10pc

ISLAMABAD, June 10: Pakistans tax revenue to GDP ratio stood at only 10 per cent during 2007-08 compared to an average of 18 per cent for other developing countries, says Economic Survey 2007-08. This indicates that substantial tax policy measures are still needed to broaden the tax base. The buoyancy and elasticity of the taxation system does not exhibit the desired improvements and needs to be focused on. According to the survey, the countrys tax regime resembles the one generally practised throughout Latin American countries, where indirect taxes, in particular the sales tax, occupy a relatively high share within the overall tax revenue. This dismal performance of the Pakistans tax machinery occurred despite the fact that the World Bank has given $150 million loans for refurbishing of new buildings, purchase of new cars and increasing salaries of the tax officials. The indirect tax to GDP ratio stood at around 6 per cent and direct tax to GDP ratio stood at around 4 per cent and less than 2 per cent if withholding taxes are excluded. The government recognises the need to broaden the tax base and reduce marginal tax rates, which would stimulate investment and production. Broadening of tax base will also ensure the fair distribution of the tax burden among various sectors of the economy. The overall services sector including wholesale and retail trade as well as agriculture are potential candidates for broadening of the tax bases. The revenue target for the current fiscal year is expected to reach one trillion rupees as against the original target of Rs1,025 billion. According to the survey, due to a number of wide-ranging exemptions and concessions as well as rampant tax evasion, the tax base is narrow and punctured. Secondly, the tax rates have been pitched at high levels, which created as vicious cycle of tax base erosion and higher tax rates. The revenue loss to the national exchequer because of major tax exemptions declined by 51.2 per cent to Rs89.52 billion in 2007-08 against Rs183.69 billion over the corresponding year. Of these, 77.3 per cent decline was recorded in income tax exemptions, which fell from Rs121.88 billion in 2006-07 to Rs27.66 billion in 2007-08. However, this major decline was due to the exemptions of capital gains tax on stockbrokers, which declined to Rs18.48 billion in 2007-08 from Rs112.45 billion in the previous year. A decrease of 11 per cent in customs exemption has been witnessed during the current fiscal year to Rs44.26 billion against Rs49.81 billion in the previous year. However, the sales tax exemptions edged up to Rs17.6 billion in 2007-08 from Rs12 billion in the previous year. The major portion of sales tax exemption was due to relief on pharmaceuticals. (By Mubarak Zeb Khan, Dawn-9, 11/06/2008)

Salient points of budget 08-09 revealed Import duty to go up by 5pc, Rs59 bn relief package
ISLAMABAD: The budget 2008-09, to be announced on Wednesday, would increase the import duty from 25 to 30 per cent on almost all imported goods while a two per cent increase in the general sales tax (GST) is also proposed, CBR sources revealed to The News on Tuesday. The GST will go up from 15 to 17 per cent while 95 per cent of imports would be affected by the duty hike. Relevant officials told The News that late on Tuesday night or Wednesday morning, before the announcement of the budget, authorities might decide on an increase in GST rate by one or two per cent. But I am sure they would be taking the latter steps, one of them said. The increased import duty and GST will raise an additional Rs 200 billion in tax revenue the government desperately needs to jack up its development and relief efforts. When contacted senior officials said the Rs 200 billion increase, from the current tax deposits of Rs 789 billion to roughly Rs 1 trillion in 2008-09, is not the only effort the government is making to ensure more cash inflows. It also needs to check bank overdrafts next year, and for this purpose the non-tax revenues would also have to be increased, so that the money required for emergency projects is made available without awkward steps mid-year.

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The GST rate increase from the present 15 per cent to 17 per cent is being envisaged by merging the one per cent federal excise duty into the sales tax deductible on more than 95 per cent items (barring the essential items like food and medicines). Additionally, another one per cent is being added to the GST rate, which should stand at 16 per cent over and above which the federal excise duty would be deductible as sales tax. Five per cent duty on import of mobile phones is also being envisaged, as presently there is no duty on the item. Some of the industrially-consumed items would also be dearer as the rate and collection mode is being changed, both at import and local sales stages.Apart from these steps, the government is also likely to announce a relief for the tax litigants, people who challenge the tax or its assessment by authorities. The tax-adjudicating authorities are being stripped of certain rights to withhold cases and decisions beyond limits of time. Now tougher time limits are being envisaged in the budget to ensure that these authorities are unable to extort litigants by delaying their cases or by helping to delay postponing payments that are due to the government exchequer. Top tax authorities have constantly been advising tax managers to tap full revenue potential existing in various sectors to recover the revenue losses occurred due to disturbances in the country last month and gas and electricity shortages which have slowed down the business, trade and industrial activities in the country. Budget-makers have identified various grey areas from which the full revenue potential is yet to be tapped, while frivolous claims of tax or duty are made against taxpayers. It is being ensured that while manufacturers, importers, dealers and wholesalers have to pay additional tax and duties, they are also helped against frivolous claims, of course keeping in view that revenue collection from adjudication areas is increased, said one senior relevant official. The budget is also programmed to ensure unusual increase in revenue collection on rental income from the properties. There is a need to formulate an action plan for tapping the tax potential by utilising computerised data available with different institutions and departments within the provinces. To plug revenue leakages and improve tax collection, administrative steps are an important part of the budget, chiefly a mechanism to unearth non-payment by effective monitoring and matching the information being received form different quarters. Under the new arrangement, lists of withholding agents would be changed to ensure that the middlemen that receive tax amounts for further depositing in banks are unable to steal public money. A mechanism for recovery of tax and duty arrears is also being envisaged to extract an additional amount of Rs 10 billion next year. The frivolous claims of arrears are being dropped but the genuine ones would be vigorously pursued, as the budgetary resolve goes. In 2007-08, about 4,000 tax appeals were disposed of by the Supreme Court of Pakistan (3,000 of direct taxes and over 1,000 of indirect taxes). Next year, the speedy settlement of cases that remain after deleting those deemed frivolous would be ensured through new mechanism. The non-tax budget is being envisaged as follows: total outlay (Rs 1.9 trillion), development portion (Rs 500 billion plus), relief package additional to the existing (Rs 59 billion), salary increase addition (Rs 23 billion), law and order addition over the existing (Rs 34 billion), anti-terror special steps over and above the present that are funded by international institutions and locally (Rs 21 billion), the rest of reckonings pertain to social sector, including health, education and employment, etc. (By Ikram Hoti, The News-1, 11/06/2008)

Per capita income tops US$1,000 for first time

ISLAMABAD: Strong growth in service industries and consumer spending increased Pakistans per capita income to more than $1,000 for the first time, and prevented a sharper slowdown in the 2007-08 fiscal year, according to the Pakistan Economic Survey released on Tuesday. But an un-sustained growth pattern was not able to save the economy from political and economic shocks, and Pakistans economy missed the 7.2 percent growth target fixed for fiscal year 2007-08. Rescued by the services sector, the Gross Domestic Product (GDP) growth stood at 5.8 percent even lower than the revised downwards target of 6.8 percent because of the rising oil and food prices, continued political uncertainty and law and order problems. Agriculture output: Giving details on the economy, Finance Minister Syed Naveed Qamar said agriculture output grew only 1.5 percent in the current fiscal year because of poor results from Pakistans main wheat and cotton crops. Manufacturing: Manufacturing grew by 5.4 percent, hampered by capacity problems, power shortages and law and order disturbances. The services sector grew by a higher-than-expected 8.2 percent against the target 7.1 percent, being the main driver of GDP growth, the survey said. Inflation: Inflation in the first ten months of the fiscal year was 10.3 percent, driven by rising oil and food prices but also by a sharp increase in government borrowing from the central bank. Qamar said public debt was 53.5 percent of the GDP at the end of this fiscal year, compared with 55.2 percent in June 2007. External debt liabilities rose from $40.5 billion to $45.9 billion due to a rise in the oil prices and higher prices and increased import of food. Tax collection by the end of June is likely to be at Rs 1 trillion, missing the target of Rs 1.025

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trillion. Exports grew by 10.2 percent between July 2007 and April 2008 but the overall export target is likely to be missed. Imports increased by 28.3 percent between July and April. sajid chaudhry. (DailyTimes-A1, 11/06/2008)

Basic pay, pension get 20pc raise

ISLAMABAD, June 11: The federal budget for the year 2008-09 envisages an increase of 20 per cent in the basic pays and pensions of all federal government and defence services employees. The minimum pension of government and defence service employees have been increased to Rs2,000 from Rs300. In his budget speech in the National Assembly, Finance Minister Naveed Qamar announced a 100 per cent increase in the conveyance allowance of government employees serving in Basic Pay Scale (BPS) of 1 to 19. He also announced a small increase of Rs75 in the medical allowance of employees in the BPS-1 to 16 by raising it to Rs500 from Rs425 per month. The minimum wage has been increased from Rs4,600 to Rs6,000. A pay and pension commission will also be set up to review the pay and pension of government employees and make recommendations for possible improvements. Government employees unable to work because of illness, accident, earthquake or acts of terrorism will get complete pension benefits because of the abolition of the condition of minimum 10-years of service in such cases. The minister has proposed regularisation of service of all contractual employees in BPS-1 to 15 in various government departments. Profit rate of the National Savings Schemes (NSS) are being increased by 2 per cent. The rate will be revised quarterly instead of biannually in order to minimise the gap in return on NSS and the rate of return in the market. The government has decided to continue with the National Internship Programme launched by the previous government for people who have completed 16 years of education. An estimated 30,000 post-graduates will benefit from the programme next year. The government has allocated Rs1.6 billion for this programme in the budget. (Dawn-4, 12/06/2008)

GDP growth target lowered to 5.5 per cent

ISLAMABAD, June 11: The cash-strapped government on Wednesday set a modest GDP growth rate of 5.5 per cent for the next financial year by lowering it from this years 5.8 per cent. The next years GDP growth target is expected to be achieved through a 3.5 per cent growth in agriculture, 6.1 per cent each in manufacturing and services while keeping inflation at about 12 per cent. The government has set an investment target of Rs2.638 trillion, 17 per cent higher than the outgoing fiscal year. In its Annual Plan 2008-09, the government admitted that it would be impossible to bring down the CPI inflation from the current level of 10.5 per cent because of the rising trend in international oil prices coupled with global food shortages. The annual plan said that the ratio of investment to GDP would stay around 21.5 per cent, almost the same level of the outgoing year. For financing the required investment, national savings as ratio to GDP is projected to increase to 14.3 per cent, compared to 13.3 per cent this year. Exports are expected to grow by 16 per cent to $22.9 billion from $19.7 billion of the outgoing year. The government said the export target was in line with the Mid-Term Development Plan (MTDP) 2005-10 and the Pakistan Export Plan 200613. Imports are expected to increase by 6.5 per cent to $37.2 billion because of rising food and oil import bill. Resultantly, trade deficit is expected to stay around $14.3 billion, compared to $15.2 billion this year. Workers remittances were projected at $7.7 billion, compared to this years $6.6 billion. An expected increase in remittances and trade deficit at $14.3 billion, the current account deficit is expected to stay around $12.7 billion or 7.2 per cent of GDP, compared to this years $14.1 billion or 8.3 per cent of GDP. The services sector will continue to be the main contributor to the GDP growth and is expected to grow by 6.1 per cent against this years 8.2 per cent. This will be achieved through growth rates in sub-sectors of the services sector: transport, storage and communication (4.5 per cent), wholesale and retail trade (5.4 per cent), finance and insurance (12 per cent), ownership or dwellings (3.5 per cent), public administration and defence (four per cent) and social community and personal services (seven per cent). The manufacturing sector is expected to grow by 6.1 per cent, compared to this years 5.4 per cent. The mining and quarry sector is projected to grow by five per cent based on 7.6 per cent increase in extraction of natural gas, 1.9 per cent in crude oil, 15.2 per cent in coal, 3.5 per cent in limestone and seven per cent in rock salt. (Dawn-4, 12/06/2008)

How the economy fared

THE economy may not be close to hitting the bottom. But its got every bare bone burgeoning twin fiscal and current

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account deficits, declining national savings, tax revenue and private investment, underperforming real sector, spiralling inflation, etc to trip over. As the Pakistan Economic Survey released on Tuesday shows, the task of sustaining growth even at the current revised level of 5.8 per cent is pretty challenging given the domestic constraints lingering political turmoil, energy and infrastructure crunch and poor law and order conditions. Then there are external shocks as well such as spiking global oil, food and commodity prices that have to be countered. Yet the economy needs to grow rapidly, and, at the same time, tame the price inflation. This is no doubt a tough job to do. The job at hand looks even more daunting at a time when all efforts to put the genie of inflation back into the bottle have already fallen apart and the country is all set to miss almost each and every major growth target for the current year. The economic growth moderating to 5.8 per cent, the lowest in five years and well below the 6.8 per cent achieved the previous year and the 7.2 per cent target for the outgoing year, may not seem to be a cause of much concern. Pakistan still remains one of the fastest-growing economies in Asia even at this rate. What is more alarming is the changing pattern of growth, mainly its deteriorating quality. Though economic growth in the past five years has mainly been driven by the services sector and private consumption, the contribution of the manufacturing and agriculture sectors and private investment to the GDP has dropped heftily. The real sector has put up a very dismal show and investment as percentage of the GDP declined, according to the Economic Survey for the outgoing fiscal 2007-08. Agriculture, which forms 21 per cent of the GDP and is the biggest employer of the labour force (43 per cent), has expanded by just 1.5 per cent due to the failure of major crops. Manufacturing, which makes up almost 19 per cent of the GDP and employs over 14 per cent of the workforce, has grown by just 5.4 per cent. Large-scale manufacturing couldnt even keep pace with manufacturing growth and dropped to 4.8 per cent. On the other hand, the large services sector, which is 54 per cent of the GDP, grew by 8.2 per cent. Most critically, investment, the key determinant of economic growth, slumped as percentage of the GDP to 21.6 per cent from a high of 22.9 per cent. Fixed investment also declined to 20 per cent from 21.3 per cent. Private investment, which makes up almost three-fourth of the total domestic fixed investment, rose by less than one per cent in real terms against the last three-year average of above 16 per cent in real terms. Foreign investment was down by 32.2 per cent to $3.6bn during July-April, foreign direct investment slumped by 16.7 per cent to $3.48bn and portfolio investment by 91 per cent to $99m. Almost 67 per cent of foreign investment went into the more profitable telecommunication, financial and oil and gas sectors rather than into the manufacturing or export-oriented sectors. Little wonder that the contribution of investment to GDP growth plunged substantially to almost 12 per cent from 45 per cent a year before. The government has already put aside the advice from the International Monetary Fund and the World Bank to further moderate economic expansion for the next fiscal year to a maximum of 3.5 per cent and is likely to pursue higher growth targeted at 5.5 per cent. But it would be a huge challenge for the government to attract domestic and foreign investment, especially in the productive sectors, in the given framework of the tight monetary regime created to leash the high price inflation. Inflationary pressures are likely to persist over a period of two to three years owing to global energy and food price shocks, removal of subsidies on power and fuel, a weakening rupee, widening trade and current account gap and burgeoning government borrowing from the State Bank of Pakistan to cover its swelling fiscal deficit. National savings required to finance investment as percentage of the GDP have already come down to just below 14 per cent from 17.8 per cent a year ago due to skyrocketing inflation. The increase in investment, essential for growth, is very much likely to stoke inflation, which is projected to cross 11 per cent at the end of this year against the target of 6.5 per cent. It is here the government will be required to strike a delicate balance between domestic demand and inflation food prices have already gone up by 15 per cent and encourage investment to remove supply side constraints. If the government succeeds in managing the economy prudently, enforcing stringent fiscal discipline, removing fiscal imbalances and creating a physical and social infrastructure for boosting industrial and agricultural output, it will be able to restore business confidence and trigger investment and growth. Also, it will be able to reduce poverty as investment in the real sector generates far more and better quality jobs. If it falters somewhere on the way, it will only fuel inflation at the cost of economic expansion, and leave hapless millions reeling under the escalating prices of food and energy. (Dawn-7, 12/06/2008)

Rs2tr budget: grappling with a faltering economy

ISLAMABAD, June 11: Facing daunting political challenges and an economic slowdown, the PPP-led coalition government on Wednesday presented a Rs2.01 trillion national budget that at once offers relief measures to the poor and the salaried class, imposes new taxes and slashes food, fuel and power subsidies. The budget, which was presented by Finance Minister Syed Naveed Qamar in the National Assembly after its earlier approval by the federal cabinet in a meeting chaired by Prime Minister Syed Yousuf Raza Gilani, seeks to meet a budgetary deficit of Rs582 billion by rationalising taxes, mainly by increasing indirect General Sales Tax (GST) from 15 per cent to 16 per cent a move likely to push already surging inflation further up. But economic experts said a drastic cut announced in the budget on food, fuel, electricity, and fertiliser subsidies from Rs407.48 billion to Rs295.20 billion would most hurt the poor already reeling from price-hike, inflation and food shortages. While the rationale behind the harsh decision is said to be an attempt at pruning fiscal deficit from 7 per cent to 4.7 per cent, it is common knowledge that international donors have been demanding the abolition of all subsidies for a long time. Senior government officials privy to the reason for the overwhelming slash in subsidies told Dawn that budgetary support had to come from external sources and such support for the budget for the coming fiscal was 29.7 per cent higher than last year. They said the government would have to make painful adjustments to achieve 25 per cent growth in revenue, whose target had been set at Rs1.2 trillion in the new budget. Net capital receipts have been estimated at Rs221 billion, against Rs59 billion of last year. However, analysts said the revenue target was too optimistic and, like the outgoing fiscal, would be revised downwards after some time when the federal bureau of revenue faced slippages.

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The finance minister said in the National Assembly that vulnerable groups would be protected from the price hike through the launching of a new programme, which will be known as Benazir Income Support Programme. For the programme, we are initially allocating Rs34 billion. The sum will be raised to Rs50 billion. This includes a monthly cash grant of Rs1,000 to each qualifying household to be selected through the computerised databank of Nadra. The beneficiaries of Benazir Card, he said, would also be provided other welfare facilities like employment, skill development training for youths, medical insurance and food subsidy. According to the budget document, servicing of domestic debt will come to Rs459.09 billion and foreign debt servicing has been estimated at Rs64.077 billion during 2008-09. Repayment of foreign loans has worked out to be Rs96.18 billion. The government seems to have backtracked on the claim of freezing the defence budget because the budget proposes a nearly seven per cent increase, from Rs277 billion spent last fiscal to Rs296.07 billion in 2008-09. However, it was not clear whether the increased budgetary allocation would go towards employees expenses or acquisition of defence assets. Resource availability estimated for the new budget is Rs1,836 billion, against last year's Rs1,394 billion. Net revenue receipts for the new budget have been worked out at Rs1,111 billion, indicating an increase of 23.1 per cent over last year. The provincial share in federal revenue receipts is calculated to be Rs568 billion, 22 per cent higher than last year. Capital receipts net for 2008-09 is estimated at Rs221 billion against Rs59 billion of last year. The overall expenditure is estimated at Rs2,010 billion, including current expenditures worked out at Rs1,493 billion, showing a decrease of 1.5 per cent over last year. The Public Sector Development Programme (PSDP) has been estimated at Rs550 billion, registering a 20 per cent increase over last year. The National Economic Council (NEC) had approved a Rs541 billion PSDP, which has been upped to Rs550 billion in the new budget. The share of current expenditures in total budgetary outlay is 74.3 per cent, compared to 77.8 per cent last year. The Water and Power Development Authority will get a subsidy of Rs74.6 billion, down from last fiscals Rs113.6 billion. Similarly, the subsidy for the Karachi Electric Supply Corporation will total Rs13.8 billion, against outgoing fiscals Rs19.59 billion. The subsidy for Trading Corporation of Pakistan on wheat and sugar will total Rs26.6 billion during 2008-09, against Rs46.5 billion of the outgoing financial year. The subsidy for Utility Stores has been increased from Rs1.8 billion to Rs2.7 billion for 2008-09. Subsidies on imported fertilisers, including urea, DAP and phosphatic fertilisers, will cost Rs35 billion to the exchequer during 2008-09. Subsidies on account of fuel oil and price differential claim of Oil Marketing Companies will be Rs140 billion, against Rs175 billion of outgoing fiscal. No allocations have been for research and development support for the textile sector during the next financial year. The budget proposes a total of Rs598.92 billion net transfers to provinces during 2008-09, including Rs505.7 billion from the divisible pool. The new budget incorporates Rs31.25 billion receipts through issuance of a global bond during 2008-09. Public order and safety affairs allocations for FY09 have been estimated to be Rs26.77 billion. Expenditures on education during FY09 have been estimated at Rs24.62 billion and Rs4.79 billion for social protection. A superannuation allowance and pension expenditures have been estimated to be Rs50.05 billion. Profits of the State Bank of Pakistan are planned to be increased from Rs88 billion to Rs110 billion during the next financial year. The government also plans to issue Pakistan Investment Bonds of Rs50 billion, prize bonds of Rs20 billion, treasury bills of Rs5 billion and government commercial papers of Rs40 billion during coming fiscal. The finance minister told the house that the government would reconstitute the National Finance Commission and convene its meeting as soon as nominations of members were received from the provinces. He said the projected income and expenditure indicated that the provinces were likely to benefit from improvement of about Rs79 billion in their cash balance after providing for the local component of their PSDP and extra expenditure. The finance minister conceded that the government did not have many resources and that we were never confronted with such grave problems. The budget for 2008-09 is part of the perspective plan on which the new government is currently working and the plan will shortly be finalised. Accordingly, we are taking a long-term perspective while announcing the budget. It will be useful to spell out the key assumptions about the macroeconomic conditions assumed to prevail during the year and will affect the budget. These include a 5.5 per cent growth rate of GDP, inflation will be contained at 12 per cent, fiscal deficit at 4.7 per cent, current account deficit to be reduced to 6 per cent of GDP and foreign exchange reserves will be increased to $12 billion. The finance minister also assured the house that loadshedding would be reduced by increasing installed electricity capacity to 1,500 megawatts. While the textile industry will have continuous, round-the-clock supply, flour and ghee mills will have 18 hours of power supply. Agricultural tubewells will have regular power supply for 10 hours at a stretch every night to make use of tariff rebate. Foreign investment in agriculture, he said, would be encouraged to increase productivity and develop cultivable areas. Large tracts of land would be made available to foreign investors to induct capital and technology in the local farming sector, he said.After the budget speech, the finance minister tabled the

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finance bill which was later transmitted to the Senate so that the upper house could formulate its proposals which could be incorporated in the final budget. Revenues and expenditures (rupees in billion) Major revenues Major expenditures (a) Tax revenue 1,251.5 Current 1,493.2 (b) Non-tax revenue 427.8 (a) General public service 929.5 Gross revenue receipts 1,679.2 (b) Defence affairs & services 296.1 External receipts 300.2 (c) Economic affairs 201.2 Bank borrowing 149.0 (d) Public order safety affairs 26.8 Less provincial share 568.3 Federal govt PSDP 399.7 Self-financing of PSDP Public sector development by provinces 124.4 programme by provinces 150.0 (By Ihtasham ul Haque, Dawn-1, 12/06/2008)

Rs549bn PSDP unveiled

ISLAMABAD, June 11: The government on Wednesday unveiled Rs549 billion Public Sector Development Programme (PSDP) for 2008-09 in contrast to the outgoing years allocation of Rs520 billion, showing a mere 5 per cent increase which, if calculated on the basis of double-digit inflation, would mean a reduction. The PSDP allocation includes Rs26.71 billion for Earthquake Reconstruction and Rehabilitation Authority (Erra) and Rs170 billion for the provincial annual development programmes, against Rs150 billion allocated in the current outlay. The sectoral distribution of the federal PSDP is as follows: Rs141.689 billion for infrastructure development, an increase of 44 per cent, and Rs197.565 billion have been earmarked for the social sector, or 51 per cent of the total PSDP. Other sectors like agriculture, industry and minerals have been allocated Rs31 billion. Keeping in view the decline in agriculture sectors growth, the new PSDP shows an increased allocation of Rs20.51 billion, against 15.79 billion earmarked in the outgoing fiscal. The next fiscal PSDP contains an increase of Rs3.1 billion in the development expenses of the Pakistan Atomic Energy Commission, which was raised to Rs15 billion while allocations for Wapdas water sector have been cut by about a billion rupees, and set at Rs62.42 billion, against the current fiscals Rs63-billion-plus and the power sectors allocations have been reduced to Rs14 billion, against Rs20 billion of the current year. Allocations for special programmes, which stood at Rs34 billion in the current fiscal outlay, has been reduced to Rs24.42 billion. Finance division, however, gets an all-time high allocation of Rs50.75 billion, an increase of Rs16.96 billion, but the education division gets only Rs6 billion, reflecting no increase over the current outlay. The provision for the health division have been increased to Rs19 billion against the previous years Rs14 billion. The communication division allocations were enhanced to Rs36.81 billion, against Rs29.61 billion earmarked in the outgoing fiscal. Allocations for Azad Kashmir and Northern Areas have been set at Rs17.6 billion, against Rs13.7 billion allocated during the current year, and Rs8.6 billion have been set aside for States and Frontier Regions. The Planning and Development department has been allocated Rs11 billion, against the previous allocation of Rs14.43 billion and the interior division gets Rs6.9 billion in contrast to the outgoing years Rs 9.5 billion. Allocations for the defence division have been frozen at Rs5 billion, while funds for law and justice division has been slashed to Rs2.38 billion from Rs4 billion, while the amount for cabinet division have been increased to Rs2.87 billion from Rs494 million, housing and works, which is planning to construct low-cost houses, gets an increased allocation of Rs4 billion, against Rs1.2 billion. Allocations for science and technology has been reduced to Rs3 billion from Rs3.6 billion, labour and manpower division to Rs123 million from Rs198 million, local government gets Rs108 million, culture division Rs413 million, sports division Rs350 million, youth affairs division Rs33 million and tourism division Rs18 million. The federal component of the PSDP has been sub-divided and federal ministries get Rs371 billion, Special Areas (AJK, FATA and Northern Areas) Rs26 billion, Special Programmes (KPP and others) Rs63 billion and corporations (like Wapda and NHA) Rs51 billion. The government intends to build hydroelectric power projects and dams to overcome energy and water shortages. In addition to new projects like Prime Ministers Pro-poor Income Support Programme, a revolving fund called Housing for All has been set up for government servants and introduces the PMs special initiative for white revolution and village product specialisation. The government also intends to expand and rehabilitate basic health units while the number of lady health workers are set to be increased from 100,000 to 200,000. (By Ahmed Hassan, Dawn-4, 12/06/2008)

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Construction workers: costliest city pays best wage to skilled ones

ISLAMABAD, June 11: Skilled construction workers get the highest wages in Islamabad and the unskilled the second highest among the capital cities in the country, according to the Economic Survey 2007-08. It presents comparative figures of the wages earned by skilled and unskilled labour in construction industry in the federal and provincial capitals from the 1993 to 2007, showing steady increase in the wages but does not mention the purchasing power of the rupee which has been falling. Islamabad is also known as the costliest city in the country. A mason, counted among skilled labour, earned a daily wage of Rs525 in the federal capital in the outgoing financial year as compared to Rs450 in Karachi, Rs491 in Lahore, Rs442 in Peshawar and Rs450 in Quetta. In the category of unskilled labourers, a labourers daily wage was Rs275 in Islamabad and Rs300 in Karachi. CARPENTER: A carpenters current daily wage is Rs525 in Islamabad, Rs450 in Karachi, Rs388 in Lahore, Rs375 in Peshawar and Rs500 in Quetta. LABOURER (Unskilled): A labourers daily wage in Karachi and Quetta is the highest of Rs300 followed by Islamabad where it is Rs275, in Lahore Rs250 and in Peshawar Rs200. During the period 1999 to 2006, 11.33 million work opportunities were created. However, in 2006-07 only 0.70 million employment opportunities, of which the bulk was created in the rural areas (0.62 million) and only 0.08 million in the urban areas.Thus indicating a weaker labour market situation, especially in the urban areas of Pakistan. (Dawn-5, 12/06/2008)

Direction right, response weak

THIS years budget makes one feel that the mandarins in the ministry of finance are in denial of the reality that Pakistan is facing a serious economic crisis and the risk of stagflation in the coming year, with the oil price threatening to break $150-a-barrel level. It would be somewhat unfair to lay the blame entirely on the PPP government that not only inherited an economic mess but was also ditched by its coalition partner half-way through the budget making process. However, these reasons or excuses, depending on ones views, are irrelevant to the people. This years budget does not do much to provide any immediate relief to the people hurt by a record 19 per cent inflation and provides little hope that the government feels strong or confident enough to make tough decisions to either expand the tax net or slash wasteful government spending. It is based on rather optimistic assumptions about the future economic performance of a country that has the second or third highest inflation rate in the developing world and one of the worst levels of budget and current account deficits. To say that the situation obtaining is the consequence of just one bad year would be an oversimplification of the problems and a serious underestimation of the challenges ahead. The budget does contain many well meaning steps and incentives for agriculture, industry, and relief for the extremely poor that are in the right direction. But as a whole, it falls short of a bold response that is needed to face what may turn out to be the most difficult year for Pakistans economy in decades. The GDP growth target of 5.5 per cent is ambitious at best and wishful thinking at worst, when viewed in the backdrop of a tight monetary policy, outlook for high oil prices, three per cent drop in the production of major crops this year, and a struggling textile sector. If the GDP growth and other estimates turn out to be optimistic, as last years were, the whole budget exercise may prove to be an academic one. The tax revenues are projected to increase by a one-fourth compared to an average growth of 18 per cent during the past two years when the economy was growing at a rate of 6-7 per cent. The finance minister announced amnesty on all undeclared assets if the taxpayers would pay two per cent on their market values. But this has been tried before and did not work. Afraid of antagonising powerful vested interests by bringing them into the tax net, the budget plans to raise 56 per cent of the additional tax revenue from indirect taxes and has raised the general sales tax by a percentage point to 16 per cent when about nearly 80 per cent of the tax burden is already faced by common people. Hence, the sales tax revenues are budgeted to contribute Rs110 billion or 45 per cent of the planned increase in the total tax revenues. The decision to raise import duties on luxury goods is a welcome step and is projected to contribute to a net increase of Rs32 billion in revenues. It can be argued that it would have been unfair to expect this PPP government to come up with bold measures such as major cuts in establishment and defence expenditures in the current political environment. So it did what it thought was a pragmatic thing to do: control the fiscal deficit and money printing spree of the previous government. It has cut subsidies by Rs112 billion to Rs295 billion which would still amount to about 20 per cent of the current expenditure, almost equal to the defence spending. This means that the consumers should get ready to pay even higher prices for petrol, electricity and wheat. The budget makes a small gesture for the extremely poor --- the PPPs traditional constituency --- by starting a Rs-34billion income support programme, but this would amount to a monthly sum of about Rs170 per person. This together with the allocation of Rs28.4 billion for the Peoples Works Programme is a considerable sum but runs the risk of a political backlash if implemented poorly. Aside from the implementation issues, it is questionable if this is an intelligent use of resources for a government that has limited policy options. This money would have been better spent on providing additional subsidy on diesel oil. The contribution of rising fuel prices to the overall inflation cannot be ignored as the country is heavily dependent on the trucks that use diesel to carry goods including agricultural products.

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If the government is expecting large aid flows from foreign governments or donors, the budget documents do not reveal this but this may be the most important aspect of the current economic situation that is not mentioned in the budget. Is the government expecting to be bailed out by the United States, Saudi Arabia, and others? Even if it succeeds in getting some aid, it may not be enough and borrowing more is hardly a way out of an economic crunch. Belt tightening is, but Pakistans establishment does not seem to be ready or willing to do that. (By Yousuf Nazar, Dawn-1, 12/06/2008)

A lacklustre budget
The first reaction to the figures presented for the federal budget for 2008-09 is that many of the estimates seem unrealistic at best. For instance, the budgeted amount for overall expenditure is estimated at Rs2,009.8 billion. While this may be higher than the budget estimates of Rs1875 billion for total expenditure for 2007-08, the government and its finance managers would have surely noticed that actual expenditure in 2007-08 was, according to the Economic Survey released on June 10, an astounding Rs2,228.9 billion! This is almost 19 per cent higher than the budgeted estimate and the survey attributes the overrun to the rising price of oil - which it quotes as being $115 a barrel in May 2008 - and the government having 1.7 million tons of wheat at all time high prices. So, if the government (be it the former PML-Q one and partly the caretaker administration of Mohammadmian Soomro) overran the budgeted expenditure estimate by such a massive margin, one can only wonder what gives this government so much confidence for it to set a budgeted amount for overall expenditure some Rs200 billion lower than the actual expenditure for 2007-08. Perhaps, one reading of this, giving the current government the benefit of the doubt, could be that the amount indicates a belt-tightening, given the current global economic environment. But here too lies a caveat two of the key reasons mentioned in the finance ministrys Economic Survey 2007-08, spiralling oil prices and the government being forced to import 1.7 million tons of wheat at all time high prices - are both likely to stay during 2008-09. The oil factor is obvious: the Economic Survey cites it as being a thorn in the governments side at a time when the price for a barrel was $115, and now it is close to $140. As for the wheat issue, the reason was smuggling to Afghanistan and hoarding by local sellers, both of which continue unabated. The bulk of the revenue, as expected comes from direct and indirect tax collection but here too the outlook is not all that bright. As admitted by the government itself, Pakistan continues to have among the lowest tax-to-GDP ratios in the world, around 10 per cent, while the average for developing countries is in the region of 17-18 per cent. In this regard, the budgeted estimate for tax collection of Rs1,251.5 billion, compared to Rs1,025 billion for 2007-08 seems overly ambitious. How the government intends to improve the Federal Bureau of Revenues efficiency such that its collection increases by almost 25 per cent is something that many would like to pay close attention to in the coming years, especially given that the tax collection and administration mechanism continues to be riddled with corruption and inefficiencies with officials exercising too much discretion and authority. In any case, one needs a booming economy to achieve such an ambitious increase in tax collection and given that growth may be decelerating this may become next to impossible. The allocation of Rs296.1 billion to defence and services - though the prime minister has said that the defence budget has not risen in real terms - again means that a large chunk of the outlay is reserved for the upkeep of the military and that Pakistan continues to be one of those unenviable developing countries which spend far more on their armies than on arming their citizens with a good education and providing them access to a safe, reliable and affordable healthcare system. The biggest chunk of the overall budget expenditure is, as always, to go on running the government. At a whopping Rs929.5 billion, the amount is also said to include pensions as well as debt servicing but is reflective of a very large, overbearing, bureaucratic and generally inefficient government machinery. That it has been rewarded in the form of higher salaries will be more or less a slap in the face of salaried persons working in the private sector and other nongovernment fields because for most of them, their employers do not necessarily index their wages to inflation. The public sector development programme (PSDP) has been budgeted at Rs549.7 billion, slightly lower than last year but it remains to be seen whether the oil price crisis and other economic issues dont end up restricting the governments ability to finance the PSDP. In this regard, the deficit between expenditure and revenue for 2008-09 is to be met partly by government borrowing, but this figure too appears to be highly unrealistic and ignores what happened on this account during 2007-08. The government has set a limit of Rs149 billion for bank borrowing to finance its expenditures for 200809 but surely it knows that this is low given that during 2007-08 actual bank borrowing by the government crossed the budget estimate by a staggering 330.5 per cent! Again, the simply, almost school-boyish question, that immediately comes to mind is that how does the present government intend to restrict bank borrowing to the targeted amount given that many of the external factors that were behind the overrun for 2007-08 are very much there. The depressing fact is that the financing of the government machinery, debt servicing and defence budget have consumed 60.9 per cent of the 2008-09 allocations. For this to be the case with a country as poor as ours is nothing but a shame. Yes miracles should not be expected overnight but the dismal pattern of the past, with these three heads eating up close to two-thirds of every rupee that the government spends is being repeated all over again. And at a time when the average Pakistanis individual budget is shrinking from all sides. It is reducing because of rising petrol and kerosene prices and it is shrinking because of rampant inflation, particularly food inflation. At the same time, his/her access to public services and amenities such as sanitation, clean drinking water and safe and reliable roads has not improved in terms of quality. In fact, the same is true for education and healthcare facilities or even to a provision as basic as vaccination, where for example the re-emergence of polio in parts of the country means that the inoculation programme for combating it is seriously flawed. The only consolation for the PPP government and Mr Naveed Qamar is perhaps that much of this has been inherited by them, given that the government was formed less than three months ago. However, that is of little consolation to the ordinary Pakistani for whom the budget, yet again, holds little promise or hope. (The News-7, 12/06/2008)

Govts failure to check inflation may cause 12pc raise in prices

ISLAMABAD: The inflationary trend is likely to persist during fiscal year 2008-09 and may cause 12% increase in prices.

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PPP government has estimated Consumer Price Index (CPI)-based inflation hovering around double-digit (12 percent) increase in prices in the next fiscal year, said an independent economist while talking to The News after the announcement of the budget 2008-09 here on Wednesday. "It will result into evaporating the purchasing power of the low income group," he further said. The government has curtailed its borrowing from banks to the tune of Rs149 billion for 2008-09 from Rs424.107 billion for the outgoing fiscal year, which will help in reducing inflationary pressure. But the government's plan to reduce subsidy on oil and electricity will further fuel the inflationary pressure in the next fiscal year so the net result would be higher inflation especially related to food items, he further said. The federal government has also announced to initiate Benazir Income Support Programme worth Rs34 billion in order to protect the poorest of the poor by providing them with Rs1000 cash grants but the expected rise in POL, electricity and food prices will prove this subsidy a meagre amount for mitigating the miseries of the poor segments of the society. Fuelled by 15 percent food inflation in the outgoing fiscal year, the CPI went up to 10.3 percent in first ten months well above the annual target of 6.5 per cent. As major share of the poor persons' consumption expenditure is incurred on food items, the prices of which have increased drastically during the current year 2007-08 and the trend is likely to persist in the FY 2008-09. The inflation rate of 12 percent estimated for the people of lower income groups in the range of Rs3000--Rs5000 per month is relatively higher over the other groups. It eats into real incomes and expenditures which undermines the gains from poverty reduction policies and human development that an emerging country targets. According to the Economic Survey 2007-08, the single largest component of the CPI is the food group, which makes up 40.34 percent of the CPI, and it showed an increase of 15.0 percent. This was higher than the 10.2 percent food inflation observed over the corresponding period of last year. A further breakdown of food inflation into perishable and non-perishable food items reveals some interesting facts. The rise in the price of perishable food items stood at 8.7 percent whereas non-perishable food items stood at 13.6 percent. Based on the current trend observed, the contribution of food inflation to the overall CPI is estimated at 59 percent and non-food inflation at 40 percent as against 52.4 percent and 47.2 percent respectively in the comparable period last year. Several domestic and international factors have contributed to the extraordinary surge in the domestic price levels in Pakistan. The high price of food and energy in the international markets can be primarily blamed on a confluence of factors that are not only structural and cyclical in nature but also involve demand and supply dynamics. The exceptionally high trend in food inflation during the current fiscal year indicates that prices of a few (18) essential food items registered sharp increase particularly during the second half of the fiscal year. The high food inflation adversely affects the low and fixed income groups as a majority of their total monthly expenditure is on food items. Thus sharp increase in prices of some key food items puts a lot of pressure on the poor segment of society. Other significant contributors to this year's upward inflationary trend include house rent, which is the index that measures the cost of construction in Pakistan, racing to 11.35 percent by April 2008. (The News-1, 12/06/2008)

Highlights of Budget 2008-09

20pc increase in basic pay for civil and defence personnel 20pc increase in net pension for civil and defence personnel Minimum pension up from Rs 300 to Rs 2,000 100pc increase in conveyance allowance for BPS 1-19 Medical allowance up from Rs 425 to Rs 500 for BPS 1-16 Increase in minimum wages to Rs 6,000/month from Rs 4,600/month Profit on NSS up by 2pc, rate revision now quarterly, instead of biannually Civil servants rendered unfit to work to get complete pension benefits Regularisation of contract employees from BPS 1-15 Pay and Pension Commission to review emoluments of civil servants Customs duty on 1800cc cars and above increased to 100pc 5pc FED on import and supply of local cars with 850cc capacity Rs 500 customs duty on import of cellular phone Import duty on betel leaves up from Rs 150 kg to Rs 200 kg FED on telecom services up from 15pc to 21pc FED on banking, insurance and franchise service up from 5pc to 10pc FED on cement up from Rs 750 PMT to Rs 900 PMT Levy of minimum tax @ 0.5 pc abolished Basic exemption up from Rs 150,000 to Rs 180,000 Basic exemption for women up from Rs 200,000 to Rs 230,000 Uniform tax rate of 2pc proposed for commercial, industrial importers Industrial, commercial consumers to pay advance tax @ 10pc on electricity bills exceeding Rs 20,000, adjustable against final tax liability Income on property tax now to have three brackets from 5pc to 15pc on different income slabs Housing developers and builders to pay Rs 100 per sq yard on developed plots, Rs 50 per sq ft on constructed property.

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(The News-1, 12/06/2008)

Mixed reaction to budget

ISLAMABAD: The federal budget presented in the National Assembly on Wednesday elicited mixed reaction from a cross-section of the society as some termed it balanced while others particularly the opposition felt it anti-poor. The opposition termed the budget 2008-09 a frustrated, anti-poor and lacking ownership and said even the government has failed to fulfil its promises with the people they had made during elections. The budget did not offer any incentive for industry and will lead to only creating more unemployment in the country, said Leader of the Opposition Chaudhry Pervaiz Elahi while talking to the newsmen here at the parliament house after the presentation of budget. Elahi said the budget offered no relief for the poor and had also failed to implement the promises, which the PPP made during the election campaign. He said there was no mentioning of any kind of reduction of prices of flour, ghee, pulses and sugar in the budget. He said the government has announced to allocate Rs 75 billion for the construction of dams and provision of electricity, but it did not mention Kalabagh dam. Kalabagh dam should be constructed which is vital for progress and prosperity of the country, he said. Criticising the government policy regarding fertilizer, he said during the PML-Q tenure the prices of fertilizer was Rs 1,200 and now it stands Rs 3,000 so the farmers will not get any sort of benefit by subsidy. He said the present government was carrying the programmes of previous government but had changed their names. We will support those programmes such as lady health workers and so on, he added. He said the government has not provided relief to the industrial sector and the construction sector will also not be developed which will increase the difficulties of the labourers. He said the price of cement has already been increased. To a question, the opposition leader said it is the only government, which supports the long marches and processions against itself. He said about one billion rupees are being spent on the long march. Agencies add: President Jamhoori Watan Party (BWP) Talal Bugti said Rs 275 billion defence budget being presented by the government in office had no justification as the country nation were passing through a very grave situation in which such massive defence budget was an excess and injustice with the people. People from various walks of life appreciated the allocation of Rs 34 billion for the poorest of the poor under the Benazir Income Support Programme. Meanwhile, the federal ministers including Raja Pervaiz Ashraf, Sherry Rehman, Neelum Jabbar Chaudhry and Adviser to PM on Interior Rehman Malik appreciated the budget, terming it poor-friendly and balanced. MNAs from the treasury benches, including Hina Rabbani Khar and others also expressed their satisfaction on the budget. Meanwhile, former finance minister Ishaq Dar lauded the government for presenting best budget under prevailing economic situation of the country. Best steps have been taken in the fiscal programme to improve efficiency of the agricultural and industrial sectors, Ishaq Dar told media men outside the parliament house after the budget-session. He termed the budget Awami, and said efforts were made to provide direct relief to the poor segments of the society under the Benazir Income Support Programme. Meanwhile, Adviser to the Prime Minister on Industries and Production Mian Manzoor Wattoo termed the budget pro-poor and said that Rs 1,000 assistance to poor families will help them stand on their feet. He appreciated the proposed measures to increase industrial and agriculture production. JUI-F Chief Maulana Fazlur Rehman said the budget will provide relief to common man. He said although the business community is under pressure owing to law and order situation, but despite these difficulties, there are many incentives for them. PML-N leader Tehmina Daultana termed the budget balanced in given economic conditions. Minister for Information Technology Qamar Zaman Qaira said it was our effort to present the budget in accordance with the wishes of people and the finance minister was successful in his endeavour. Minister for Labour and Manpower Syed Khurshid Shah said the increase in the salaries and pensions of government employees and armed forces are hallmark of this budget. Ms Donia Aziz of PML-Q termed the budget a replica of previous budgets presented by last government. She said our government provided electricity in the far-flung areas. (By Asim Yasin, The News-1, 12/06/2008)

Poverty higher in Sindh than Punjab

Poverty levels in Sindh are higher than those in Punjab and the provincial government is trying to deal with the situation by implementing poverty alleviation schemes, Sindh Chief Minister Syed Qaim Ali Shah said Wednesday. He was speaking with a delegation from Karachi Stock Exchange (KSE). The group comprised KSE MD Adnan Afridi and Arif Habib, while Minister for Board of Revenue Syed Murad Ali Shah and other authorities were also present on the occasion. The chief editor of a Peshawar-based daily, Rehmat Shah Afridi, also called on the chief minister. The CM appreciated the performance of the KSE and said that it had played a vital role in strengthening the economy of

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the country. Shah said that there would be no new taxes in the provincial budget. Efforts are being made to generate employment opportunities for the youth, while incentives would be offered to attract foreign and local investment in the country, particularly in Sindh, Shah said. In the wake of the global food crisis, the government has decided to provide incentives for the promotion and expansion of the agriculture sector, which, Shah said, was the backbone of Sindhs economy. (The News-14, 12/06/2008)

Thoughts on the budget

We must not forget the cost to the hapless taxpayer of maintaining a fleet of executive jets, each more expensive, bigger and faster than the previous one, with each jet of an entirely different make and model (one a Citation, another a BeechJet, the third a Falcon, and so on) presenting a maintenance nightmare and doubling the cost of maintaining them, the salaries and perks of the awam's representatives which they solemnly vote to increase periodically with nary a thought to making even a token sacrifice, the staggering costs of the President's House, the Prime Minister's House, the Army House, and other houses, and so on and so forth where the cost of a quiet dinner (not a banquet) in one of these Houses can feed five hundred people, most of whom haven't had a square meal in a month. The list is endless and the waste simply mindboggling. And no one seems to blink an eye. Nor should it be forgotten that the entire cabinet and national and provincial assembly members, and all other sundry VIP's will now all fall seriously ill and proceed abroad in PIA's new sleeper seats at government expense, attendant in tow, as permitted under the rules made for them and by them, ensconce themselves in the most luxurious hotels, eat and drink heartily, and have their blocked arteries reopened, reflecting, as my friend Khalid Hasan puts it, "evidence of their lifelong love of deep-fried trotters," if de-clogging should be deemed necessary. Otherwise, it's just a "check-up" to ensure robust health to cope with the challenging task of running the country mixed in with some shopping, all brought back duty-free, causing loss of revenue to government. But what is the whole point of being a VIP if you have to pay import duty like everyone else? Another area which can do with some cost cutting and a better sense of priorities is the public sector development programme. Because they are called developmental, it is generally thought that this is a good thing and there must be more of it. Nothing could be farther from the truth. The size of the development programme is invariably too large and beyond our absorptive capacity to implement efficiently. It is over-stuffed with badly-designed projects of dubious economic and social value, sponsored by powerful and aggressive government departments, ministries, politicians, and bilateral and multilateral aid agencies, projects longdelayed and slow-moving with massive cost overruns and no hope of completion (and which should be abandoned instead of throwing good money after bad), other projects starved for funds, etc. In the aggregate the public sector development programme probably yields a rate of return below the cost of capital. The government might as well put the whole allocation in a Khaas deposit and let the private sector do the development for them. These expenditures can be pruned and the focus sharpened towards projects and programmes which are truly viable and stand the test of rigorous cost-benefit analysis. The Planning Commission, while sadly denuded of talent, can still do this job if it is left to do so without let or hindrance and if it is not sidetracked into dusting off an old "mega" project or two (to keep up appearances with the previous government), that was discarded as uneconomic and unfinanceable twenty years ago and shove it in the development programme, choking it further, spreading money thinner, starving more projects, some of which might actually be good projects, and slowing everything down. That the development programme is 11 percent bigger than the previous year is no cause for celebration. It simply implies more waste. An increase in the salary of government servants appears to be a done deal. Since the private sector will take its cue from what government does, there is likely to be a generalised wage push in the economy, risking more inflation. This would erode the real value of the wage increase that was intended to offset past inflation in the first place and possibly leave the wage earner worse off than before. There is little to be done about this with inflation soaring and adversely impacting the fixed income groups. It is pushing them to despair and suicide. Some compensation, whatever the cost, needs to be made. Yet, all need not be lost. Tight macroeconomic policies can still ensure that inflation and inflationary expectations do not become embedded and lead to a second-round spiral of wage and price increases which cascade through the economy and exacerbate the initial wage push. There appear to be some sensible proposals on cash transfers to the truly poor and needy who have been devastated by inflation. A few caveats, however. One hopes we have been able to identify the poor (not an easy task) and know where they reside and how they can be reached; and one hopes this will not become another avenue for corruption because the word "cash" must put a twinkle in many an eye. Additionally, this cash transfer system has not been tried in Pakistan before. There is a risk that it might prove to be too little and be misdirected and bring a bad name to the new government. Its implementation will need to be monitored carefully. Who will do this remains to be seen although any and all ministries and departments must be salivating at the bit to take on this noble task. Finally, on the highly emotive subject of eliminating subsidies which would help cut budgetary expenditures drastically. The experience of subsidies in Pakistan has not been a happy one. They have proved to be open-ended, badly targeted and wasteful and their benefits accruing mostly to the rich. While eliminating or phasing out subsidies is always a painful undertaking, and will be widely condemned, the question is, how long the Pakistan economy can remain insulated from seemingly irreversible global developments? The rising price of food and oil globally does not appear to be a one-time phenomenon which may reverse itself anytime soon. All nations, rich and poor, are and must adjust to the new ground realities.

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Even America, a nation with the greatest gas-guzzlers (and polluters) in the world, is adjusting. With pump prices soaring, the sales of hybrid vehicles (using gasoline and electricity) are up 56 percent while those of large-engined sports utility vehicles, once much loved and in virtually every garage, have fallen steeply and plants producing them have been shut down. The unfortunate fact is that if there are subsidies, someone has to bear the cost. Someone has to pay the price because there is no free lunch. If subsidies mean a higher fiscal deficit than would otherwise be the case, and a higher amount of monetary financing of that deficit than is prudent, the cost to the people will come through more insidious channels, and in the cruellest form of all and which hits the poor the hardest. Higher inflation. This is the trade-off and this is precisely what is happening today and needs to be rectified as carefully and humanely as possible. Many would argue that to ease the pain, the government should remove some of the hefty taxes it collects on oil and its products. In principle, this is not a bad proposal. But where is the revenue lost to be made up from, given that our tax collection effort can barely hold its head above water and is actually sinking? Or where can offsetting expenditure reductions be found so the impact of removing oil-related taxes is, at least, neutral? One last point. One hopes there will be no price controls. That would be the best way of ensuring that every commodity subject to price controls disappears from the market immediately. The up-coming budget will, no doubt, be declared pro-growth, pro-poor, pro-business, pro-development, pro-people, prodemocracy, and pro-everything else imaginable by the government, and bashed by the opposition. It will also be a deliberately confusing document, as it always has been, set out in a manner completely different from internationally acceptable accounting practices, with, for example, borrowing being called "capital receipts" and external borrowing being considered as part of our "resources," both words completely misleading but which at least sound nice. The fiscal deficit shown in the budget documents will only be that part of the deficit that will be financed by the central bank, and not the bigger, truer overall fiscal deficit as conventionally defined and measured internationally, all to dupe everyone and make it look good. As one of Pakistan's most bright and able economists, who was briefly finance minister and presided over a budget, confessed to this writer: "I have no idea how they make the budget." Rest in peace, Doctor Sahib, neither does anyone else. As for me, I hope this esteemed paper doesn't ask me to write anything after the budget is out. I would have to decline because I won't have a clue about the budget numbers either and would be completely lost if there were any budgetary measures with unpronounceable Urdu names. Let the budget be all things to all people and more, and let it confuse everyone as it always does. But let it, on a serious ending note, also be a sound and credible budget that influences expectations positively, plays its due role in stabilising the economy and, along with other policies, starts the process of pulling it back from the brink. (By Dr. Meekal Aziz Ahmed, The News-6, 12/06/2008)

Sindh govt desperate to take over the MTD

Differences between the Sindh government and the City District Government Karachi (CDGK) may increase as the former looks desperate to take over the Mass Transit Department (MTD) of the city government. The mass transit should be given to the Sindh Government so that we can work on our policies without any hindrances, suggested the Sindh Transport Minister, Akhtar Hussain Jadoon. In an exclusive interview with The News at his office, Jadoon expressed serious reservations regarding the existing system of the Sindh government which, according to him, cannot work unless all powers are given to the Ministry of Transport. All the main departments are under the control of the CDGK making it a system within a system, which should not be the case, said Jadoon. They have spent approximately Rs80 million only on their visits to foreign countries which is a huge waste, he lamented. The federal government gives funds to the Sindh Ministry, which are to be returned by us along with interest but the same is being utilised by the CDGK, which is ridiculous, he complained. If the federal and city government have to work for the city, then what is the purpose of having a transport ministry he questioned. Jadoon further said that as far as Karachis transport and traffic issues are concerned, they cannot solve them unless they have the power to do so. All the key areas including the inter-city bus terminals, truck stands, urban transport are under the control of the CDGK, he continued, adding that even the most important mass transit cell that can play a vital role in Sindhs development is also controlled by the city government. The provincial minister said that without a proper mass transit system the city cannot be given a good transportation system. I fail to understand why the funds of the federal ministry are used by the city government if they are to be returned by the Sindh government, he said. Regarding the fitness of the vehicles and other traffic problems, he said: The Motor Vehicle Fitness Department should also come under the transport ministry and the driving license branches should also be represented by us. He further added that the transport system of the city and rest of the province can be reformed only after the authority is transferred to the Sindh government. Replying to a question regarding their transport policy, he said: In the first stage, I have to make sure that all powers are taken back by the transport ministry and then, we will introduce a formula or a system under which every one will have to abide. He mentioned that they would encourage the private sector especially the foreign companies since improved technology is the need of the hour, although they would not ignore the transporters needs. I will take these transporters into confidence regarding our transport policy so that no one suffers, he explained. When asked whether the government has any plans to launch their own transport services, he answered that they are considering the option of operating government owned transport but that will be possible only if the circumstances permit. As far as the CNG buses are concerned, he said that they have proposals from several companies. However, they cannot sign any contracts unless they have complete authority. Giving details of a recent proposal about the CNG buses,

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he mentioned that a Pakistani company has showed interest in this regard and they want to spend five million dollars while a Chinese company famous for manufacturing CNG buses will provide technological support. Under this proposal, two CNG buses will be brought in December and shall be operational in the city on an experimental basis. These buses will be able to carry 45 seated and 30 standing passengers while its manufacturing will be carried out, keeping in view the weather conditions of Karachi as well as interior Sindh, Jadoon said. These buses will be able to run on even three feet of water and will have a life span of 10 years. When The News asked him, how long it will take them to get the powers back, he answered that they have already sent a summary to the chief minister in this regard and are hopeful that it will be approved soon. Once it is approved and the control of these departments is given to us we can start working for the betterment of the transport system across the province, he concluded. (By Farooq Baloch, The News-19, 12/06/2008)

$7.5m ADB loan for Lahore mass transit

RAWALPINDI, June 12: The Asian Development Bank (ADB) has agreed to provide $7.5 million loan to Pakistan for technical assistance in the Lahore Rapid Mass Transit System (RMTS), it was officially learnt here on Thursday. The loan will help the Punjab Planning and Development Board to prepare a structured design for the project aimed at improving the urban rapid mass transport network in Lahore. The $7.5 million technical assistance includes a foreign exchange component of $6 million. The government sought the ADB assistance to develop a mass transit system for Lahore as part of the banks growing engagement in the countrys urban infrastructure and services sector. (Dawn-3, 13/06/2008)

Budget or a wish list?

BUDGET 2008-09 is an ambitious document bordering on the wishful, considering the current chaotic international economic environment and the tight domestic resource situation. One has no dispute with its size or its targets for growth, budgetary and current account deficits, the rate of inflation and so on and so forth. There is so much to be done and so little to go by. Still, the budgetary proposals for the next fiscal year announced by Finance Minister Naveed Qamar appear totally oblivious to the economys current resource generating ability. Neither do the authors of the budget seem to have kept in mind the current inflationary fires in the country while estimating expenditure. Never ever in Pakistans fiscal history has the country managed to expand its revenue income by 25 per cent in a matter of a year. Drastic reforms are needed to be introduced in the Federal Board of Revenue (FBR) to build its capacity to estimate and collect revenues more efficiently. Nor has the government ever succeeded in keeping expenditure from going through the ceiling by at least 10 per cent by the end of each fiscal year. In order to be able to keep expenditures within budgetary estimates the government would first need to give up all those activities which overlap those of the provinces. It is, therefore, essential that the concurrent list is removed from the constitution urgently. It has become a tradition with successive finance ministers, whether they have attainted the position through a political process or those selected by military dictators, to overestimate income and underestimate expenditure. They have all been selling dreams through annual budgets to a people undergoing a never ending nightmare. Indeed, one can hardly find any fault with the priorities of the next years budget or its aims. The budget speech contained all the right ideas and the proposals included all the right economic measures needed to be taken at this point in time. But then that has been the case with all the previous budgets and all the mid-term economic plans made in this country over the last 61 years. Our official economic managers have a knack with rhetoric. They have been known to have drafted the most ideal plans and most effective speeches. Remember the story about South Korea adopting one of our five year plans in the early 1960s and becoming a tiger? We as a nation are very good at words but lack pathetically when it comes to action. It is at the delivery stage that we fail, partly because of inefficiency of the implementing personnel and the agencies, partly because of vested interest and partly because Islamabad over the years has ceased being sensitive to the publics needs. The finance minister has announced a number of seemingly sound measures to boost growth in the agricultural sector. One can hardly question the logic of any of these. But then as they say, the taste of the pudding is in the eating. Unless these measures are implemented earnestly and according to the plan and on schedule, there cannot be any positive change in this sector by end year. Here it would not be out of place to emphasise that with food prices sky rocketing the world over, we would be in a hotter soup if we failed to implement the proposed plan and; if we did we stand to earn a lot of much needed foreign exchange by exporting surplus food. Similarly, the measures to boost growth in the manufacturing sector also appear, on the face of it, rather sound. One would, however, like to point out that since most of our industry except textile is heavily dependent on imports, especially chemicals, machinery, medicine, two and four wheelers etc. and that too from far away lands it would be in the fitness of things to see if we could import these items from neighbouring India and China because with oil at $138 a barrel and expected to reach $150 soon the shipping freight rates would make these imports from the present sources rather too exorbitant. The finance minister has pledged to significantly reduce borrowing from the State Bank for budgetary purposes and to mobilise the required resources from non-baking sources. This measure would help curb inflationary trends. Also, one would not take issue with the proposal to slash subsidies. But then care must be taken to see that the indigent do not suffer much from this step. There are a number of measures in the proposals to put some extra spending cash in the hands of the poor, the salaried classes and the pensioners. The Benazir card is a welcome measure but care should be taken that it is not distributed only among the supporters and workers of the ruling coalition parties. Only a feeble attempt has been made to get the real estate sector to contribute its due to tax revenue. To encourage investment and documentation, the rich have been asked to whiten their black money by paying a two per cent tax. And the stock brokers have been allowed exemption from capital gains tax for two more years. These measures would only widen the gap between the rich and the poor and give rise to serious social inequities. The government could still keep these inequities within limits if it adhered strictly to its development projects in education, health and infrastructure. And there was nothing in the budget speech to back the governments earlier claim that the defence budget would no more be confined to one line.

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(Dawn-7, 13/06/2008)

Poverty eradication
THE founding fathers of Pakistan and the Constitution of 1973 envisioned the country as a democratic, developmental and welfare-oriented state. The state was expected to encourage economic growth and spread welfare gains equitably across regions and people. Such visions have hardly been used as the basis for public and social policy formulation in the country or to create a feeling of fraternity amongst the federating units in the course of economic development. In fact, such visions have been thwarted and the availability of economic, social, political and administrative factors for equality appears to have been crushed by the authoritarian, extortionist, and predatory clutches of the state. The fact that every fourth Pakistani, despite some claims of poverty reduction since 2001- 02, lives below the poverty line, seriously questions the 60 years of development performance of the state in Pakistan. Statistically speaking, more than 40 per cent of Pakistans population which is clustered around the poverty line has become a primary target of negative shocks to their real incomes. And the story does not end here. Under the current downturn of the national economy, this population segment has suffered a devastating blow to its long term capability to sustain the shock and fight back for survival as well. There are two reasons for this development of underdevelopment. One reason is that with such dips in purchasing power, the vulnerable fall into the poverty trap and a vicious circle of socio-economic and political deprivations and exclusions sets in. The poor quickly lose access to mainstream economic activities and resources. They definitely have no access to a single rupee of the sixty billion that were given away as bank loans and were written off during 1999 to 2007. The second reason is rooted in the absence of a developmental and welfare oriented activist state. This ensures that any residual social entitlements to decent public health and education opportunities as well as income and respect vanish like water in a drought. A state consistently failing to plan and execute public-sector development despite its vision of creating equality needs thorough soul-searching. To be able to cure socio-economic ailments, the state needs to go beyond the social safety net approach and try to formulate trade, industry, investment, education, and health policies which are in sync with egalitarian outcomes of economic growth and development. The state should also know that economic and social inequality becomes an ignition switch that triggers flames of social upheaval, political unrest, and ultimately result in insolvable problems of national unity. However, on the contrary, at the highest decision and policy-making levels, the ideas of getting institutions and interventions right for egalitarian development have been consistently neglected. The real casualty has been of those possible institutional innovations and cross-cutting interventions which could build economic assets of the poor and attempt to diversify economic growth dynamics. Pundits of political economy claim that the states institutional arrangements now behave more like weapons of the powerful elites to extort riches from the economy than as systems of social protection for the disempowered and poor citizens of Pakistan. It is also claimed that politics of economic liberalisation has helped the wrong people while fundamentally twisting the states central role of moderating economic and political rights and obligations for socioeconomic justice in society. The Pakistani state has actually deviated from its primary role of being an entrepreneur who coordinates savings and investments and executes structural transformation in economy. The structural transformation that can allocate resources from low to high equilibrium should be fully cognisant of distributional effects of such interventions. The state has also deviated from a primary role of being an institution builder. By becoming a high quality institution builder, it could have been an effective conflict manager and property rights protector. At this moment, the state cannot look the founding fathers of Pakistan in the eye. Can such socio-economic injustices be remedied without giving respect to legitimate institutions provided by the Constitution of 1973 namely the judiciary and parliament? The answer is a plain no if two manifestations of any civilised society the rule of law and democracy still matter in Pakistan. To further deepen our understanding of the link between the rule of law and egalitarian socio-economic development, the United Nations report Making the Law Work for Everyone can be helpful. The document establishes that the rule of law has a very close connection with poverty eradication, providing secure entitlements, and improving democratic governance. The legal empowerment of people, let alone the judiciary under current circumstances, seems to be a pre-condition to get out of the current crisis of food and fuel insecurity. In fact, the failure in establishing a democratic, developmental welfareoriented state of Pakistan is fundamentally a failure of establishing the rule of law and democracy. (By Zubair Faisal Abbasi, Dawn-7, 13/06/2008)

PWU emerges victorious in Steel Mills referendum

KARACHI, June 12: The Peoples Workers Union emerged victorious in the referendum held after a lapse of over 13 long years in the Pakistan Steel Mills on Thursday by beating its rival group United Workers Front by as many as 3,411 votes.

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Around 5,321 workers were eligible to participate in the process and as many as 4,797 of them exercised their right to vote. The Peoples Workers Union (PWU) polled 4,065 votes to become the collective bargaining agent against the United Workers Front (UWF) that managed to fetch only 654 votes. The Deputy Director, Labour, Mir Mohammad Baloch, who had been assigned the task of conducting the referendum, said that around 13 votes were rejected due to different reasons and 19 workers of the Steel Mills had sent in their votes through postal ballots. The poll results, however, cannot be termed unexpected as the overall situation had become quite obvious a few days back when almost all the other labour unions operating in the Steel Mills had extended their support to the PWU. It is worth mentioning that the PWU is backed by the Pakistan Peoples Party and the UWF enjoys the support of the Muttahida Qaumi Movement. The day-long polling that started at 9am went on peacefully and smoothly till 6pm at the 17 polling booths 14 on the premises of the mills and one each at its establishments at Gharo, Makli and Jhampir. Long queues of enthusiastic voters were seen at all the polling booths till noon, after which things got quite relaxed and the remaining voters cast their votes quickly without having to wait in long queues. The activists of both unions, while remaining at some distance from the polling booths, were seen actively guiding and assisting the voters. The PSM management had made special transport arrangements for the workers so that the majority of them could cast their votes. After a comfortable win, the chief of the PWU, Shamshad Qureshi, thanked the workers for entrusting the PWU with such a major responsibility and pledged to make all-out efforts to fulfil the promises that the union had made during the campaign regarding the welfare of the workers. Later, the workers took out a procession and chanting slogans, went around different areas of the mills. Benefits planned The benefits that the PWU had promised included regularisation of contractual and daily wage employees, restoration of sons quota in recruitments, introduction of pension scheme, plots for employees in Gulshan-i-Hadeed, abolishment of Hadeed Welfare Trust, medical facilities for self and family for life, etc. Other labour leaders who addressed the gathering of workers included Dhani Bux, Mustafa Zardari, Razi Haider, Saleem Soomro, Sattar Butt, Hameedullah and Mirza Tariq. Besides, the winning side has also planned a rally at the Hathora Chowk near the head offices of the Pakistan Steel Mills on Friday morning, after which a procession will be taken out that will go all the way to Bilawal House, where PPP leaders, including co-chairman Asif Ali Zardari, are expected to address the gathering. Commenting on the results of the referendum, the chief of the United Workers Front, Mohammad Mohsin, told Dawn that the UWF was not expecting anything else as the workers were fully aware of the fact that a union having the support of the government would be in a much better position to solve their lingering issues. The UWF chief said that his side had participated in the referendum to boost democratic norms. He said that the UWF would extend its support to the newly-elected CBA in its efforts to solve the various issues facing the workers of the mills. Mr Mohsin recalled that at the time of privatisation of the Pakistan Steel Mills, all the labour organisations had joined hands against the decision and had struggled against it and it was owing to their unity they had emerged successful in their mission. The referendum was held after a lapse of almost 13 years. The last referendum was held in 1995 in which the Peoples Workers Union was the CBA. After the completion of its two-year tenure, the United Workers Front had challenged it and the referendum was to be held, but one of the unions had approached the National Industrial Relations Commission (NIRC), which took around 11 years to settle the dispute and eventually, on May 22, 2008, the NIRC ordered that the referendum be held by June 15. As the unions had extended support at a later stage to the PWU, so the ballot papers which had been printed earlier carried names of all the unions and due to that very reason some of them also bagged some votes. These unions were Pakistan Steel Labour Union (five votes), Employees Unity of Pakistan Steel (16 votes), Pakistan Steel Democratic Front (five votes), Labour League of Pakistan Steel (one vote), Pakistan Steel Progressive Workers Union (30 votes) and Pakistan Steel Staff and Workers Union (two votes). Meanwhile, Sindh Chief Minister Syed Qaim Ali Shah congratulated the Peoples Workers Union over its victory in the referendum. (By Bhagwandas, Dawn-17, 13/06/2008)

Senior bureaucrats stand to gain more from pay increase

ISLAMABAD: Senior bureaucrats will get more monetary benefits than the low-grade employees with 20% increase in their running basic pay announced by the government in the budget 2008-09, The News has learnt. The average increase for Grade 19-22 will be around Rs 4,900 to Rs 6,930 per month depending on seniority of the service. On other hand, the average increase for low-grade employees will be in the range of Rs 680 to Rs 1,920 from Grade 1 to Grade 15. The Ministry of Finance has also recommended 10% increase in the house rent ceiling for 2008-09. This increase will be approved through a notification to be issued by the Regulation Wing of the ministry after approval of the budget, probably by the first week of July 2008.

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According to the ministry, the average increase for BPS-1 will be Rs 680 whereas for a Grade 22 officer the raise will be Rs 6,930 per month. Grade 21 officers will get Rs 6,294 per month additional amount from the next financial year. For Grade 20 officers, the raise will be in the range of Rs 5,655 per month whereas Grade 19 officers will get on average a raise of Rs 4,900. The average increase for Grade 18 officers will provide them monthly relief of Rs 3,702 while for Grade 17 officers the amount will be Rs 2,872 on average. The Grade 16 employees will get an average increase of Rs 2,180 per month in their salaries after incorporating the recent 20% raise in salaries. The government employees in Grade 15 will get an average increase of Rs 1,920 per month in salaries from August 1, 2008. Those working in Grade 14 will get Rs 1,765 per month from the next financial year. The average increase for other employees is as follows: Grade 13 Rs 1,629; Grade 12 Rs 1,506; Grade 11 Rs 1,376; Grade 10 Rs 1,304; Grade 9 Rs 1,207; Grade 8 Rs 1,136; Grade 7 Rs 1,068; Grade 6 Rs 1,007; Grade 5 Rs 961; Grade 4 Rs 885; Grade 3 Rs 823; Grade 2 Rs 770 and Grade 1 Rs 680. The conveyance allowance has been increased by 100 per cent for Grade-1 to Grade-19 government servants and the medical allowance for Grade-1 to Grade-16 employees has been increased from Rs 425 to Rs 525. The minimum pension has been increased from Rs 300 to Rs 2,000 per month. This will cost the national exchequer Rs 1.1 billion. The increase in salaries by 20% will cost the government Rs 16.8 billion while pension will account for another Rs 4.1 billion in FY 2008-09. The minimum wage has been increased from Rs 4,600 to Rs 6,000 per month. Those government employees who are unable to work due to illness, accident, earthquake or terrorism will get complete pension benefits and the condition of ten-year service in this regard has been abolished. (By Mehtab Haider, The News-2, 14/06/2008)

Saddar, Lea Market pay Rs25m in extortion money every month

Millions of rupees change hands in Karachi everyday in the form of bhatta or protection money. The beneficiaries include all sorts of people, from ordinary police constables to officials sitting at the top echelons of power, while the payment is made by hawkers, shopkeepers, motorists, traders, industrialists, land grabbers, and the like. According to a survey conducted by the Urban Resource Centre (URC), hawkers at the Saddar and Lea Market area pay Rs25 million per month as bhatta. The informal sector is in fact a constant and lucrative source of illegal earnings. Bhatta or protection money is collected by one of the vendors every day and then handed over to employees of traffic police, the [now defunct] Karachi Metropolitan Corporations land department, and area Station House Officer (SHO), a police official told The News requesting anonymity. He says bhatta is also collected by the employees of the City District Government Karachi (CDGK) and Karachi Electric Supply Corporation. Shopkeepers have to suffer immensely if they did not pay bhatta to the police. The entire attention of the Preedy police is focused on collecting bhatta from vendors. Police mobiles are busy in collecting money between 5pm to 9pm and this is the most opportune time for robbers to loot the people, says Mairaj Ahmed Khan, general secretary, Zargram Welfare Association. He says failure to pay bhatta results in high repercussions and the police instead of investigating robberies and apprehending them, harass jewelers. In a letter addressed to IG Sindh, Dr Shoab Suddle, the Association points out that not a single robber has been arrested nor looted goods were recovered which were committed in Saddar jewelry shops and workshops between 2006 and 2008 despite the fact that the First Information Report (FIR) was lodged at the Preedy police station after every robbery. Instead of apprehending the robbers, police very often ask odd questions such as why the jewellery was not insured, why gold in such a huge quantity was kept at workshops and the police allege that we were lodging fake FIRs, Khan says. Even hawkers who have authorised businesses are made to suffer. We have 735 newspaper stalls in the city approved by the CDGK and we have NOCs from the City Nazim but we too have to suffer when kiosks are removed by the CDGK in connivance with the police, says Iqbal Loon, President Anjuman Imdadia Akhbar Farooshaan Karachi. Interestingly, while protection money is paid to the police by hawkers, there is a well organized bhatta system prevailing in the police department itself and even beyond. There are more than 100 police stations in Karachi and police stations at Gadap, Malir, Memon Goth, Surjani Town, Manghopir, Ibrahim Haidery, Sachal, Korangi, Mochko, Kalri, Baghdadi, Kalakot, Chakiwara, Boat Basin, Bin Qasim and Shah Latif Town are the most lucrative, says a police official on condition of anonymity. He says in the jurisdiction of some police stations drug mafia is active and it pays handsome bhatta to the respective police stations. Then in areas, such as Gadap, the reti bajri mafia pays bhatta to the respective police stations. Deadly drugs such as heroin and deadly arms such as Kalashnikovs are brought to the city through the Super Highway and drug barons and gangsters pay a handsome bhatta to the respective police stations. Police stations are divided in accordance with the illegal money they generate and police officials are posted there after paying a huge sum of money to senior officials. The posting of a Station House Officer (SHO) at a lucrative police station costs Rs300,000 to Rs500,000 while a Town Police Officer (TPO) has to pay more than Rs1 million to get a nice posting, police sources said. The sources said the modus operandi until the recent past was that the home minister would ask the IG police to depute a particular police officer at a lucrative police station who in turn would ask the DIG to issue a requisition. Most of the bhatta money in turn would go in the coffers of top officials.

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Obviously, after paying a handsome bribe, police officials resort to extortion or bhatta collection to compensate their investment. Bhatta is collected by what in the police parlance called beaters who collect money from hawkers, shopkeepers, traders, industrialists and land grabbers etc and it is then distributed among the top officials and the subordinates. In return, they are allowed to function smoothly. The sources said that two senior police officials collect the bhatta money and then distribute from the top to bottom. Police stations at the suburbs of the city are more lucrative because huge sums of money are involved in land disputes and land grabbing. Similarly, reti bajri mafia that has virtually killed the Malir River pay a huge amount to police for lifting sand and gravel from the Malir and Gadap area. According to Arif Hasan 60 billion cubic feet of sand and gravel has been drained from the river so far. The informal sector is ready to pay a certain fee to the government if it is not harassed and coerced by government officials. The informal sector offers immense job opportunities to the poor and could be a good source of revenue. (By Shahid Husain, The News-13, 15/06/2008)

The budget -- the good, the bad and the ugly

I would wish to congratulate my friend Naveed Qamar and his team for putting together a budget under very difficult economic circumstances. On the face of it, the numbers add up and there seem to be goodies for all. But a look behind the numbers highlights several areas of concern, perhaps resulting from the rush nature of the budget's preparation and lack of a coherent economic vision reflecting the constantly shifting coalition politics. These shortcomings can, and must, be addressed in the coming days and weeks during the parliamentary debate. First, the budget lacks the medium-term economic vision and development strategy that it supports, and how the fiscal and expenditure policies and allocations fit into this vision and strategy. The budget is perhaps the most important policy document, and it was imperative for the growth and poverty reduction strategy to have been included in it. In addition, there is inadequate discussion of the medium-term macroeconomic framework. It is unclear whether the fiscal, monetary and external sector numbers and targets are internally consistent. Also missing is a credible medium-term strategy for lowering the fiscal and current-account deficits to sustainable levels. Second, a major drawback is the optimism in the budget. On the revenue side, the expected increase in revenues appear very ambitious in the light of the difficult economic conditions in the next 12 to 18 months and of slow growth, while on the expenditure side the untargeted subsidies appear underestimated. Hence, the fiscal deficit, as well as the currentaccount deficit, is most likely going to end higher, as happened in 2007-08. Third, there is lack of clarity on the tax strategy. The budget should have clearly articulated that the tax-to-GDP ratio has to increase to 16-17 percent in three to four years. Either that or Pakistan cannot provide its citizens with adequate quality education, healthcare, clean water and basic infrastructure without increasing taxes. Past governments, legislators and the media have been highly irresponsible in harping on "tax-free" budgets when in fact they should have highlighted the need for raising taxes. It is worrisome that the government has not aggressively moved on taxing some of the undertaxed sectors, like stock market and real estate. The proposed tax on real estate is a joke when viewed in the context of the market prices of land and building. It is hoped that this government will show leadership and courage by committing to a credible strategy for achieving the higher tax/GDP goal. The budget should also have highlighted how the proposed and current taxes impact on different segments of society. Fourth, there are several issues in respect of the proposed expenditure allocations. Most important, there is no commitment or strategy to ensure that taxpayers' money will be well spent, which is essential to the raising of taxes. Taxpayers need to be assured that the government's past predatory behavioursuch as using taxpayers' money imprudently and siphoning off resources for the benefit of its own employees and officialwill be changed. A quick review of the allocations conveys a strong impression that the government has continued with the shotgun approach to allocations, rather than their being selectivity based on undertaking a systematic and ruthless exercise to eliminate the high degree of waste that has crept into the current and development expenditures. Both current and development expenditures need to be ruthlessly pruned to free up resources for pro-poor spending. There are over 1,700 development projects in the PSDP. It is all over the place. In respect of the PSDP, it should focus on a few hundred high-priority and quick-yielding projects that will increase water and energy resources and food-grain production, and improve human-development indicators. The other projects must be deferred by a year or two or dropped all together. Continuing to allocate good money for bad projects is irresponsible use of taxpayers' money. In addition, the government needs to put in place benchmarks and credible monitoring mechanisms to assure the taxpayers, legislators and policy-makers that money is being wisely spent and that the benefits are being achieved. As we all know, spending money by itself does not lead to expected benefits. Another important weakness is the inadequate level of funding and scope of the Benazir Bhutto cash subsidy programme. The present allocation is a disappointing 1.5 percent of the budget, for a government that claims it is giving priority to the poor. It appears that the poor are being sacrificed at the altar of fiscal space. On a minimum, at least 10 million households should have been targeted for the next two years, including low-income families, and adequate resources (at least Rs120-130 billion) provided in the budget by pruning the current and PSDP expenditures and reducing untargeted subsidies. A larger beneficiary pool is critical to avoid an unmanageable backlash when the untargeted oil and electricity subsidies are withdrawn. As done under the livelihood programme for earthquake-affected households, where a clear message was conveyed that cash support is not a lifetime entitlement, the cash subsidy for low-income households could be withdrawn in a year or so, while maintaining the programme for those below the poverty line. Also the proposed NADRAbased scheme is flawed in its ability to identify the poor and will not stand up to best practice examples. It is not clear why the government chose to ignore more simple and less discretionary methodsfor example the proxy means-tested and

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self-selection programme used successfully for the earthquake families or using children in government schools as a starting point. The proposed public works programme of Rs28 billion, in the name of the poor, could end up being a waste, unless it is truly labour-intensive, and communities and civil society have a major role in its design and implementation. It is strongly recommended to channel this money through the poverty-alleviation fund, the rural support programmes and wellgoverned NGOs. The estimates for the untargeted oil and electricity subsidies also appear on the low side. The budget needs to clearly spell out the assumptions and inform people how the subsidy will be brought down, especially considering the prospects of rising oil prices. To the extent Pakistan gets the deferred payment facility from Saudi Arabia, this should be used to shore up reserves, and not wasted by continuing the consumer subsidy. Unless and until the consumers pay import prices, they will consume more and the oil import bill will not go down. Fifth, the budget is silent on several important elements of the macroeconomic programme and strategy, or does not discuss them adequately. There is limited discussion on strategy in respect of either public-sector borrowing or strategy for financing the huge current account deficit, while at the same time increasing reserves. The budget also does not articulate the government's privatisation or foreign direct investment strategy. Conspicuous by their absence in the budget are: (1) any discussion on how the federal and provincial governments will coordinate their fiscal and real sector policies in respect of achieving human development goals whose implementation falls in the domain of provincial governments; (ii) strategiescomprising policy, pricing and institutional reforms and budget allocationswhich will enable Pakistan to enhance water and energy resources, increase food-grain production, and make exports the driver of growth. Only allocations are discussed without it being highlighted how the allocations will lead to the desired outcomes. The budget, as presented, may not fully meet the requirementsin respect of a sound macro-framework and sustainable targets for reduction of twin deficits necessary to get budgetary support from the international financial institutions, or get the "seal of approval" of the IMF which is useful to enhance financial standing in the international markets. The proposed budget is also unlikely to be seen as credible by the rating agencies as well. The above shortcoming can be overcome in the coming days and weeks, while the budget is being discussed in Parliament. One way to address these issues is for the government to present to Parliament its detailed strategy and policy statements in regard to the shortcomings and to reprioritise the proposed allocations. (By Abid Hasan, The News-6, 15/06/2008)

How to overcome economic crises

This is a good time for Pakistans new rulers to take some decisions that will not only heal the economy but also change some of its structures. Policymakers respond in two different ways to serious economic crises. Those who are bold use the opportunity to deal with the causes behind the crises since most of the time crises are produced by structural flaws in the economic system. It is best to identify the flaws and remove them from the system. This way the problems would not occur again. Those who are less bold apply bandages to the wounds that have appeared and hope that the underlying disease will not reappear again. Pakistans policymakers have usually opted for the second approach, preferring short-term fixes rather than deep structural changes. Not surprisingly, the result was recurrence of crises produced by the same faultlines in the economy. Of the many structural problems faced from the time since its birth sixty years ago, two have been particularly important. The first is poor human development. The second the one that will concern me in this article is a low domestic savings rate which did not yield enough resources for the economy to invest. If the economy is to grow at seven to eight per cent a year a rate of growth sustained by a number of economies in Asia it must invest close to 30 per cent of the gross domestic product. Pakistan has a domestic savings rate of only 22 percent which can support a growth rate of less than six per cent, perhaps no more than 5.5 per cent a year. The country has done well when domestic resources were augmented by foreign capital flows. The reliance on external savings is not a wise policy to follow since foreign flows are unreliable. On a number of occasions, foreigners have reduced the amount of money they were providing the country. Each time that happened, the amount invested and hence the rate of GDP growth declined. For the country to climb out of this roller-coaster ride, it must increase the amount of resources generated from within the economy. Domestic savings come is three forms savings by the government, those by the corporate sector and those by individual households. Public policy influences all three, in particular savings (or disavings) by the government. This is where budgets enter the picture. Ever since the state withdraw from playing a dominant role in the economy as happened during the period of President Pervez Musharraf policy instruments available to it for effecting the economy have been reduced to basically two. These are the fiscal and monetary policies. Whereas, the monetary policy is controlled by the State Bank of Pakistan, the countrys central bank, the fiscal policy is the responsibility of the Ministry of Finance. The State Bank can change the monetary stance any time; the Ministry of Finance usually alters the fiscal policy only once a year, when it announces the budget for the year that follows. This is one reason why the budget receives so much public attention. The budget for the financial year 2008-09, announced by the Finance Minister on June 11, is a particularly important policy statement for two additional reasons. First, it is the first major policy statement by the government that assumed power following the elections of February 2008. Second, it comes at an exceptionally difficult time for the economy. After a period of relative calm for about six years, the economy has run into rough weather and has lost its balance. This is evident on three fronts inflation, fiscal deficit and balance of payments deficit. The budget can influence all of them.

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Before examining the policy embedded in the budget announced on June 11, it would be useful to look at the way the fiscal deficit has behaved over the last several years. Fiscal deficit is the difference between governments revenue and expenditure. Governments revenues come in two forms; tax and non-tax. Expenditures also come in two forms; current and development. The data provided in the accompanying table show some interesting trends over the last decade. The government of President Pervez Musharraf inherited a difficult fiscal situation in 1999. In the two previous years, fiscal deficit had averaged at seven per cent of the gross domestic product; two percentage points higher than what experts consider to be the sustainable level for Pakistan. While governments revenues were reasonably high about 16 per cent of GDP expenditures were even higher. The difference was of the order of seven per cent mostly because of current expenditures. Non-development expenditure was close to 20 per cent of GDP. It was clear to the new set of policymakers who took office after General Pervez Musharraf intervened, that major adjustments had to be made to restore economic balance. They went to the IMF for assistance and received the advice that significant adjustments had to be made. This was done over a three-year period by putting the lid on current expenditures which declined to an average of 16 per cent a year, a reduction of nearly four percentage points compared to the levels reached in the late 1990s. The most significant reductions were obtained by constraining government employment and putting a lid on government salaries. Further reductions in non-development expenditures became possible after 9/11 when, led by the United States, the donor community reduced the countrys outstanding debt by a significant amount. This lowered the interest payments Islamabad paid to its creditors. These adjustments, while reducing the fiscal deficit, also made it possible for the Musharraf administration to increase development expenditure. In the last three years of the Musharraf period, development expenditure increased to an average 4.5 per cent of GDP. This was one percentage point higher than in the late 1990s and almost double the share in the first three years of Musharraf. The policymakers faced the same kind of challenges in preparing the budget for 2008-09 that confronted the Musharraf government in 1999. The fiscal deficit and the balance of payments deficit in terms of the proportion of GDP had reached unsustainable levels. Adjustments needed to be made to reduce the fiscal deficit by raising taxes and constraining government expenditure. Islamabad also had to deal with the pressures on lower income groups as a result of the increase in the prices of food and fuel. However, in preparing their proposals and presenting them to the National Assembly, the policymakers have opted for the approach adopted by their predecessors: they have not attempted to bring about structural changes in the economy, preferring to tinker at the margin. That said, there are some attractive features of the budget. An attempt is being made to help the poor by creating a new fund that would provide them with cash transfers. On the revenue generation side, some rates have been adjusted to increase the burden on the rich. Some items of luxury consumption would cost more and the higher income groups will pay more for some of the services they use, such as cash withdrawals from the banking system. These changes will help to raise some additional tax revenues for the government. I have calculated the impact of these proposals on government revenues and expenditures and the size of the fiscal deficit. These calculations are shown in the table. They are more reasonable than the estimates provided in the budget. The budget proposals may also reduce conspicuous consumption by the rich. The changes, however, will be marginal and will not make much of a difference to one of the most important structural weaknesses in the economy: dependence on external flows for a significant proportion of gross investment. What could the policymakers have done to deal with the structural faultlines that continue to affect economic performance. Those who made the budget could have taken four additional measures. One, they could have created fiscal space for the provinces thus creating the opportunity to both raise additional government revenues and greater provincial control over public expenditure. This could have laid the basis for increasing domestic resources by bringing government closer to the people. Two, they could have significantly reduced current expenditure by the centre by eliminating some of the functions it should devolve to the provinces. Three, they could have provided for public works programmes for creating employment opportunities for the poor in both rural and urban areas. And four, they could have further rationalized the tariff structure by levying regulatory duties on imports that feed consumption by the rich without doing much to increase investment in the economy. A quick glance at the budget gives me the impression of a glass half full; it could have been filled a bit more to address the problems that continue to produce recurrent crises in the economy. The policymakers chose not to go that route. (By Shahid Javed Burki, Dawn-Economic & Business Review, Page-1, 16/06/2008)

Relief for the poorest of the poor

The Rs2 trillion budget 2008-09 will be remembered for a desperate attempt to reduce fiscal deficits through measures that are likely to aggravate the same variables that the budget is ostensibly trying to control. Passing on the burden of rising energy and food prices to the people is likely to feed back into inflation that might adversely affect economic activity, government revenues, and thereby fiscal deficits once again that will then have to be controlled through measures that time alone will reveal. With top 10 per cent of the population securing almost 27 per cent of the income, direct tax payers remain abysmally low at 1.38 per cent of the population. This is gross inequity coupled with lack of responsibility at both the micro and the

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macro levels. Rate of highly regressive sales tax has also been increased by one percentage point. The burden of indirect taxation falls disproportionately more on the voiceless and the cloutless lower income segments. Common people stand more burdened than was the case thus far. As pain increases, relief is sought. Relief is contemplated for the poorest only. An income support programme of Rs34 billion is proposed for the poorest of the poor. While many of the poor and other low income groups are left out, the sum allocated for the poorest is a mere 1.7 per cent of total budgetary outlay as opposed to over 60 per cent allocated for debt-servicing, defence, and government expenditures. Each qualifying household will be given a cash grant of Rs1000 per month that will amount to almost Rs167 per head per month for a family of six. One wonders how it will help even the poorest as the amount is insufficient for even the basic food needs of a family. Secondly, CNIC holders will be eligible for this scheme. The poor usually do not have national identity cards. So, they will be required to get one. Will they be inclined to go through the hassle when the poorest can beg and get almost Rs100 a day in populous cities? Since all cities are not large enough, the poorest in other parts of the country should avail this cash grant. The poor are the ones below the poverty line that comprise almost one-third of the population. Actually, another one-third or more are also poor due to the various deprivations that they experience much more than the middle and the upper middle income groups do. The income support scheme is for the poorest who arithmetically would comprise a target group of some 2.83 million households. That is a population segment of roughly 17 million people that is almost 11 per cent of the population only. This means that not all of the population below the poverty line is targeted. Only one-third of the one-third poor are being targeted. The scheme is grossly inadequate even for the poor in terms of both coverage and intended benefits. So, what about all the poor who are not covered by the income support programme, however, inadequate it may be? They are left to the mercy of the marketplace that has no space for the needy, the poor, and the low-income groups. A display of care for the poorest is something that will help the rhetoric more than the cause of all the materially poor there are. However modest the scheme may be, it intends to touch the bottom 11 per cent. The implementation plan of the scheme requires clarification. How will the government reach out to the poorest spread far and wide? How will it be assessed that the ones reached are indeed from the bottom 11 per cent and not from amongst the 22 per cent above them who might try to avail the scheme due to their own poverty levels? What will the administrative costs be? And, what will the scheme cost in all? How will favouritism and other malpractices be guarded against? An assessment of overall effectiveness of the scheme cannot be gauged by mere allocations. Economic policy is not just about the dole. It is about engagement of the people in a manner productive enough so that they are eventually able to generate their own incomes and are on their own. The budget envisages revival of People Works Programme and proposes to allocate Rs28.4 billion. Exact impact on employment remains unknown except for a vague, sizeable employment opportunities statement. Reliance on infrastructure projects for employment generation may not have a lasting impact on employment if opportunities are not created in the real sectors following the completion of the infrastructure projects. Given the inflationary environment coupled with the situation on terror and law and order, it is the creation of employment in the real sectors that remains a big question mark. While the rest of the low income population segments are expected to fend themselves, a soother is provided in the form of 20 per cent raise in government employees salaries. First, this raise is usually based on the basic salary that is a pittance for most low-paid government employees. It is little wonder that these employees are unhappy. Second, most of the employed are not with the government. So, how would they get an inflation-indexed raise? In some autonomous organisations in the public sector, government-granted raise is denied. As far as the formally employed segment is concerned, the issue is one of intra-organisational disparity in compensation. Unless the concept of equity is introduced within the organisations, some will continue to appropriate a chunk of the pie that might be too large in relation to their marginal contribution. As a result, many stand deprived and are offered peanuts in terms of inflationary-indexed raises. Intra-organizational compensation disparities need to be ironed out to ease some of the burden faced by low-income groups. The Budget 2008-09 rests on World Banks advice of subsidies withdrawal and to let the users pay. It, however, remains a short-term solution to the issue of fiscal deficits. As said time and again, the international financiers only have symptomatic solutions for us as that jibe with their own interest in our fiscal stability in the interim. And, their interest must stand served even if our population is overburdened. The IFIs lack vision and interest in our transformational change. So, they do not have any long-term solutions for us. Nor should we look upon them for meaningful changes that will make a difference. For, our difference is not their priority area. We go to the polls to elect national leaders for national decision-making and not IFIs policy advisers who should cease to determine the course of our destiny. It is time that the elected leaders take charge and steer the course of this country in a way that pleases our people more than the representatives of people overseas. (By Dr. Mahnaz Fatima, Dawn-Economic & Business Review, Page-VI, 16/06/2008)

WB asks govt to withdraw wheat subsidy

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WASHINGTON, June 15: Nearly half of Pakistans 160 million people may soon be unable to buy food because of rising prices, warns the World Bank but in the same report it also advises Islamabad to withdraw subsidies on wheat, the countrys staple diet. The banks latest report on global development finance also warns that Pakistans slower growth outcomes will compress government revenues and make further consolidation more difficult. The policy makers will have less manoeuvrability to stave off potential effects of deterioration in the external environment. Referring to the UN World Food Programme estimates on food shortages, the World Bank points out that nearly half of Pakistans 160 million people are at risk of running short of food due to rising grain prices. The poverty impact of the surge in food prices could be high and in some areas it could wipe out years of gains in poverty reduction, the report warns. But in the same report, the bank says that high subsidies in Pakistan have kept wheat prices relatively low, encouraging smuggling to neighbouring countries. At two recent seminars in Washington, Pakistani and American economists also urged Pakistan to review its policy of subsiding wheat to feed its urban population. They noted that such policies do not benefit the majority which lives in the villages and causes smuggling of wheat to India and Afghanistan where prices are higher. They advised the government to consider new measures, such as issuing food stamps, to feed its urban populations instead of subsiding wheat. But they also acknowledged that the new Pakistani government did not have the political strength to take such measures. They conceded that withdrawing subsidies would cause a sudden rise in wheat prices which could lead to food riots as witnessed in some other countries. The World Bank, however, notes that continued smuggling of wheat to the neighbouring countries could also lead to an acute shortage of food, causing unrest and instability. Given tight domestic supplies, a poor crop year could sustain or reignite inflationary pressures and put remote regions at particular risk, the report says. The bank warns that rising inflationary pressures, particularly for food, will reduce the purchasing power of the urban poor in a number of South Asian countries, including Pakistan. A moderation in domestic growth will contribute to a slowdown in import volume, including capital goods imports. The bank points out that output growth in Pakistan slowed during 2007, moderating half a percentage point to 6.4 per cent. Heightened political uncertainty in the lead-up to elections in early 2008 undermined overall confidence and led to weaker investment and private consumption outlays. Output was also disrupted by growing power shortages. And, in part because of high fuel costs, Pakistans current account deficit deteriorated substantially in 2007 and continued to further deteriorate into 2008. To cover the widening current account deficit, about $3.4 billion in foreign exchange reserves have been drawn down since July 2007, bringing the merchandise import cover below three months, as of May 2, 2008an unsustainable trend. The fiscal deficit has also widened substantially. This deficit primarily reflects a rise in government borrowing on the domestic market, as foreign lending has largely halted, the privatization program has stalled, and Pakistans spreads on international markets have risen. Surging food and fuel prices in Pakistan are contributing to rising inflationary pressures. Consumer price inflation was up 17.2 per cent year over year in April 2008, from 14.1 per cent in March; that is the fastest pace in at least 25 years. The report notes that some South Asian economies have reduced their fiscal deficits in recent years, though these deficits remain large in some cases. But it warns that widely subsidised food and fuel prices in South Asia would further widen the gap between domestic and international prices and could lead to significant fiscal deterioration, aside from creating problems in incentives. South Asia appears poised for a significant slowdown in GDP growth to 6.6 per cent in 2008, from 8.2 per cent in 2007, according to the medium-term outlook contained in the World Bank report. Private consumption and investment are expected to decelerate because of tighter international and domestic credit conditions in combination with weakened external demand. (By Anwar Iqbal, Dawn-1, 16/06/2008)

Budgetary projections tend to be way off the mark

Jenkinsons Law says: Budgets dont work. So what chance is there that the budget for fiscal year 2008-09 announced on June 11 by Finance Minister Naveed Qamar will balance out neatly at the end of the day, with all the revenue and expenditure projections as well as all the economic targets being spot on? Very little chance, Id say. Budget-makers have always overestimated revenue and underestimated expenditure. This has happened with monotonous regularity year after year, but our budget-makers never seem to learn. Come budget-making time, and out comes the same tired old fourmula: overestimate revenue and underestimate expenditure, necessitating resort to what were once euphemistically known as mini budgets. The expression is no longer much in vogue, but the mandated utility tariff hikes and increases in other imposts, including POL prices, that charaterised mini budgets continue to this day and are used to meet revenue shortfalls during the course of every fiscal year.

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But what is it about our budget-makers? Why do they fall into the same trap over and over again? Could it be that what is at work here is another law that says: a little money is good but large sums foul up the works? In other words, does the thought of all those billions (so many billions for poverty alleviation, so many for debt servicing, so many for grants to provinces, so many for the Public Sector Development Programme, etc.) cloud the vision of our budget-makers and lead them to think that 2 plus 2 somehow equals 22 billion rupees when it comes to projecting revenue receipts but only 4 billion rupees when it comes to projecting expenditure? Whatever the case, theres no denying that the budget genie has been with us for years and keeps turning up like the proverbial bad penny. We are likely to see the same bad penny turning up yet again during the course of fiscal 2008-09. We probably wont know for sure, however, until we are into the third quarter of fiscal 2008-09, which is usually the quarter when it dawns on our budget-makers that their projections and targets have gone wrong yet again. Budget-makers love making optimistic assumptions about the quantum of revenue that is expected to flow into government coffers. Such assumptions are like dreaded typographical errors that are always found only after the final copy of the book has been bound and mailed. Negative slack tends to increase and the only alternative to perseverance is failure. But our budget-makers seem to think that it is possible to exceed the limits of possibility. They should know, however, that creativity varies inversely with the number of cooks involved with the broth. One says this because the number of government officials involved in making the budget runs into hundreds, if not into thousands. Its not just the finance ministry that is involved in this exercise. Every ministry, every government department and every public sector corporation tends to get in on the act in one way or another. Wags say that the rumbling sound one hears in the Islamabad secretariat at budget-making time is not thunder over the Margalla Hills but the sound of hundreds of bureaucrats rushing around in the corridors of power to get their two bits worth of wisdom into the budget. When budget policy fails, and fail it invariably does, our budget-makers should try thinking. Budget-makers, these days, are very fond of talking about market forces. Indeed, it could be said that market forces are their sine qua no. But those who go on and on about market forces should know that the existence of a market does not insure the existence of a customer. So if we want to increase our exports from the present level of about $ 17 billion a year, we will first have to find customers for the additional goods we seek to export. Its a simple enough proposition, yet one that still doesnt seem to have registered in the minds of our budget-makers. Of course, even finding potential customers for higher volumes of Pakistani export goods is not going to be enough. We will also have to increase the range of goods we produce for export. After all, there is a limit to the quantity of onions or hides and skins we can export. By the same token, we will also have to take concrete steps to urgently revive our hundreds of sick industries, especially those units that could produce export goods. Weve been hearing talk about reviving sick industries for years, going back to the days of the early 1980s Beg Committee on the Revival of Sick Industries. For all the talk, though, the number of sick industries has increased over the years, not decreased. Now, were hearing the same kind of talk again. But whether these sick industries will actually be revived, and whether exports will actually go up in the year ahead, remains an open question. Imports can easily go up any amount, especially in this era of soaring imported oil prices, which have quadrupled over the last five years and have doubled to about $ 135 a barrel in the last one year. Increasing exports, however, is another matter. Some few years ago, there was much talk in Islamabad about Pakistans external trade staging a V-Shaped recovery, with both exports and imports exhibiting a strong rebound from the significant downturn of the previous year, as the finance ministrys economic survey for that particular year put it. But just what, pray tell, is a V-Shaped recovery? One has heard of slow recoveries, fast recoveries, export-led recoveries and many other types of recoveries. But a V-Shaped recovery? What breed of recovery is that? Then, of course, there is the question of Pakistans foreign debt, which has gone up from $ 36 billion in 1999 to a hefty $ 47 billion today. Thats nearly three times our current annual export earnings. Where is the money going to come from to pay down this debt? Not from petty cash, surely? It is, of course, theoretically possible that the money could come from some surprising source. I wouldnt bank on it, however. The world may be full of surprises, but very few of them are pleasant. It goes without saying (but Ill say it anyway) that we cant come to grips with the issue merely by talking about it. As the American poet Robert Frost said, The only way to learn to play tennis is to play it not talk about playing it, not debate the pros and cons of playing it, but actually going ahead and playing it. Not addressing the problem is not going to make it go away. Nor will it go away by selling off a few state-owned corporations to foreign buyers and using the money to pay off foreign debt, contrary to what successive governments have been saying in recent years. Talk is cheap, especially in the corridors of the bureaucracy. Thats why it is said that of all possible bureaucratic reactions to any given national agenda item, the action that will occur is the one that will liberate the greatest amount of hot air. As for all the pious hopes usually expressed in budget speeches about cutting expenditure and increasing revenue, here is what C. Northcoate Parkinson (of Parkinsons Law fame) had to say on the subject: Expenditures rise to meet income.

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So if the government actually succeeds in increasing revenue receipts, as it claims it will be able to, the chances are better than good that expenditure, too, will rise to what stratospheric heights only an outfit like the Space and Upper Atmosphere Research Commission may know! This aside, there has long been a tendency in Pakistani officialdom to just let things roll along, from one year to the next, from one budget to another interrupted only by talk, talk, talk, and more long-winded and jargon-ridden talk, talk, talk. In the context of long-windedness, Im reminded of Professor Gordons Rule of Evolving Bryographic Systems. It goes something like this: While bryographic plants are typically encountered in sub-strata of earthy or mineral matter in concreted state, discrete sub-strata elements occasionally display a roughly spherical configuration which, in the presence of suitable gravitational and other effects, lends itself to combine translatory and rotational motion. One notices in such cases an absence of the otherwise typical accretion of bryophyta. We therefore conclude (wait for it) that a rolling stone gathers no moss. Given all this, its not surprising that Jenkinson said budgets dont work. (By Kaleem Omar, The News-15, 16/06/2008)

Federal budget a test of loyalties

One can only wish that the budget was as impressive as the finance ministers moustaches. Instead, it is as disappointing as his command over Urdu. The Urdu we can forgive, the unimaginative budget we cannot. The budget is, in most aspects, a non-affair. The decision to raise power rates and fuel charges was done before Naveed Qamar stood up and delivered his speech. As if for good measure, another decision to this effect was taken some days later. The painful decisions have already been taken. We will suffer the consequences, budget or no budget. Now we have to face the rising prices of essential items. In this the government is of no help. The number of people sleeping on the streets has increased. So will crime. But Islamabad is not worried. We are told to tighten our belts. But one wonders what the civil and military bureaucrats are doing. Their salaries have been increased and their perks and privileges continue to be enhanced. If performance was a criterion, then there should have been a cut in both salary and benefits. But they have the last laugh when governments are wobbly and there is no one truly in charge. While one cannot blame the government for raising fuel and power rates, we can ask a number of questions. For one, why is it that the rich are not being asked to cough up more. The tax proposals seem to favour the rich and powerful. The agriculturists have been given many incentives and benefits in the name of promoting the agriculture sector. One can only pray that the poor peasants also get some relief. We are quick to introduce schemes to whiten black money. One can only wish that the FBR chairman were as deft in his moves to catch the huge number of tax evaders. In a country of over 140 million, we have only over two million direct taxpayers. This is a disgrace and a matter of shame for the government. From the budget some very interesting conclusions can be reached. For one, it was prepared by the babus of the Federal Secretariat and not some right-thinking politician. As a result, we see idiotic and highflying promises but very little in terms of relief for the poor. The two trillion rupees budget sees nearly Rs300 billion going to defence. More is being spent also to maintain an evergrowing government. The Prime Ministers House may have tightened its belt but no effort is being made to check the bulge of wasteful government spending. As Pakistanis, we have suffered many harebrained schemes. So we will suffer the Benazir Income Support Programme in silence. These schemes do not help the poor but they do give the bureaucrats and politicians money to dole out to their near and dear ones. Has anyone wondered why it is that billions are spent every year in poverty alleviation but poverty continues to rise? Where does this money go? The money goes in buying multimillion-rupee vehicles for politicians, the military and the civil bureaucrats and to anyone else who matters. We are told that the spiritual advisor of the prime minister has been given an expensive official car at our expense. Money also goes into paying for trips abroad, medical expenses and a lavish lifestyle for our government servants. How long can we afford this? The week started with the election of Mian Shahbaz Sharif as chief minister of Punjab. One wonders why it is only Sindh that suffers when it comes to chief ministers. The present chief minister may not be financially or morally questionable, but, then again, he does nothing. The province is heading towards decay and chaos, but the chief minister sits happy. For everything he turns to Mr Zardari. Possibly that is why he has been appointed in the first place. Mr Zardari, for his part, continues to reward his near and dear ones with plum positions. This week, we heard that the sister of his most efficient letter-writer has been given the post of chairman (or is it chairperson) of the Karachi Port Trust. But disaster has been averted. We were earlier told that this position may go to a Karachi-based businessman-turnedpolitician who stood for elections from a posh locality on the PPP ticket. Why is it that only those competent persons who know the powers that be are rewarded? Why not merit alone? It is a sad day for the PPP, however. The information minister has had to defend the right of the president to appear on public and private television channels. Ms Rehman, who needs to do more to clean up her ministry, has also had to explain why there is an unofficial ban on state TV with regards to President Musharraf. All good things, we are told, have to come to an end. The more things change, the more they stay the same. That is why the PPP government (we are reminded that the PMLN is no more part of the centre) continues to hold on to vestiges of the Musharraf era. We are told that hundreds of

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retired military officers hold key positions in the government. This is in addition to retired bureaucrats who have been rehired. It is not only a matter of re-employing retired officials. It is also about generating employment. Why cant we ask those who have played their innings to now rest at home so that others who need to be employed get a chance. Instead, we let them stay and create new positions for more. That is why the cost of running the government is rising, and this is being done at the expense of the taxpayer. The biggest tragedy last week, however, was the attack by two US fighter aircraft on several Pakistani towns and border posts. Nearly thirty Pakistanis were killed by the Americans for no fault of their own. A large portion of those who died were Pakistani soldiers. The government has made all the right noises. However, more needs to be done. We expect this from our elected government. But democracy has its merits. The Gilani government confirmed in the august house this week that the mindboggling sum of Rs60 billion was written off during rule of President Musharraf and Prime Minister Shaukat Aziz. So much for good governance and accountability. This information could only be wangle in the present parliament. Some of those who have benefited from this largesse sit in the parliament too. We hope the brave State Bank governor will take the matter further. It would be a crime to let these write-offs, most of which we are told were done at the behest of the suave Mr Shaukat Aziz, be ignored. But the governor is appointed by the president. It is a case of loyalties, some say. (By Kamal Siddiqi, The News-7, 16/06/2008)

NWFP presents Rs107bn surplus budget

PESHAWAR, June 16: NWFP Finance Minister Mohammad Humayun Khan on Monday presented a tax-free budget of Rs107.904 billion containing a surplus of Rs345.561 million for the coming financial year. The minister also announced a 20 per cent increase in the basic salary and pensions of government employees. The total revenue included general revenue receipts of Rs100.089 billion, general capital receipts of Rs400 million, development receipts of Rs13.179 billion and general capital receipts (food) of Rs57.237 billion. The minister said that the government expects an expenditure of Rs170.559 billion, including current revenue expenditure of Rs67.3 billion, current capital expenditure of Rs4.477 billion, developmental expenditure of Rs41.545 billion and capital expenditure (food) of Rs57.237 billion. He said the government would receive Rs59.684 in the provinces share in federal taxes. An income of Rs7.332 billion is expected from the collection of general sales tax (GST) and expects to earn Rs6 billion in net hydel profits. The province will get a grant of Rs14 billion and Rs4.429 billion in royalties on crude oil and natural gas and Rs767 million in GST on services. Humayun Khan said the next years allocation for current expenditure amounted to Rs67.3 billion, which included Rs40 billion for payment of salary while the remaining amount was for other heads, including mark up on loans, subsidy on wheat and other expenses. The minister said: This province is confronted with problems like price hike, food shortage, electricity crisis and the deteriorating law and order situation. The governments first priority is to resolve these problems. The government had signed an agreement with Taliban in Swat that led to the establishment of a peaceful environment in the province, he observed. HYDEL PROFITS: The minister said that according to an arbitration tribunal, Wapda owed the province Rs110 billion in net hydel profits, but the government wanted to resolve the issue with the federal government through mutual understanding. He expressed a hope that all political forces would support the government on the issue. About next years fiscal measures, he said the government has allocated Rs21.72 billion for the education sector, which was 10.2 per cent more than the revised estimates and also included allocation for district government. Rs6.426 billion has been allocated for the health sector, 10 per cent above the revised estimates. The government has created 975 new vacancies in the sector. About Rs500 million has been allocated for the agriculture sector, 20 per cent above the revised estimates, and Rs825 million for infrastructure development, 37.5 per cent more than the current allocations. He said Rs5.777 had been allocated for pensions. Humayun Khan said in the next ADP, the government had focused on completion of ongoing projects, improvement of education, health, irrigation and agriculture sectors, creation of employment opportunities, improvement of inter-district and pan-district infrastructure, broadening of industrial sector, enhancement of private investment and controlling poverty. The minister said the total volume of the next years Annual Development Programme was Rs41.545 billion, 5.37 per cent more than the previous years ADP. The provincial governments share in the ADP amounted to Rs27.148 billion, 23.7 per cent more than last years estimates. He said external funding of Rs4.617 billion was also included in the ADP. He said: This years ADP includes 901 schemes, 604 ongoing and 297 new ones. The minister said none of the ongoing project had been abandoned. He said Rs8.094 billion had been allocated for 61 schemes identified under the head of special programmes. He said Rs1.218 billion had also been allocated for the district development programme. He said the government had allocated 43.05 per cent of the funds at its disposal for social sector, of which health sector allocations were 14.51 per cent, 20.29 per cent for education, 4.56 per cent for the Tameer-i-Sarhad Programme and 3.68 per cent for provision of water. Of the total funds, 16.48 per cent were allocated for roads, 2.95 per cent for construction and housing, 4.7 per cent for irrigation, 2.63 per cent for agriculture, 1.76 per cent for forests, 4.2 per cent for industry and 19.6 per cent for regional development. The federal governments development programme for the NWFP included Rs8.094 billion for 61 schemes in 21 sectors.

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He said for poverty alleviation, the government had allocated Rs1 billion. Besides establishing the Imam Dheri Islamic University in Swat, the government will set up Medical College in Mardan, 20 new colleges across the province, four cadet colleges and 300 new schools. Rs5.507 billion has been allocated for 88 schemes in the education sector, included 57 ongoing and 31 new ones. He said monthly scholarships of Rs200 would be provided to female students (Class VI to Class X) in all districts. He said 2,500 teachers would be trained, 200 new primary schools would be constructed, while 100 existing primary schools would be upgraded to middle and 100 middle schools to higher secondary level. He said 20 new colleges would be established. He said Rs3.94 billion had been allocated for chronic and infectious diseases in the ADP. He said a 500-bed Benazir Bhutto Shaheed Hospital would be established in Peshawar. Ten dispensaries will be upgraded to Basic Health Unit (BHU) level and 10 BHUs to a rural health centres (RHC) and 10 RHCs to be upgraded to category-D hospitals. Separate hospitals will be established for cardio-thoracic diseases and ambulances and 200-KVA generators will be purchased for hospitals in the province. He said scholarships of Rs1,000 would be provided to 1,800 senior citizens and Rs2,000 stipend to 1,200 unemployed postgraduates. The existing school for the blind in Peshawar would be rebuilt and upgraded, a child welfare and protection bureau would be established, land would be purchased in earthquake-hit areas of Mansehra, Shangla, Battagram and Kohistan for social welfare complexes and women development centres. (By Mohammad Riaz, Dawn-1, 17/06/2008)

Rs2.6 billion allocated for special projects

KARACHI, June 16: The Sindh government has allocated Rs2.639 billion for special projects in Karachi in its budget statement for the financial year 2008-09. The allocation is in addition to the Asian Development Bank funded Karachi Mega City Development Programme. In his budget speech, Sindh Chief Minister Syed Qaim Ali Shah said that the programme was being upgraded and would specifically attend to mass transit including light rail. We expect to scale it up from existing $800 million to $1.5 to 2 billion. The government has allocated Rs50 million for Karachi Mega City project (technical assistance) while it is expecting Rs285 million foreign grants during the current financial year. Budget documents show that the Sindh government has allocated Rs200 million for the Lyari Expressway Resettlement project. A Rs50 million Lyari Development package is also part of the budgetary allocation. The major chunk of the budgetary allocation goes to water and sewerage and works and services related schemes. An amount of Rs200 million has been earmarked for the construction of a flyover at Banaras Chowk with the inclusion of four pedestrian bridges; Rs100 million is allocated for the construction of a bridge over the Lyari River connecting Surjani with Gulshan-i-Maymar Super Highway; Rs50 million for the construction of a bridge over railway line in Gulshan-i-Iqbal Block 10; Rs10 million for the construction of an overhead bridge at Thado Nullah in Gadap Town. The government has allocated Rs200 million for construction of a road from Super Highway to Jinnah Terminal; Rs70 million for widening of Sharea Faisal from FTC to Hotel Metropole. Besides, a huge sum of Rs1.114 billion has been allocated for 18 projects relating to construction and rehabilitation of different roads in the city. The projects include rehabilitation and construction of University Road (Rs100 million); Link Road from Hawkesbay Housing Scheme to Karachi Northern Bypass (Rs50 million); construction of road from Shahrah-iQaddafi and rehabilitation of 21 roads CDGK (Rs150 million). Around Rs211.77 million has been allocated for eight other schemes relating to laying or improvement of water and sewerage infrastructure system in the city. These includes laying of a water supply line from Hub reservoir to Hawkesbay Scheme and Baldia Town (Rs100 million); laying and joining of 24 dia pipeline from Hub reservoir to German pump station Orangi Town (Rs20 million); construction of natural nullahs in Orangi, Baldia, SITE, North Nazimabad, Korangi, and Gulshan-i-Iqbal towns (Rs25 million); replacement of old damaged encroached main, sub-main and internal water supply lines and removal of construction and improvement of water supply system in different union councils of Shah Faisal Town (Rs25 million) etc. (By Azfar-ul-Ashfaque, Dawn-17, 17/06/2008)

Rs267.7bn deficit budget for Sindh

KARACHI, June 16: Sindh Chief Minister Syed Qaim Ali Shah presented on Monday a Rs 267.76 billion budget for 200809 in the Sindh Assembly. The budget has an estimated deficit of Rs14 billion, which would be met by improving revenue, by introducing austerity measures and an expected transfer of gas development surcharge from the centre to the province. The budget shows a current revenue expenditure of Rs 180.9 billion and a total development outlay of Rs 77.31 billion. The development outlay includes provincial ADP of Rs 55 billion, allocation for district governments totaling Rs 12 billion, Drought Emergency Relief Assistance Rs 510 million, Foreign aided projects Rs 4.35 billion, Sindh Devolved Social Services Program Rs 2.73 billion, Sindh Cities Improvement Program Rs 2 billion and other federal grants Rs 12 billion. The chief minister, who holds the finance, planning and development portfolios, announced withdrawal of 0.1 per cent stamp duty levied in the 2006 finance bill on par value of each electronically transferred share in Karachi Stock Exchange.

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He announced an increase of 0.3 per cent on infrastructure cess. The levy is presently 0.5 per cent on imported goods. The finance bill stipulates various slabs for infrastructure cess on imported goods. This increase in cess is bound to invite angry statements from the business community, which is groaning under heavy taxation of federal budget, a business leader said. He recalled that trade bodies had already reacted sharply on sparing stock exchange transaction gains from taxation and putting burden on business. The Rs180.9 billion revenue expenditure envisages Rs102.99 billion revenue expenditure by the provincial government and Rs77.98 billion by district governments Qaim Ali Shah said the province would get Rs177.5 billion through transfer of funds from the federal government from the divisible pool of taxes. Estimates under oil and gas receipts show negative growth whereas these had been growing at a rate of over 26 per cent in last five tears, complained the chief minister, adding that the matter had been taken up with the federal government. He, however, disclosed that Sindhs own revenue collection had shown improvement during the current fiscal year and was being expected at around Rs 30 billion in 2008-09. Thanks to inflow of loans from the World Bank, Asian Development Bank under various reforms and investment programme, the capital side of budget will show a surplus of Rs 5.5 billion. As against receipts of Rs 14,5 billion, the capital expenditure for 2008-09 is Rs 9.5 billion. Syed Qaim Ali Shah announced a 20 per cent increase in salaries and pensions of provincial government employees. The additional expenditure will push up the wage bill by Rs 10 billion. The Sindh government already pays Rs 60 billion to 500,000 employees. The police will be given a grant of Rs 21.3 billion to recruit 3,500 employees and for purchase of vehicles, arms and ammunition. The force would also get one billion rupees to purchase surveillance cameras and equipment. Since the wages of Sindh police are being brought at par with Punjab police, an additional grant of Rs 570 million has been sanctioned. Some salient features of the budget are Rs 18.2 billion for water and power, total education budget for province Rs 19.5 billion, health Rs 10.5 billion, water and sanitation Rs 1.12 billion. The chief minister blamed the previous government for outside budget releases totaling Rs 9 billion development and current expenditure side motivated political considerations. It will be examined how much of this has been irregular expenditure, he announced. In the current fiscal year 2007-08 he said the federal government provided about Rs 3 billion less than indicated Rs 151 billion. The shortfall has come from less collection of federal revenue bureau and in gas development surcharge. The Chief Minister put Sindhs share in GDP at 29 per cent. He said the biggest challenge for his government was poverty. (By Sabihuddin Ghausi, Dawn-1, 17/06/2008)

Rs389bn Punjab budget unveiled: Rs17bn allocated for pro-poor subsidy

LAHORE, June 16: Punjabs coalition government announced on Monday its first revenue budget of Rs389.896 billion for 2008-09 and set aside Rs17 billion for pro-poor subsidies. The budget carries a revenue surplus of Rs 133 billion and the expenditure is estimated at Rs257 billion. The subsidy package meant for cash handouts for the marginalised, and food price, healthcare, public transport and other subsidies -- is part of the expenditure estimates, finance minister Tanvir Kaira said in his maiden budget speech in the Punjab Assembly. He also tabled a finance bill proposing to tax all forms of transfer of immovable property, whether through sale, exchange, gift or mortgage, and transfer of right or interest relating to an immovable property by a development authority, housing authority, statutory body, cooperative housing society, company or a developer/builder. The bill also proposed imposition of a one-time levy on imported luxury cars with engine capacity of 2000cc and above to boost revenues. The PML-Q boycotted the budget speech in protest against the delay in issuance of an order by the speaker notifying its leader, Chaudhry Zaheeruddin Khan, as leader of the opposition in the assembly. The subsidy package included Rs13 billion for cash handouts, and food price and healthcare subsidy to the poor. The finance minister, however, did not spell out the size of cash handouts to be disbursed among the poor. The rest of the funds have been set aside for subsidising public transport and agricultural tube wells and writing off housing and agricultural loans of poor widows. The minister announced introduction of a free, air-conditioned bus service in seven major cities of the province for facilitating needy students. An amount of Rs1 billion will be provided to public transport in six cities with the help of the private sector. He said Rs540 million had been set aside for setting up dialysis centres in the province. In order to overcome the energy shortage, the Punjab government will set up projects to generate 350MW of electricity. Mr Kaira said that price control boards would be constituted to protect the poor from rising prices of foodstuffs and other commodities and curb black-marketing and profiteering. The government will launch a low-cost housing scheme for the poor with a sum of Rs1 billion and allow a subsidy of Rs100,000 per unit for the purchase of tractors to farmers with less than 12.5 acres of land under the Green Tractor Scheme, to be re-launched with a sum of Rs1 billion.

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Landless, educated farmers will be given 60,000 acres of state land on lease for increasing production of vegetables and bringing down their prices. The finance minister announced an Annual Development Programme of Rs160 billion, which is 6.6 per cent higher than the budgetary estimates of Rs150 billion for the outgoing year. The share of district and TMA in the ADP, however, remained unchanged at Rs12 billion, although they, according to the revised estimates, had received Rs14 billion this year. The development programme, Mr Kaira added, would be financed from the revenue surplus of close to Rs133 billion, capital account surplus of Rs13.593 billion, net public account surplus of Rs1.22 billion and foreign assistance (loans) of Rs12.237 billion. SELF-RELIANCE: He said the government had been trying to reduce its dependence on foreign loans for financing development plans. We are relying more on our own resources for funding development projects and have successfully managed to reduce the size of foreign assistance by Rs23 billion for the next year. The budget outlay for the next financial year is almost nine per cent higher than the outgoing years original estimates of Rs356 billion and 19 per cent higher than the revised estimates of Rs315.602 billion. Punjab is projected to receive Rs285 billion in federal transfers, which is around 25 per cent more than budgetary estimates and almost 30 per cent higher than the revised estimates for the outgoing year. The hike in federal transfers to the provinces is projected on the basis of an increase in the tax revenue target of the federal government as well as in the provincial share in the divisible pool under the National Finance Commission (NFC) award. The provincial own tax revenue income has been estimated at Rs40.362 billion, up by eight per cent from budgetary estimates of Rs37.315 billion and 31 per cent from the revised estimates of Rs30.627 billion. The provincial own non-tax revenue is estimated at Rs64.528 billion, down by about 30 per cent from the budgetary estimates and above one per cent from the revised estimates for the current year. The expenditure for the next fiscal is five per cent higher than the original estimates of Rs243.487 billion and about 10 per cent higher than revised estimates of Rs232.187 billion for the ongoing year. If the allocation for subsidies is put aside, the size of the revenue expenditure shrinks by Rs4 billion as compared to the original estimates for this year. We are providing money for pro-poor subsidies by reducing our current expenditure, Mr Kaira added. He said the Punjab government had decided to enforce fiscal discipline and improve governance by plugging leakages in the system. The government will cut expenditures on official functions and has banned purchase of new vehicles, furniture, air-conditioners and other luxury items for government departments. A re-organisation committee has been set up to recommend steps for cutting unnecessary government expenditure. The ministers speech was full of rhetoric and loaded with promises to establish social and economic justice in the province. We have inherited several crises -- food crisis, judicial crisis, water and power crunch, etc, that have mostly affected the poor. But we are trying to handle them, he said. Mr Kaira said that in line with the chief ministers policy statement, the Punjab government had decided to give the subordinate judiciary an allowance three times their basic pay scales. We hope that it will improve their working and also expect the high court to purge the subordinate judiciary of all corrupt elements. Also, we expect that in future judges will be recruited in a clean and transparent way through the provincial Public Service Commission. He accused former LHC chief justice Iftikhar Hussain Chaudhry of making recruitments in violation of rules and merit. Mr Kaira promised to provide quality and inexpensive education and healthcare to the poor people and support the agriculture sector to boost output and said the government had enhanced allocations for social, industrial and agricultural sectors. (By Nasir Jamal, Dawn-1, 17/06/2008)

Allocations reduced for Governor, CM houses

The Sindh government has reduced the budget of the Chief Minister House and the Governor House while increasing the budget for the Sindh Assembly. The previous government had allocated a budget of Rs140,792,800 to the CM House for 2007-08 and the revised budget was Rs165,850,900. The Pakistan Peoples Party (PPP)-led coalition government has reduced this and has allocated Rs156,203,400 for 2008-09. The Governor House was allocated a budget of Rs26,266,000 for 2007-08 and it was revised to Rs34,276,000. Now the budget for the Governor House stands at Rs26,366,000. The coalition government in Sindh, comprising the PPP, the Muttahida Qaumi Movement (MQM) and the Awami National Party (ANP) has increased the Sindh Assembly budget for 2008-09 by allocating Rs130,263,000, while the previous regime allocated Rs129,663,000, with the revised budget at Rs97,366,000. The PML-Q-led provincial government had failed to utilise the budget allocated to the new building of the provincial assembly. A fresh amount has now been allocated for this purpose by the PPP government. (The News-13, 17/06/2008)

Rs.389.8bn surplus budget for Punjab

LAHORE: Punjab Finance Minister Ashraf Kaira presented in the provincial assembly Rs 389.8 billion provincial budget for 2008-09 that carries a surplus of Rs 147.7 billion with a development outlay of Rs 160 billion.

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The Punjab government would get Rs 284.6 billion as federal transfers that is 64.5 billion higher than the amount it received in 2007-08. The federal grants would amount to Rs 23.3 billion against Rs 17.0 billion provided in 2007-08. The provincial tax revenue is expected to increase by almost 25 per cent from Rs 30.627 billion to Rs 40.362 billion in 200809. Provincial non-tax revenue would decline by around Rs 5.5 billion to Rs 36.613 billion. The finance minister in his speech announced some prudent steps to provide relief to the common man like abolition of registration of tongas, carts, rickshaws that is likely to save over 100,000 low cadre self-employed from the tentacles of police. The inclusion of property in DHA under tax net was another bold step taken by the Punjab government in next years budget. The one time tax on luxury vehicle of Rs 200 000 and Rs 300,000 according to engine power is a direct tax on the rich elite and is likely to net the government Rs 1.5 billion. The agriculture sector was also provided meaningful incentives through various schemes. The green tractor scheme introduced during the first Shahbaz tenure has been revived under which the provincial government through ballot would provide Rs 100,000 subsidy on the purchase of 100,000 tractors to farmers having land holding of 12.5 acres. The farmers with four acres or less landholding would be given 12.5 acres of cultivable government land on lease for growing vegetables. The scheme would also be offered to educated youth in the farming families. Around 60,000 acres of land have been earmarked for current year. The government has also announced to provide 25 per cent subsidy on the purchase of 1000 air-conditioned buses to ease the miseries of commuters. This measure would revive the revamping of public transport initiated by PML-N government nine years back and was discontinued by the successor government. The government undertook to pay back the house building and agriculture loans outstanding against the widows. The government has also announced cash subsidy for the poorest of the poor but no details were provided in this regard. The revenue expenditure is estimated at Rs 259.9 billion that includes Rs 17 billion pro-poor subsidies. The net revenue expenditure after deducting subsidies is Rs 239 billion that is Rs 7 billion higher than the revised budget estimates of 2007-08. The Punjab government has finally decided to pay attention to the small and medium industries sector and has earmarked Rs 1 billion for disbursement of loans to SMEs. The finance minister, however, claimed that the net revenue expenditure had been curtailed by Rs 4 billion from the original estimates of Rs 243 billion. However, the government has managed from the current revenue expenditure for increase in salaries, three times increase in salaries of lower judiciary, subsidy on green tractor scheme, block allocation for kidney centers. The savings from the net revenue expenditure amount to Rs 132.9 billion. The current capital receipts in 2008-09 are expected to reduce to Rs 136.5 billion from expected receipts of Rs 145.4 billion in 2007-8. The savings in net capital account in 2008-09 would be Rs 13.59 billion against saving of Rs 35.93 billion in the revised estimates of current fiscal. The surplus from the net public account would be Rs 1.22 billion that would increase the total budget surplus to Rs 147.7 billion. The government expects foreign loans worth around Rs 11 billion and grants of Rs 1.226 billion to finance the Rs 12.3 billion gap in ADP. The total debt stock of the Punjab government is stated in the budget document to be Rs 304. 58 billion out of which Rs 253.36 billion is foreign loans. The amount of foreign loans is calculated at dollar rate of Rs 62.5. However, at current official dollar rate of Rs 66.66 the debt in local currency has increased to Rs 321.446 billion. Most of the foreign loans were taken by the previous government in its five-year tenure. The finance minister announced to reduce the component of foreign loans for this year by 25 per cent. (By Mansoor Ahmad, The News-1, 17/06/2008)

Arbabs CM House spent Rs 25m over budget in the last year of his tenure
KARACHI: The new Sindh Budget documents show that during the last year of the tenure of former chief minister Dr Arbab Ghulam Rahim, Chief Minister House spent Rs 25 million more than what it was allocated. House expenses were budgeted at Rs 165,850,900 for the year 2007-2008 but in revised estimates, a bill of Rs 165,850,900 was run up. Salaries and allowances for officers and other staff of CM House ran over the limit, with Rs 22,859,600 over the budgeted amount of Rs 120,659,200 being spent. The net bill on this front was Rs 142,518,800. The government had allocated Rs 20,000,000 for entertainment and gifts. However, Rs 4,438,600 more were spent. While Rs 16,126,900 were allocated for the expenditure of the chief pilot office of the Sindh governor and chief minister, Rs 43,634,800 was spent instead. The present government has allocated Rs 25,183,700 on this account. Ministers and advisors: The allocation for all expenses of former provincial ministers was Rs 95,571,900, but their expenses reached at Rs 125,803,600 by the end of the financial year. Keeping in view the large number of cabinet members presently, the government has allocated Rs 204,118,000 for their expenses in new financial year. The previous government allocated Rs 84,146,500 for the expenses of its advisors and special assistants, while they went on to spend Rs 89,731,500. Today Rs 86,812,500 have been allocated for advisors and special assistants. MP Bhandara, Nirmala Panday and Tariq Khan remembered in Assembly: Sindh Assembly members observed a minute of silence on Monday in honor of former MNA M. P. Bhandara and Indian peace activist Nirmala Deshpande and offered Fateha for the soul of PML-N Sindh Vice President Tariq Khan. Munawar Suharwardy and several members and relatives of PPP and MQM workers who have died were also remembered in the condolence prayer. The budget session scheduled to start at around 5:00 p.m., was delayed as the leader of the House was at least an hour late. Speaker Nisar Khuhro came to the hall after the arrival of Qaim Ali Shah,

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leader of the House, and started the session. With his permission, the MPAs gave names for whom fateha was to be offered. This process took 25 minutes and finally PPP MPA Jam Tamachi proposed that MPAs ask for fateha on separate points of order. Should you want to offer fateha, you must offer fateha for the dead Kalabagh Dam, he proposed tongue in cheek. Rs 443.01 million for new and ongoing renovation work: The Sindh Auqaf Department has been allocated Rs 433.01 million in the Sindh Budget 2008-09 for new and on-going schemes. A total of Rs 243.605 million has been set aside for six new schemes and Rs 189.405 has been allotted for the completion of ongoing projects. The new and unapproved schemes include the historical masjid at Ghouse Pur, Kandhkot (Rs 14.47m), Dargah Khairdin Shahs, Sukkur (Rs 33.645m), Dargah Hazrat Sheikh Abdul Wahab Shah Jilani, Hyderabad (Rs 128.37m), Dargah Sacchal Sarmast, Khairpur (Rs 2.12m), Dargah Abdullah Shah Ghazi, Karachi (Rs 60m) and for Hazrat Makhdoom Noohs shrine, Mitiari, (Rs 5m). The ongoing projects include the renovation of Dargah Lal Shahbaz Qalander, Sehwan (Rs 64.916m), Dargah Hazrat Sadaruddin Shah, Jamshoro (Rs 20.674m), Syed Latif Shah Bukharis shrine, Larkana (Rs 6.582m), Dargah Shah Abdul Latif Bhitai, Bhitshah (Rs 44.62m), Dargah Sakhi Dadwahi, Naushero Feroz (Rs 12m), Dargah Hazrat Mohammad Zaman, Badin (Rs 23.774m), Makhdoom Hashim Thatvi Academy, Thatta (Rs 15.857m) and Jamia Masjid Tajo Dero, Jacobabad (Rs 0.982m). (DailyTimes-B1, 17/06/2008)

Pakistan to receive $256.85m WB loan

LONDON, June 18: The World Bank on Tuesday approved $256.85 million credit and loan to Pakistan, designed to improve reliability and efficiency of power supply. Poor electricity service has been identified as a major constraint to Pakistans sustained economic growth. While electricity sales have risen by 40 per cent in the past five years, generation capacity remained practically stagnant. It is estimated that the system lacks about 2000 MW to cover peak demand with acceptable reliability. The countrys transmission and distribution networks are over-loaded, under-invested, and under-maintained, with high technical and commercial losses. The Electricity Distribution and Transmission Improvement Project aims to improve distribution and transmission networks to meet increasing electricity demand and to strengthen institutional capacity of electricity distribution companies. While Pakistan has added about one million new, mainly household, electricity connections each year, about a quarter of its population still has no access to electricity, and the quality of service to those who are connected has been deteriorating sharply, said Yusupha Crookes, World Bank Country Director for Pakistan. This has an adverse impact on both the normal conduct of social and economic activity and the delivery of social services. Improving electricity distribution and transmission services is a key element of the overall effort of reforming Pakistans power sector and strengthening its operating performance. The project supports investments in the distribution and transmission networks, which are essential to meet the growth in electricity demand more efficiently, and with improved quality of service, said Rashid Aziz, World Bank Senior Energy Specialist and project team leader. The project also aims to help the companies reduce technical and commercial losses and help strengthen various corporate functions and governance. It also includes a component to support energy efficiency and conservation activities to urgently respond to the critical shortages that the country is facing right now. The $173.6 million loan from the International Bank for Reconstruction and Development (IBRD) has 30 years maturity, including a five year grace period. The $83.1 million credit is provided by the International Development Association (IDA), the World Banks concessionary lending arm and has 35 years to maturity and a 10-year grace period. (Dawn-3, 19/06/2008)

The Benazir card

NOT everyone is convinced that the Benazir Income Support Programme will benefit the right people. While one can expect those with reservations about a PPP-led government to voice concern at the scheme that aims to cushion the poor from the impact of inflation, the governments allies too seem to harbour apprehensions. On Monday, a resolution adopted by Karachis MQM-dominated city council demanded the Benazir card be operated through the union councils to ensure that its benefits were distributed fairly. The demand is reasonable enough. After all, the main thrust of devolution is to empower the people and the way to reach them is through the union councils and nazims that are wellpositioned to identify the truly needy. The implementation of the scheme at the federal level might be seen as an attempt by the majority party to favour its own workers. No doubt, many union councils are politicised and backed by one political party or the other. Still, the overall division of benefits is not confined to a single set of people subscribing to a particular ideology. Unfortunately, corruption and poor transparency are endemic in our political culture when it comes to the execution of any major scheme by any government department. Poverty alleviation schemes like the Rs34bn Benazir income programme are especially vulnerable to misuse. This is so because without adequate information, education or strong forums for dispensing justice, the target groups find their voices suppressed. Even the zakat scheme, which for reasons of faith would appear to have a higher moral standing, has not been without flaws. There have been allegations of favouritism and embezzlement where the disbursement of zakat funds is concerned. Nevertheless, a decentralised system of distribution is bound to find greater public support than one which is perceived as being at a distance from the grassroots.

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Finance Minister Naveed Qamar has said that the selection of needy families would be based on information provided by the National Database and Registration Authority. But neither this nor the assurance that the data would be constantly updated to include the maximum number of deserving households in the selection process has dispelled suspicions. It is in this context that the city council resolution must be carefully considered. At the same time, it would profit all to guard against corruption, bureaucratic hassles and favouritism. To achieve this end and to avoid past mistakes, a simple, lowcost, apolitical structure to oversee the implementation of the Benazir income scheme makes infinite sense. (Dawn-7, 19/06/2008)

Not in the land of milk and honey

Fresh milk rates need to be regulated according to the judgement of the Sindh High Court as higher rates of fresh milk are not only hurting the consumer but the retailers as well, said the President of the All Karachi Milk Retailers Welfare Association, Hafiz Nisar Gaddi. He said that the steady rise in the prices of fresh milk has, on one hand, been detrimental to the cause of consumers who have had to face repeated price hikes, and as a result have switched to alternatives or reduced their consumption which is subsequently hurting the retailers. Before the inception of the City District Government of Karachi (CDGK), there used to be a department of Sindh government called the Bureau of Supply and Prices which employed several experts who meticulously gauged the costs incurred on the production of one litre of milk. There are a lot of factors that the Bureau considered before attributing the final cost of milk at the retail end. These include the cost of the animal the animals daily feed consumption, the cost of feed including rice, wheat husk, green grass and hay. Other factors such as the maintenance of the animals including their medicine and water for them to bathe etc and the wages of the workers were also considered as important factors. One animal produces 7.5 litres of milk per day, the farmer keeps his profit and sells to the wholesaler. The wholesaler who is more of a distributor than anything else also charges his transportation costs linked with the diesel and the petrol along with charging his profit as well. Coming to the retail end of the equation, the retailer has to pay for the shopping bags, rubber bands, the electricity used to chill the milk in storage. The retailer also pays for at least two resident workers who work shifts between the Fajar prayers and evening and also from the evening to closing time, also paying for their meals. Also the retailer has to pay for the sales tax and fees for the calibration of measuring apparatus. Gaddi said that once this Bureau has established the factors affecting the price of fresh milk, it conducted an independent market survey of the prices of all these factors and would publish a quarterly report on this. All decisions to raise milk prices were taken after discussions with all parties concerned whereas the raising of prices or not was taken on the basis of the seasons. After the takeover of the CDGK, this department was abolished and as such there was no statutory body that worked with the farmers or wholesalers or retailers for affixing the price of milk. Meanwhile, the dramatic rise in the price of petrol and like products has also affected the milk prices. This is because of the increase in the cost of transporting milk. Since the shopping bags are made from plastic derived from petroleum, a rise in the price of petroleum has caused sharp rise in the cost of the plastic bags used to package fresh milk. Plastic bags which were sold at Rs40 per kg in 1998, cost Rs192 per kg today, which is now expected to jump to Rs225 per kg. Even the bands, made from Malaysian imported rubber are also getting expensive with the exchange rate being disfavour-able for imports of any kind; rubber bands cost Rs430 per kg. Feed prices have gone through the roof as the price of rice and wheat is soaring, hence even the price of their husks and the flour residue (known as chowkar) is very expensive. The green grass and hay eaten by the animals used to come from the interior Sindh, but due to drought like conditions for the past few years it has to be brought in from the Punjab and even imported from India adding to the cost. Electricity used heavily to keep the milk cool and hence guarantee a longer storage time costs over Rs11 per unit. According to Gaddi, the government should at least charge the agricultural rate of electricity from the farmers. Even the gas used to heat raw milk, in order to disinfect it, is also getting expensive. The Annual Animal Contract known commonly as Bandi is pretty high. From being charged around Rs300 per litre in 1998, the contracts stand at Rs1420 for retailers today. The contract is a security taken in advance by the farmer that acts as a guarantee to provide milk by the farmer by buying animals and maintaining them to provide a steady supply of milk, and for the retailer to buy it. At this rate, the farmer sells the wholesaler milk for Rs36.70, the wholesaler keeps Rs1.33 as profit and resells the milk for Rs38.40 to the retailer. The retailer, according to an agreement between the government and the retailers in 1998, sell the milk by keeping two rupees profit per litre. From within these two rupees, the retailers have to pay their expenses, overheads, bills and profit. Another problem that Gaddi points out is that Farmers sell milk in barrels of 40 Ser which is approximately equal to 37.32 litres. They sell in ser but charge according to litres and the CDGK has been unable to resolve this issue. All the CDGK has done is just to go out and catch the retailers, who are easy targets given their proximity. Pakistan used to be the third largest producer of fresh milk in the world and India used to be fifth. Now, India is up to third while Pakistan is number five on the list. The countrys milk production has gone down drastically and until and unless good facilities, water and financial support is extended to dairy farms, the near future does not bode well for a lot of people especially those employed in the dairy

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business and the consumers at large. Already a lot of farms have closed down and there is a shortage of milk in the city. Amid this crisis the CDGK arrests the retailers, throwing them into jail like they are some sort of criminals and levying heavy fines amounting to millions of rupees against them. The government should take concrete steps to ease the problems faced by the dairy businessmen. The new budget for livestock and agriculture promises a lot but as usual a major chunk of it is going into the Punjab. Of what comes into Sindh will go into the hands of the waderas and the feudals and nothing for the farmers. A concerted effort needs to be made to bring the price of milk down for the benefit of the masses. (By Gibran Ashraf, The News-19, 19/06/2008)

Budget on a wing and a prayer

THE PPP government had, admittedly, inherited a difficult situation. Unfortunately, however, it took a casual view of the challenges that lie ahead. The finance ministers budget speech did not articulate a vision or medium-term strategy to address these, partly because the government has been thrown into the deep end, given the political uncertainty and the timing of election. That we find ourselves in this situation is not just because of the unparalleled increases in international prices of commodities like oil and food grains but because government expenditures had run wild. It is important to understand our predicament because of this factor, since the foremost issue is not the level and volume of taxation but what tax payers are being provided from their tax contributions. To illustrate the point take the following examples of what has been happening to expenditures with tax revenues increasing from Rs386bn in 1999-2000 to a trillion rupees in 2007-08. Defence expenditures have risen from Rs150bn to Rs320bn (including military pensions), this works out to US$34 per capita against US$23 for education and health combined. New F-16s are being purchased and Rs75bn were overspent during the year just ending. And there is no debate on whether we are getting value for our money. Similarly, take the case of civil administration. The expenditure has grown from Rs48bn to over Rs140bn. Six aircrafts were bought in recent years for the president, the prime minister and the four chief ministers, with countless bullet-proof and luxury high fuel consuming cars, innumerable lavish foreign trips of VIPs (and nothing has changed with the prime minister, who two weeks ago took an entourage of 84 for Umrah). Again, the Public Sector Development Programme (PSDP) of Rs550bn supports additional homes for federal ministers although the concurrent list is being abolished. Add to this list the schemes that should be implemented by the provincial or local governments, low priority projects not being dropped, etc. and you get a flavour of the quality of the much celebrated PSDP. The assumptions on the budget deficit (4.7 per cent of GDP) and inflation (12 per cent) are optimistic. Although the announcement to freeze non-salary expenditure components, the ban on purchase of new cars and the reduction in the budget for the PMs secretariat (the latter having symbolic importance) deserve praise, we do not see a serious effort to cut expenditures. And these are our bane particularly the spending on defence, administration and the general untargeted subsidies on oil, fertilisers and electricity consumption of the more affluent. The target of the budget deficit is ambitious for the following reasons: a) The current expenditures appear to be significantly underestimated, the best example being provided by the decision to allow interest charges to go up nominally despite the increase by almost 20 per cent in debt, to raise interest rate by two percentage points on the National Savings Schemes and shift borrowing to sources other than the State Bank. b) The full cost of the 20 per cent salary increase and the enhancement of pensions of retired civil and military personnel have not been fully factored in, with this bill being particularly steep for the provinces. c) While increased reliance on indirect taxes has been preferred, it is estimated that collections from direct taxes could go up by another Rs100bn with little additional tax effort. But this may not actually happen. d) The target of 25 per cent growth in tax revenues looks unreasonable even if we factor in the tax mobilisation proposals of Rs66bn. This is so because industrial production and competitiveness (and thereby economic growth and government tax revenues) are expected to be hit by energy shortages, the increase in interest rates as monetary policy is tightened further, the L/C 35 per cent cash margin requirement and the phasing out of oil and electricity subsidies. In other words, the budget deficit may well be two percentage points of GDP higher. Sadly, no attempt has been made to begin to tackle the structural and systemic issues that saddle the tax regime. The government has chosen to tax the already taxed sectors (by simply increasing GST to 16 per cent and by enhancing excise duty on cement, telecommunications, financial services) rather than improving the structure, removing the distortions in the incentive systems and expanding the coverage/base to other exempted (agriculture) or lightly taxed sectors like services and trading in listed shares. This will simply incentivise evasion. Nor has the issue of definitions been resolved, with trading incomes of stock market and real estate brokers continuing to be treated as capital gains and exempted from taxation, without the Capital Value Tax (CVT) on transactions being raised. Yet another fourth one amnesty whitener scheme at two per cent has been announced despite the tried, tested and failed experience of such initiatives.

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Duty on all imports has been increased by one per cent and on 300 luxury items by 30-35 per cent ostensibly to narrow the trade deficit by discouraging imports. Although the measure is well-intentioned given our weak administrative mechanisms and systems this is more likely to succeed in encouraging under-invoicing and smuggling. Also, while passing on the increase in international prices of oil over a shorter period there is a need to consider reducing the GST to five per cent (or to a specific subsidy) to ensure no revenue loss for two years to raise it back to 15 per cent when the economic situation improves. Moving to the direct poverty addressing measures, the scope of the cash transfer programme (the Benazir card) is disappointing considering that there are around 10 million households below or hovering around the poverty line that need help urgently for the next year or so. Moreover, the use of this card as an instrument of payment will not be transparent. To prevent leakages we need public display of the names of the beneficiaries and public distribution of the grant. The other worrying aspect for which there are no easy answers, except that perhaps the untargeted subsidies should only be withdrawn (with all the implications for the budget deficit) when the system of cash transfers is fully in place. Whereas the demand is for immediate relief setting up the system could take as much as six months, and is likely to continue to exclude a sizable chunk of eligible beneficiaries (in Fata, Balochistan, interior Sindh) with no ID cards. The government has chosen not to spell out its strategy to finance the massive current account deficit projected at US$13bn for next year, especially if the domestic and international environment for privatisation and floatation of Global Depository Receipts (GDR) remains murky. Although there has been a net capital inflow, the bulk of them are sources either volatile or tenuous in nature, raising serious questions about the stability of the external sector. However, the biggest challenge for the government will be the management of public expectations. This holds especially true with respect to subsidies (particularly of wheat flour from the three million tons of high cost imported wheat and the R&D subsidy for industry). The planned reduction in subsidies will require significant increases in electricity tariffs, oil and wheat flour prices, a politically daunting task. (By Shahid Kardar, Dawn-6, 20/06/2008)

New budget, old problems

THE 2008-09 budget, announced recently, offers a lot of relief for the poor who have been facing a great many hurdles in enjoying their fundamental rights, specially in the last eight years commonly known as the Musharraf regime. The agricultural sector is a very important one supporting 70 per cent of the economy but still needs a lot of reforms and relief even after the announcement of the budget. The poor farmers, the major players of agriculture, have no money to buy high-priced oil and are facing troubles in buying fertilisers, specially DAP, in order to get the best results, particularly the crops of sugarcane and wheat. Farmers are using cheap fertilisers instead of DAP which is far from their purchasing capacity. This replacement would affect agricultural income. Agriculturists regard it as a minute subsidy of Rs1,000 over DAP. It is the season of planting the rice crop these days that needs more water, fertilisers and sprays as compared to any other crop in Pakistan. The huge problem is of electricity. Loadshedding occurs almost 12 hours in a day in rural areas and most of the farmers rely on the electric tube-wells. Since electricity is not available according to their needs, how should they irrigate their crops? Another point which has been given due respect in thebudget is poverty. Poverty is a major problem halting Pakistan from progress. The new government has taken some bold steps regarding the eradication of poverty. They have made a fund programme, Benazir card, under which poor families would be given the amount of Rs1,000 as monthly aid. Now the problem is that who will benefit and who will not? This aid will certainly go either into the pockets of politicians themselves or to their political affiliates. The result of this programme would be the same as that of Zakat committees. MUHAMMAD ALI HARAL, Lahore (Dawn-6, 20/06/2008)

Is it transparent now?
THE new government has made the defence budget relatively transparent. The new defence budget now discloses expenditure on personnel, operations and assets. It also contains service-wise breakup. Although the disclosure is still not perfect and a lot of people expect more details, the availability of some information as compared to the one-line budget of the past is an essential first step. It shows that the new military leadership had realised that it could not improve the organisations image without making some basic concessions including relative transparency of its spending. How far the appetite for greater information will be satisfied will depend on this and the successive governments ability to capitalise upon this opportunity to expand its power vis--vis the armed forces. Broadly speaking, there are two patterns of transparency in military expenditure. The first relates to the Nato definition of defence spending which clearly specifies that it would include all activities, even those in the civilian sector and by paramilitary forces, which are designed to strengthen the militarys capability. The Nato classification includes pension, defence industry, special projects and all other defence related spending.

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The other pattern relates to the Indian definition of the defence budget that provides certain amount of details but does not meet the Nato definition. The Indian budget gives breakdowns for the three services and also figures of annual capital expenditure versus operations spending. Since there is no hard and fast rule about what each country will reveal, Pakistan seems to have followed the latter approach. This pattern represents the via media between civilian demand for greater information and the militarys sensitivity for some amount of secrecy. It could be argued that it is not impossible to follow the US and British pattern of disclosure of defence estimates, but given the colonial nature of the military institution, the figures which have been provided now are better than the complete opacity of the past. This transparency is a historic milestone on, hopefully, what will turn out to be a road to greater transparency and better civilian control of the defence sector. Improved civilian authority over the armed forces is a corollary of greater transparency and vice versa. A more confident civilian government means the one which makes the military and the country at large confident of its ability to deliver and govern the state. In Pakistans historical context, the military is a political force to reckon with and it would have to be convinced of the ability of the political dispensation to govern the country to cooperate more. A glance at the recently released budgetary figure of Rs295.306bn shows that the armed forces are spending 34 per cent on personnel, 28 per cent on operations, 4.1 per cent on travel, 29.7 percent on physical assets (meaning weapons), 8.7 per cent on civil works and 23.9 per cent goes on general expenditure. The service-wise breakdown is 43 per cent is the armys share, 24 per cent is for the air force, and 9.8 per cent for the navy and 22.5 per cent goes to inter-services and defence production institutions. The teeth-to-tail ratio appears negative. The defence budget does not include approximately Rs45bn in military pensions nor does it necessarily disclose offbudget financing. There are definitional issues as well such as where to classify retired military personnel that continue to work in civilian departments whose pay and personnel cost is not charged to the defence budget. Then there are other expenses incurred by the civilian local governments on behalf of military establishments or in cantonment areas which does not show up as part of military expenditure. One could go on and on with details of where the lines between military and civilian spending are fuzzy. Tabulating all such figures we could reach a total of Rs350-360bn. This does not mention the spending on the nuclear programme, not all of which can be found in this more transparent defence budgetary figure. But lets not complain about the current level of transparency. The greater problem is with the other claim regarding the possible reduction of defence spending which cannot happen due to the following reasons. First, the current configuration of the military does not allow for a substantial reduction of the militarys long-term liabilities such as personnel cost. A noticeable reduction can happen in two situations: (a) a unilateral decision by Pakistan (within a regional arms control framework) to disarm and (b) change the structure of the military by making it less labour intensive and more capital intensive. These are serious political decisions which cannot be taken until the government is stable and the Defence Cabinet Committee of the Parliament (DCC) is strong enough to make such decisions. Second, currently the DCC depends upon the military for input. The 22 parliamentary committees, which were formed during the 1970s as a result of higher defence re-organisation of the Bhutto days, do not have a system whereby independent opinion is sought to corroborate the information provided by the military intelligence services and the service headquarters. For example, during the 1980s, the air and naval headquarters had played up external threat to force the government to allow the services to buy a certain category of French missiles. Since the government then did not have an alternative source of information, it gave in to the demands. The present parliament could either encourage a system of lobbying by various stakeholders as happens in the US or allow for the streamlining of the defence bureaucracy for better information. This brings me to the third issue of the lack of capacity of the existing Ministry of Defence (MoD). Over the years, the MoD has become impotent due to its militarisation and lack of expertise. The MoD should be manned by experts who know management of defence. This means training of bureaucrats and bringing in outside experts. The Pakistani civilian bureaucrats, especially of the MoD, are no comparison to their more powerful counterparts in India. The appointment of military officers in key positions in the ministry has completely weakened the ability of the civilian bureaucrats to deliver. An under-capacitated MoD bureaucracy cannot reduce the wastage in the defence budget which is estimated to be over 20 per cent. This means that we cannot have reduction in the short or medium terms. Fourth, accountability is a crucial factor. There are structural flaws in the militarys accounting and auditing system which currently encourages wastage. Finally, given the militarys existing plans to carry out military modernisation, it does not seem that immediate defence burden will reduce substantially in the short to medium term. Thus, a short-term suggestion one could offer the existing parliament is to hold a conference of experts on military expenditure and defence accountability in which international and national experts could apprise the government about how to go about its business of dealing with the defence burden. If the cat is to be belled, let it be done properly. (By Ayesha Siddiqa, Dawn-7, 20/06/2008)

Rs71bn deficit budget for Balochistan

QUETTA, June 21: The cash-strapped Balochistan government on Saturday announced a budget of Rs71.19 billion for financial year 2008-09 which showed a deficit of Rs8.80 billion.

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Prime Minister Syed Yousuf Raza Gilani has promised to provide Rs3 billion special grant from his discretionary fund, Balochistan Finance Minister Mir Asim Kurd informed the provincial assembly in his budget speech. With this grant, the budget deficit would come down to Rs5.80 billion, which would be met by enhancing provinces own resources, he added. Like the outgoing fiscal year, the development outlay for 2008-09 is largely unfunded and it depends entirely on special grants from the Centre. The last years development budget of over Rs13 billion showed a resource gap of over Rs10 billion. The finance minister announced that the Rs2 billion subsidy on tubewells would continue. The subsidy was introduced last year to cope with the damage of drought in the province. He said that mega projects worth Rs51.36 billion being carried out by the federal government in the province would bring a green revolution. The projects include Mirani and Subakzai dams, Kacchi canal, extension of Pat Feeder, Kirthar canal, recharge of ground water, Bolan dam at Kacchi, reconstruction of Shadi Kaur dam, Nawa Batozai storage dam in Qila Saifullah and rehabilitation of Nari canal. Mr Kurd said that four of the five dams the federal government planned to construct were in Balochistan. He said the provincial government was planning to allot land to landless farmers. He announced a number of austerity measures and imposed a ban on purchase of new cars, machinery and other goods for official purposes. Petrol consumption will be kept at the minimum possible level. Legislation for the Balochistan Public Procurement Regulatory Authority and institution of a provincial employees pension fund and an investment fund under the General Provident Fund Act are some of the proposals. A financial manual is being compiled to ensure full compliance with rules and regulation of the government. The minister announced a 20 per cent raise in pension and salary of the government employees, besides an increase in medical and conveyance allowances. The Rs71.19 billion budget has three distinct segments -- Rs47.52 billion current revenue expenditure, Rs7.92 billion capital expenditure and Rs15.74 billion development outlay. The revenue budget shows a surplus amount of Rs4 billion. The capital budget shows a deficit of Rs1.69 billion which reduces revenue surplus to Rs2.30 billion. With the expected foreign assistance of Rs4.62 billion and Japans cash assistance of Rs11.50 million, the revenue surplus of Rs2.30 billion will contribute Rs6.93 billion to financing the Rs15.74 billion Annual Development Programme. It leaves a big gap of Rs8.80 billion, which will be partly met from the Rs3 billion special grant and Rs3 billion Uch gas royalty for which the prime minister has constituted a committee. Mr Kurd informed the assembly that the province was expected to get Rs48.05 billion from the federal government during 2008-09. The provincial own revenue generation is estimated at Rs3.47 billion, of which Rs2.50 billion will be non-tax income and only Rs972.16 million is expected to be collected as taxes. As against the current revenue expenditure of Rs47.52 billion, total revenue receipts are Rs51.52 billion, showing a surplus of Rs4 billion. The capital expenditure of Rs7.92 billion provides Rs2.97 billion performance grant to district governments, Rs1.95 billion debt-servicing to the State Bank, Rs1.17 billion debt-servicing to the federal government, Rs1.40 billion payment against cash development loans and a few small payments against loans. Total capital receipts amount to Rs6.22 billion, of which Rs4.55 billion comes under the BDSSP in foreign exchange. A deficit of Rs1.69 billion on capital budget has brought down the surplus to Rs2.30 billion from Rs4 billion. During the outgoing fiscal year 2007-08, the revenue income outgrew budgetary projections. As against the original projection of Rs43.82 billion revenue income, the revised estimate of revenue amounted to Rs46.38 billion. The provincial revenue also outgrew and the revised estimate of Rs3.22 billion, against the original projection of Rs2.96 billion. The revenue expenditure budget in 2007-08 came down to Rs39.95 billion from the original projection of Rs41.95 billion. The development outlay was Rs12.58 billion, against original projection of Rs13.47 billion. The budget for 2007-08 showed a deficit of over Rs10 billion. It had been adjusted through financial engineering by improving Rs2.56 billion revenue income and bringing down the current expenditure to Rs5.54 billion and the development expenditure to Rs850 million. (By Sabihuddin Ghausi, Dawn-1, 22/06/2008)

Rs 71.19 bn tax-free budget for Balochistan

QUETTA: Balochistan Finance Minister Mir Asim Kurd Gailo on Saturday presented a tax-free deficit budget for the financial year 2008-09 in the provincial assembly with the total expenditure of Rs 71.19 billion. Balochistan Assembly Speaker Muhammad Aslam Bhotani chaired the budget session. The total income (receipts) of the province is estimated at Rs 62.38 billion against the total expenditure of Rs 71.19 billion, showing a resource gap of Rs 8.81 billion. The total receipts through different means include the income from the provincial resources standing Rs 3.47 billion and the income from the federal receipts estimated at Rs 48.05 billion. The ongoing expenditures in the next financial year are estimated at Rs 47.52 billion. A total of Rs 15.74 billion have been allocated for the development sector, which includes foreign assistance projects worth Rs 4.64 billion while Rs 11.75 billion were allocated for the Public Sector Development Programme.

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In his budget speech, the finance minister vowed that the deficit of Rs 8.81 billion would be met by increasing the local income, cutting off the expenditures and assistance of the federal government. He, however, added that the budget deficit would decrease after getting the special grant of Rs 3 billion, as announced by the prime minister sometime back. Gailo said the transfer of resources to districts was increased to Rs 20.46 billion from the revised estimate of Rs 16.23 billion for the outgoing financial year. For strengthening the district governments, a performance grant of Rs 805 million has been allocated, he said. Gailo mentioned that among the total federal receipts of Rs 48.05 billion, as compared to Rs 43.16 billion in the revised financial year 2007-08, Balochistan would get Rs 25.92 billion from the shared taxes (Rs 20.06 billion in the outgoing financial year), Rs 13.6 billion in the head of subvention (Rs 10.7 billion in the outgoing revised budget), Rs 3.73 billion in the head of surcharge on gas (against Rs 4.66 billion in the outgoing budget), Rs 1.49 billion in the head of excise duty on gas (Rs 2.15 billion in the outgoing budget), Rs 3 billion in the head of royalty on gas (Rs 2.91 in the outgoing budget), Rs 283.44 million in the head of the GST (provincial) against Rs 275.429 million, which had been allocated in the revised budget of the financial year 2007-08. Among the total provincial receipts of Rs 3.47 billion, tax receipts are estimated at Rs 972.16 million against Rs 937.35 million of the outgoing financial year budget while non-tax receipts are estimated at Rs 2,504.42 million against Rs 2,283.44 million in the outgoing financial years budget, he said. In the current revenue expenditure of the province, he said, the major chunk was of Rs 7,951.90 million to the general administration, Rs 5,115.31 million to the economic services, Rs 4,858.46 million to the law and order, Rs 4,373.03 million to the social services and Rs 2,850.98 million to debt servicing. Subsidy on wheat would eat up Rs 600 million. While the major expenditure shown in the budget is on the provincial allocable/GST 2.5 per cent, which stands Rs 20.46 billion, he said. The finance minister said the first budget of his government would bring prosperity in the province under the leadership and guidance of Balochistan Chief Minister Nawab Muhammad Aslam Raisani and support of Governor Nawab Zulfiqar Ali Khan Magsi. He vowed to curtail the non-development expenditures considerably and would also adopt certain other measures to bring financial discipline in the state of the provincial affairs. He announced a 20 per cent increase in the salaries of the provincial government employees and pensions of the retired employees. Moreover, there is also a proposal for making an increase in the medical and conveyance allowances of the employees in line with the decision made by the federal government, he added. The government, he said, would also continue to extend financial assistance to the heirs of the employees who died in the act of terrorism. Full salary would be paid to the heirs of those personnel of police, levies and prisons martyred in the line of duty. He announced to upgrade the employees serving in Grades 1-4. Similarly, Rs 400 monthly increase is being made in the utility allowance of the secretariat employees of Grade 16-21 while Rs 400 monthly is being increased in the allowance of the secretariat employees of Grade 1-15. The allowance of the employees of the Governor Secretariat and Chief Minister Secretariat is also being increased substantially, he added. The finance minister announced to create 2,425 new vacancies in order to reduce unemployment. He announced to set up 567 filtration plants in order to provide clean drinking water in the province. A filtration plant would be set up in each union council, he maintained. He said Rs 80 million had been earmarked for the rehabilitation of water-supply schemes which were damaged in the last flood. Out of the 413 schemes, 374 have already been restored, he added. Gailo announced to cooperate with the private sector to set up 300 educational institutions in the province. He added that in Basima, Darwaza and Huramzai, 132 KV grid stations would be installed, while work would be started on the 220 KV Dadu-Khuzdar transmission line. In order to supply gas to Sorab, Rs 340 million have been earmarked, he said, adding that Rs 360 million had been allocated for Noshki under the Peoples Works Programme. (By Muhammad Ejaz Khan, The News-2, 22/06/2008)

Sindh Assembly hall project not yet approved

KARACHI, June 22: The construction of the new Sindh Assembly hall is not likely to take off during the coming financial year 2008-09 as the planning and development department has not approved the project. In the budget book for the year 2008-09, the assembly building hall project has been shown as an unapproved scheme. An allocation of Rs20.4 million has been approved for engaging a consultant architect and engineering firm for the architectural and structural designs of the new Sindh Assembly hall. However, the allocation of Rs94.6 million out of the Rs1,939 million estimated cost of the project has not been approved. According to sources, the same scheme was approved in principle by the department at its meeting on May 20, which was presided over by the additional chief secretary (development). The Speaker of the Sindh Assembly, Nisar Ahmad Khuhro, has summoned a meeting of the department concerned to find out the status of the scheme. The meeting, sources said, also considered the constitution of a construction committee for the project and the appointment of its project director.

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The scheme of the new assembly hall was conceived in 1991, when the Sindh government decided to preserve the present assembly building as a national monument in view of the historical role played by the Sindh Assembly in the creation of Pakistan. Besides, it is the same building where Lord Mountbatten had signed the document of transfer of power from the British Raj to Quaid-i-Azam Mohammad Ali Jinnah as the first governor-general of Pakistan. Despite the finalization of the building plan in the early 1990s, the project could not take off for three years due to a controversy over supervisory power between the works and services department and the general administration of the assembly. The issue was resolved only after the project was handed over to the assembly secretariat. However, despite the approval of its PC-1 and inclusion of the project in the budget document of 1996, the scheme was dropped as the then Pakistan Peoples Party government had decided to build its capital city in Malir on the pattern of Islamabad, where not only its secretariat but also the assembly building would be relocated along with residences of government functionaries. For this purpose over 20,000 acres were acquired. With the installation of a new government in 2002, the old project to build a new hall for the Sindh Assembly in the backyard of its present location was restarted to make a provision for future expansion of seats from 168 to 350. Its foundation stone was laid on August 31, 2007 by the then chief minister Dr Arbab Ghulam Rahim and the then speaker Syed Muzaffar Hussain Shah. A construction committee was also constituted, headed by senior minister Syed Sardar Ahmad, which was given the task of negotiating with the owners of the two buildings adjacent to the assembly to make them part of the project. However, it is not known about the outcome of negotiations initiated to construct the buildings on the assembly premises. The two buildings, which had not been in use for over two decades, are located at the intersection of Maulana Deen Mohammad Wafai Road and the entry point of Assembly Road. The new hall, whose PC-1 was approved last year before laying of its foundation stone, will comprise a basement and ground plus three floors to be linked with the old historical building. It will have a seating capacity for up to 350 members in addition to the provision of further expansion. Its basement will have a library, a mosque, and a parking lot. The ground floor will have chambers, offices, a hall, voting lounges and related facilities. The second floor will have rooms for ministers, conference rooms, a gallery and an auditorium. (By Habib Khan Ghori, Dawn-13, 23/06/2008)

Main points of Budget 2008

* Benazir Card scheme to provide Rs 34 billion subsidy on essentials * Defence budget to increase by 7.2 percent to Rs 295.5 billion, against a Rs 330 billion demand * Salaries of government employees belonging to grades 1 through 16 likely to increase by 20 percent, and grades 17 through 22 by 15 percent * Pensions to increase by 10 percent * Emphasis on increasing taxes and duties on luxury goods * Amnesty for legalising undisclosed assets by paying taxes ranging from 2 percent to 10 percent * Budget deficit likely to be Rs 560 billion or 4.6 percent of GDP * Rs 541 billion to be allocated to the Public Sector Development Programme (PSDP) * Rs 523 billion to be allocated to the Annual Development Programme * Economic growth target set at 5.5 percent of GDP (DailyTimes-A1, 23/06/2008)

Bias forcing special people to live in poverty: experts

ISLAMABAD, June 23: Discrimination against individuals with physically impairments have pushed many people and their families towards conditions of poverty. This was the gist of a national seminar on disability, organised by the Directorate General of Special Education here on Monday. Speakers at the seminar, which was held in the National Institute of Special Education (NISE), said disability and poverty were inter-linked and key factors in the vicious spiral. They presented their situational analyses and shared information on the services and facilities currently available to physically challenged persons in the country. The discussion also dealt with the obstacles being faced by the special persons and their families. The speakers said women and girls with impairments were particularly prone to discrimination. Special people are seriously under-served by all basic services as only a few per cent of physically impaired children have access to schooling, they noted. Talking about the vision of the national policy for persons with disabilities, formulated in 2002, in pursuance of which a National Plan of Action has been approved by the prime minister, Director General Special Education Khalid Naeem said the policy aimed at providing an environment in which special people would be part of the mainstream society. The plan, inter-alia, envisages increase in rehabilitation services, promotion of inclusive education for children with special education needs, reinforcement of vocational training, legislative support to persons with impairments, creation of barrier-free physical environment, provision of sports facilities and more support to NGOs for service delivery in rural areas, he added. Mr Naeem said the Disabled Persons (Employment and Rehabilitation) Ordinance-1981 had been amended to raise the

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employment quota of special persons from one per cent to two per cent in both public and private sectors, besides declaring Islamabad, Lahore, Peshawar, Quetta and Abbottabad Disabled Friendly Cities. These cities will cater to the needs of physically challenged persons through provision of ramps, rest areas, reserved car parking and service desks in public buildings. Persons with impairments have also been allowed to appear in Central Superior Services (CSS) examinations, which will open avenues to enter top-level government hierarchy, Mr Naeem noted. The Directorate General of Special Education has also developed a park for the special people inside the F-9 Park in Islamabad. This is the first of its kind facility in the region, Mr Naeem said, adding that the park had a recreational and play area, a restaurant, amphitheatre, display hall, hall for indoor games, a jogging track, footpaths with railing and picnic and campaign area. (Dawn-2, 24/06/2008)

Provincial finances
THE truth can be inconvenient. All the four federating units are groaning under the severe pain of resource constraints due to their heavy dependence on federal funds largesse in the case of smaller provinces like Balochistan and the NWFP in terms of meeting their expenditure. This fact is underlined in the provincial budgets for fiscal 2008-09. Balochistan, for example, is facing a resource gap of Rs5.8bn in the implementation of its Rs15.75bn development programme for next year. This shortfall is in spite of a special grant of Rs3bn announced by the prime minister, ironically from his discretionary funds. Others are looking for financing part of their annual development programmes through loans from multilateral institutions like the World Bank and the Asian Development Bank. While the smaller provinces chose to vent their resentment against their difficulties in the preparation of the annual budgetary estimates in so many words, Punjab and Sindh opted to disguise their frustration in softer demands for greater provincial control over their respective fiscal resources. That was exactly the point the provinces underscored at an informal meeting of their finance ministers in Lahore earlier this month. Both Punjab and Sindh, with a large base of rapidly growing service sectors, decided to reach out to Islamabad for seeking an expansion in the scope of provincial sales tax to hitherto untaxed services (this is the only area that can help them substantially boost their own meagre provincial tax revenues) and to demand the transfer of its collection function to them. On the other hand, Balochistan and the NWFP wanted reimbursement of their outstanding dues owed by the federal government on account of unpaid gas royalties and net hydel profits. Balochistan strongly feels that the federal government is subsidising gas consumers in the other three provinces at the expense of its development, while the NWFP holds that the centre is doing a grave injustice to its people by capping net hydel profits at Rs6bn despite the far higher amount determined by the A.G.N. Qazi Commission and the Arbitral Tribunal. Simply put, both Balochistan and the NWFP want, and justifiably so, a greater share of the income accruing from their natural resources. The highly centralised fiscal and tax structure that allows the federal government to control chunks of monetary resources is impoverishing the provinces, especially the smaller ones, and spawning regional disparity and inter-provincial tensions. The rigid, centralised control over provincial resources has in the past forced the federating units to borrow heavily from the federal government or multilateral agencies to support their development programmes. That has resulted in the accumulation of huge, unsustainable debt stocks. The debt stock of Punjab, considered to be the richest province, has already shot up to over Rs304bn, including a foreign exchange component of Rs253bn. Similarly, Balochistan has built up an overdraft of Rs19bn from the central bank and is looking for its complete write-off or conversion into a soft loan to save a few hundred million rupees for development. The conditions in Sindh and the NWFP are not very different, with the former looking for a loan from the ADB to finance its development. The NWFP, meanwhile, is left with little to support development projects in the social sector as it is forced to divert a big chunk of resources towards improving law and order in the province. Burdened by a huge debt that eats into their meagre resources, little wonder the three smaller provinces are demanding an immediate change in the formula of resource distribution under the National Finance Commission by giving greater weightage to revenue collection, backwardness and area size to make it more equitable for them. Punjab, which lacks in natural resources, insists on retaining population as the sole or major criterion for resource distribution among the provinces and sees it as a great equaliser. Yet, all the provinces are unanimous in their demand for a substantial cut in the size of the federal share which has been slashed to 56.25 per cent for the next financial year in the divisible pool of taxes. That would, Punjab believes, largely assuage the smaller provinces grievances and remove their objections to retaining population as the sole or major criterion for resource distribution among the provinces. As is quite obvious from their budget documents and the ministers speeches, the provinces also differ with the centre on the issue of implementation of the Public Sector Development Programme, which at Rs549bn is almost double the Rs280bn collectively allocated by the provinces for their annual development programmes. Provincial governments want a bigger role in the selection and execution of projects in their respective territories. The demand is quite justified in view of the fact that provincial governments understand the development needs of their people better than the bureaucrats sitting in Islamabad. (The development programmes of Punjab and Sindh for 2008-09 show a clear bias towards the social sector education, health, water supply and sewerage and productive sector agriculture, irrigation and industry, if and when they can spare resources for that.) Moreover, a number of PSDP projects relate to provincial subjects like agriculture, education, health, etc and should therefore be handled by the provinces. The centre should be concerned only with the execution of cross-provincial projects, and that too in close consultation with the relevant federating units. If the past is anything to go by, there is little likelihood of the federal government relinquishing control over financial resources. The only way for the provinces to get Islamabad to acknowledge the principle of fiscal devolution, and concede provincial ownership of natural resources, lies in formulating a joint strategy to persuade the centre to this effect. That said, it would be difficult, if not impossible, for them to move in that direction unless they manage to evolve a consensus of sorts and narrow down their differences on fiscal disputes. The Lahore meeting of provincial finance ministers could provide an opportunity for that.

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(Dawn-7, 24/06/2008)

Time for difficult decisions

THE budget presented by the new government on June 11 missed an opportunity to prevent the economy from completely going off the track. As previous administrations have done during periods of economic stress, Islamabads policymakers have once again chosen the easy approach. Rather than opt for changing the structure of the economy so that it will not go through crises every few years, Islamabad has papered over the problems it has to deal with. The solutions I am proposing will be politically difficult since they will impose some burden on powerful constituencies. It is the job of the politicians to resolve these political conflicts; if they walk away from them, they are not earning their living. The present crisis is the result of the faulty policies pursued in the five-year period between 2002 and 2007 when the economy was allowed to expand without any worry about the stresses that the expansion may produce. The consequence of this misguided approach was the neglect of some of the sectors that should have produced the supplies needed by the expanding economy. This is precisely what happened to the sectors of agriculture and energy. For some inexplicable reason, the previous administration did not invest in electric power generation or on increasing the supply of natural gas. At the same time it encouraged village electrification and added more areas to the gas grids. The demand for these two essential commodities increased while their supply remained severely constrained. The process of adjustment that has been forced upon the current administration will have to take place when the global economy itself is under great strain. Having given up development planning, the annual budget exercise is the only occasion when the government takes a careful look at the economy and lays down the policy framework for developing it. The amount of economic power that was captured by the finance ministry since 1999 has meant that the Planning Commission lost the role it used to play. While the Q block captured power, it did not acquire the capacity to do serious analytical work. During the latter part of the Musharraf period, policymaking led by finance, was ad-hoc and opportunistic. Given the difficult economic situation that confronts the country today, it must develop a coherent strategy aimed at both reviving the economy and placing it on a high growth strategy. In addition the model of development should include two additional objectives reducing the incidence of poverty and narrowing the inter-personal and inter-regional income distribution gaps. I will today focus on two aspects of the strategy that needs to be formulated: to develop the sectors whose development needs immediate attention, and to reduce macroeconomic deficits. In this context, the policymaker must ask and then find answers to the following four questions. One, what to do with domestic prices when most experts agree that we are witnessing a paradigm shift in the prices of agricultural commodities? Two, what should be the response to the increase in the price of oil, an important item of import for the country? Three, how should the governments finances be improved to narrow the fiscal deficit so that it does not go beyond five per cent of GDP, which, in Pakistans conditions, is a sustainable level. And, four, what should be done to narrow the current account deficit and also bring it to a sustainable level of around four per cent of GDP? In so far as the energy sector is concerned, the government should pass on the prevailing international prices to the consumers. Subsidising the consumption of petroleum products and natural gas places intolerable burden on the national exchequer. It also skews the pattern of demand which is not efficient for the economy. In fact, the price of petroleum products that are consumed by the well-to-do should not only reflect international prices. The government should also impose an additional levy from which some subsidies should be given on the products that are consumed by the poor. The second area for policy attention is the sector of agriculture and, related to it, the prices of food gains for the poor consumers. Pakistan should take full advantage of the changes in agricultures terms of trade. This is the first time that agricultural prices have moved higher than the prices of manufactures and services. Allowed to be passed on to the producers, there should be a fairly quick supply response. Subsidising the prices of food grains, limiting their movement or preventing their export are all akin to levying tax on agriculture and passing the revenue to the urban areas. Such an approach will keep the sector of agriculture underdeveloped. It will also keep millions of people poor who depend on agriculture for employment. The third area of concern is the growing fiscal deficit. This ripples through the economy, affecting the level of prices, private sector investments and balance of payments. Pakistan has one of the lowest tax-to-GDP ratios of any major developing country. It barely acceded 10 per cent at the end of the Musharraf period. The total government expenditure approached one-fifth of the GDP. These ratios suggest a tax and expenditure regimes that need a total overhaul. The government should have a careful look at the tax policy, closing the loop-holes the rich have exploited to avoid paying their due share. The share of the well-to-do in the taxes collected by the government needs to significantly increase; sub-national governments should play a larger role in mobilising tax revenues; incomes from all sources, including agriculture, should be taxed; speculative activities in real estate and stock markets should be discouraged by levying capital gains tax. On the expenditure side, duplication of work between national and provincial governments should be eliminated by transferring more functions to the governments at the sub-national levels. The fourth area that needs government attention concerns trade. The only time Pakistan aggressively pursued export expansion was in the 1960s when the Ayub Khan government introduced the Export Bonus Voucher Scheme. The scheme allowed the exporters to earn large premiums financed by the importers. The country then had a dual exchange rate, one for exports and the other for imports. In sum, considerable amount of analytical work needs to be done to reshape the Pakistani economy by devising the right kinds of public policy. The donor community could nudge the government by supporting a programme of deep structural change. (By Shahid Javed Burki, Dawn-7, 24/06/2008)

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All subsidies to go this year: minister

ISLAMABAD, June 24: Commerce Minister Chaudhry Ahmed Mukhtar told the National Assembly on Tuesday that all subsidies being provided by the government on various items would be withdrawn by the end of the current year. Speaking on a call-attention notice, he said the subsidies on gas and electricity were being removed gradually. He said people would have to learn to live without subsidies. He said the government did not have surplus funds for the energy sector. He expressed concern over import of raw material, saying that over $1 billion was spent on importing cotton. He said reducing the import of food items which were available in the country would have a positive impact on the economy. (Dawn-1, 25/06/2008)

US releases $523m in aid

WASHINGTON, June 24: The United States has released and approved more than $523 million to Pakistan over the past two days, doing away with the impression that Washington may bring financial restrictions on Islamabad to spur it to do more in the war against terror. The US House of Representatives approved $150 million of economic assistance to Pakistan on Tuesday, which is additional to the aid Pakistan gets under a $3 billion package signed during President Pervez Musharrafs visit to Camp David in 2003.On Monday, the United States transferred $373.841 million to Pakistan from the coalition support fund. The fund is used for reimbursing Pakistan for the expenses it incurs during anti-terrorism operations along the Afghan border. We are still looking forward to a long-term commitment from the United States, manifested in a democracy dividend of at least $1.5 billion a year as proposed by two of the wisest senators of the US, Biden and Lugar, said Ambassador Husain Haqqani while commenting on the release of US funds to Pakistan. All disagreements between Pakistan and the US will be resolved. And we will not let anything come between our visions of a strategic partnership between the two democracies, he said. The release of $373 million from the coalition support fund clears dues up to November 2007. Pakistan is still to be reimbursed for November 2007 to March 2008 while Islamabad has not yet submitted bills for the March-May period. Pakistan receives between $80 to 90 million a month from the coalition support fund. But recently, the reimbursements faced severe criticism from US lawmakers who claimed that Pakistan was using this money to buy weapons that can only be used in a conventional war against India and not for fighting insurgents. Islamabad countered the argument by saying that reimbursement is not aid and Pakistan is free to use this money for whatever it wants to purchase. The US administration initially accepted Pakistans argument but later tightened the reimbursement procedure following claims in the US Congress that Islamabad was inflating its expenses. The US administration remains divided on this issue. (By Anwar Iqbal, Dawn-1, 25/06/2008)

Allocation for CDGK in Sindh budget Decrease in funds issue to be resolved by July 1: opposition
A resolution demanding a repeal of the decrease in the Octroi Zila Tax (OZT) for the City District Government Karachi (CDGK) was tabled and passed with a majority on Thursday. The resolution also demanded that the right to collect the OZT be given back to the CDGK. Meanwhile, the opposition benches continued to maintain that the resolution was redundant because a policy to deal with the decrease in the City District Government Karachis (CDGK) share in the Sindh government budget for 2008-09 will be announced by July 1. The debate began initially when a resolution about the decrease in the CDGKs funds in the provincial budget was tabled during the previous City Council session (on Monday). The resolution had been put in pending, and was taken up for voting on Thursday. Rafiq Ahmed from the opposition said, however, that the issue should be discussed and not just voted on, for a number of reasons. While the decrease in funds is undoubtedly sad, but over the past three years, the CDGK did not give us (UCs) the funds that had been allocated to us either, he said. We want those funds first. Leader of the House, Asif Siddiqui countered this with a statement about how the funds that Ahmed was speaking about were khairat (charity) given to the UCs by City Nazim Mustafa Kamal. Right now, were talking about what is rightfully ours. Were not begging for charity like some other people are, he maintained. This led to a storm of protests from the opposition members, who found the term charity offensive. The convener of the session (and City Naib Nazim) Nasreen Jalil handed the microphone over to opposition leader Jumman Darwan, while members of the opposition demanded that Siddiqui take every word back. Even a beggar does not beg in Pakistan. Even they ask for their rightful shares, Darwan began. The decrease in the CDGK funds will be rolled back. We have been assured by the Sindh government. A policy announcement in this regard will be made by July 1.

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Jalil asked him if something along the lines had appeared in the media. Everything will be resolved by July 1, Darwan replied. Well, [Pakistan Peoples Party (PPP) Co-Chairman] Asif Ali Zardari also assured us during a meeting that the Karachi Water and Sewerage Board (KWSB) will be handed over to the city nazim. If that has not been implemented yet, how do you expect us to believe your July 1 deadline, Asif Siddiqui asked Darwan. What capacity is Darwan speaking in? Has he been authorised by the provincial government to give this statement? If not, this is merely an attempt to divide the house over the issue of funds for the CDGK, Abdul Jalil from the treasury benches proclaimed. Members of the ruling party supported his stance by wholeheartedly thumping their desks. During Nawaz Sharifs tenure (in 1996), a decision was made that the OZT will be increased by 15 percent every year, and all districts would get this. Even this rule has not been implemented yet. Why are we not talking about this, Arshad Qureshi from the treasury benches asked. I met with the Sindh local government (LG) secretary. A notification about repealing the decrease in funds was being typed out at the time. Everything will be clear by July 1, Naseem Khan from the opposition said. He then went on to complain about how the CDGK had not released funds owed to his UC and how his contractors were suffering because their bills had not been paid yet, despite the passage of six months. He was drowned out by constant desk-thumping by the treasury benches. Jalil from the treasury benches then sent in a resolution calling for a repeal in the decrease in OZT funds, and for allowing the CDGK to collect the OZT. He said that the decrease in funds for the CDGK in the provincial budget was a conspiracy to kill specific local governments. The debate escalated amidst much finger-pointing and bandying about of blames about misappropriation of funds. Eventually, Dilawar Khan from the opposition took up from where he had left off in the last City Council session and started chanting slogans demanding UC funds. The rest of the opposition members joined in. Meanwhile, the treasury members thumped their desks in rhythm with the oppositions sloganeering. Amidst the ruckus, the resolution tabled by Abdul Jalil was voted on and passed with a majority. Unable to control the House or restore order, the convener announced that the session had been adjourned for five minutes. When the session reconvened, Nasreen Jalil announced that KWSB Chief Engineer Gulzar Memon had been invited to answer questions raised by the House. Meanwhile, opposition member Saifuddin requested that he may be allowed to speak. Permission was granted, but treasury member Abdul Jalil protested and said that as per the rules, once a resolution has been voted on, no one can speak on it. The convener countered him and after repeated protests, said he would not be allowed to speak again if he did not maintain silence and let Saifuddin speak. The latter went on to allege that City Nazim Mustafa Kamal had misappropriated CDGK funds, leading to a volley of protests from the treasury benches. Once the pandemonium died down, four resolutions about water issues were tabled. Members of the Council then put their questions forward to Memon, who answered most of them saying either that the issue will be resolved or that their concerns will be forwarded to the relevant authorities. Meanwhile, when members of the House were informed that Memon was the electrical and mechanical chief engineer, and not the chief engineer for sewerage, some came up with comments about how they wanted water problems, and not car problems fixed. Members brought up issues such as contamination in the water supplied to them, water scarcity, non-functional pumps at pumping stations in their UCs and illegal water hydrants. The major reason for the scarcity of water, Memon said, was load-shedding from the Karachi Electric Supply Corporation (KESC). We are not shot on water. The Hub Dam reservoir currently has 328 cubic feet of water. This is enough for twoand-a-half years, he said. The only problem is the irregular electricity supply from the KESC. We either get no voltage or low voltage. Our pumps need 11kW to work, and during low voltage supply, we get only 9.5kW. If the pumps cant function, houses cant get water. During the question-and-answer, Memon was heckled quite often. Many other members had questions for him, but the session was adjourned till 04:30 p.m. Friday. Due to the heckling and jeering, however, sources said that Memon had refused to reappear before the House on Friday. (By Urooj Zia, The News-14, 27/08/2008)

Rs34.33bn Sindh supplementary budget approved

Sindh Assembly unanimously approved the supplementary Rs34.33 billion budget (2008-09) of the Sindh government on Thursday, with the opposition neither opposing these expenditures nor moving any cut motion. The treasury Pakistan Peoples Party (PPP) members as well as the ministers and even the speaker were surprised as to why the opposition was not raising objections on the budget and not moving any cut motion, as the PPP members used to move hundreds of cut motions when they were in the opposition. The speaker read out all 51 demands for grants of the supplementary budget in the house moved by Sindh Information Minister Shazia Marri on behalf of Chief Minister Syed Qaim Ali Shah and the house approved it unanimously. Before moving all demands for grants the speaker asked the leader of opposition as to whether he wanted to move any cut motion or oppose the expenditures. Jam Madad told him that the opposition did not want to move any cut motion and the treasury benches responded the gesture by thumping the desk.

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The speaker also fixed one hour for discussion and asked the members to debate on supplementary budget. However, Muttahida Qaumi Movement (MQM) Minister Syed Sardar Ahmed, who had presented five budgets during the previous government, told the chair that there was no need to debate on the supplementary budget as the house had no power to vote against it. Ahmed said that it had remained a past practice that the expenditures did not come under discussion. Under the constitution the house can only discuss on expenditures but cannot vote for it, thus there is no need to indulge in discussion, he observed. He said that amendments should be made in the law. Sindh ministers Murad Ali Shah and Shazia Marri insisted for discussion on expenditures while quoting constitutional provision in this regard. After arguments and counter arguments by the PPP and MQM members and ministers, Chief Minister Syed Qaim Ali Shah finally intervened and told the house that there was no need for debate on supplementary budget. Shah said though this amount was not spent by this government, the treasury benches were showing grace and giving approval to these demands for grant. It will be seen in the future whether the opposition will reciprocate the same gesture of grace, he observed. He also quoted Article 120 of the Constitution, saying that it was not mandatory to hold discussion as this budget as there was no need for voting. Later, Sindh Minister Shazia Marri read out the demands for grants one by one and the house approved it with voice vote and finally the speaker clubbed together all the 51 demands for grants and the house approved it without any opposition. Finally, it was decided that no discussion will be held on the expenditures, and demands for grant for supplementary expenditure may be taken up. Later, the speaker adjourned the proceedings till Friday after the house approved all the demands for grant for supplementary expenditure 2007-08. (By Tahir Hasan Khan, The News-13, 27/06/2008)

$150m aid for Pakistan

WASHINGTON, June 27: The US Senate on Friday approved $150 million of economic assistance for Pakistan. Since the House of Representatives has already approved this assistance, the Senates endorsement completes the process of congressional approval. The bill approved by the Senate requires Pakistan to spend part of the fund on development projects in the Federally Administered Tribal Areas. The fresh assistance is included in the US war supplemental budget measure to support efforts into the year 2009, beginning October 1, 2008. The $150 million will be in addition to allocations Pakistan will receive under regular budget for 2009. The US administration has already requested a total of $901 million for Pakistan in the year 2009. (By Anwar Iqbal, Dawn-1, 28/06/2008)

Who is allowed to fly the flag

The Sindh Chief Minister Syed Qaim Ali Shah was questioned during the Sindh Assembly session regarding who exactly is entitled to fix the National Flag on vehicles. To this query, the Sindh chief minister replied that, According to the Ministry of Interior Government of Pakistans letter No. 8/4/1997-Public, dated 25-02-2003 under the Pakistan Flag rules only the following dignitaries are entitled to do so when sitting in the vehicles themselves: (i) President of Pakistan (ii) Prime Minister of Pakistan (iii) Chairman of the Senate of Pakistan (iv) Speaker of the National Assembly of Pakistan (v) Chief justice of the Supreme courts of Pakistan (vi) Chief Justices of the High Courts (vii) Governors of the Provinces (viii) Chief Ministers of the Provinces (ix) Federal Ministers. He added that, In addition to the dignitaries mentioned... the prime minister has been pleased to direct that all provincial ministers shall be entitled to fly the National Flag on their cars vide Ministry of interiors notification No. nil Islamabad 2nd May, 2003. (The News-13, 28/06/2008)

Finance bill adopted as budget session concludes

KARACHI, June 28: With the adoption of the Sindh Finance Bill 2008 on Saturday by the provincial assembly, the Rs267.76 billion budget for the financial year 2008-09 was passed. Through the bill, the government has withdrawn levy on transfer of shares while it has charged cess on gold and on the weight of goods upon their entry and using the infrastructure in the province. Besides, the bill has also levied a one-time luxury tax on imported and locally manufactured or assembled cars. After the approval of the finance bill, Bill No 3 of 2008 for amendment in the Revenue Act was introduced. Before calling it a day at 2.10pm, Speaker Nisar Ahmed Khuhro said that the budget session stood concluded and now the house stood adjourned to meet on Monday as a normal session when Bill No 3 of 2008 would be taken up for consideration. Earlier, Chief Minister Syed Qaim Ali Shah laid before the house the schedule of authorised expenditures for 2008-09. Before the finance bill was taken up for consideration clause by clause, in a brief discussion, opposition leader Jam Madad Ali and Arif Mustafa Jatoi objected at the withdrawal of levy on transfer of shares while Murad Ali Shah, Shazia Marri and Syed Sardar Ahmad, led by the chief minister, defended its removal.

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The chief minister said the levy was being withdrawn on the request of the Karachi Stock Exchange as this was not levied on transfer of shares in any other stock exchange. After the statement by the chief minister regarding objects and reasons, the bill was taken up clause by clause and passed without any objection from the opposition. In the finance bill, through an amendment in the Stamp Act 1899, the following entries from schedule Article 31 in clause (a) shall be abolished: i 1.5 per cent of the face value of shares subject to a minimum of one rupee on physical and on withdrawal from the Central Depository Company. ii 0.10 of the face value of shares deposited to the Central Depository Company. In Section 9, Sub-section (1), for the proviso the following shall be substituted: Provided that cess on gold shall be charged at the rate of 0.125 per cent of the total value assessed by the customs authorities. The government had also levied cess on the weight of goods upon entering and using the infrastructure of the province and the distance covered within the province up to 1,250 kg at 0.80 per cent of the total value of goods as assessed by the customs authorities plus one paisa per km. Exceeding 1,250kg, 0.81 per cent will be charged, exceeding 2,030kg but not 4,060kg 0.82 per cent, exceeding 4,060kg to 8,120kg 0.83 per cent, exceeding 8,120kg to 16,000kg 0.84 per cent and exceeding 16,000kg, the rate of cess shall be 0.85 per cent. In the bill, through an amendment which was carried by the house through amending Section 3 in Sub-section (1) of the Sindh Sales Tax Ordinance 2000, the words fifteen per cent shall be substituted from sixteen per cent. While in the Sindh Motor Vehicles Taxation Act, 1958, a new provision was added in Section 3 in Sub-section (1) for levying a one time luxury tax on imported and locally manufactured/assembled cars at the rate of: Imported cars with engine capacity from 3,000cc and above Rs100,000; from 2,000cc to 2,999cc Rs50,000; from 1,500 to 1,999cc Rs5,000 and locally manufactured or assembled cars with engine capacity from 1,500cc and above Rs5,000. However, the cars purchased by the federal or provincial governments, a transport or commercial vehicle, vehicles exempted from taxation under the Sindh Motor Vehicles Taxation Rules, 1959, and a motor vehicle notified by the government shall not be charged tax. Before the finance bill was taken up after the question hour, Shazia Marri, through a point of order, requested the speaker and the chief minister to bring back the original record of the Sindh Assembly pertaining to the proceedings of the adoption of the Resolution of Pakistan, and other historic documents of Quaid-i-Azam, which were shifted to Punjab after the One Unit, in order to preserve it in the assembly. This suggestion was endorsed by Arif Mustafa Jatoi and Jam Madad Ali from the opposition and Makhdoom Jamil-uzZaman from the treasury. After the session, addressing a press conference, Jam Madad Ali pointed out the reported kidnappings in the interior of Sindh of Mumtaz Jogi, Adnan Bhanban, Asir Das and the political victimisation of the governments opponents. He urged the government to pay attention to the law and order situation. (By Habib Khan Ghori, Dawn-17, 29/06/2008)

Opposition steals the show at budget session

The opposition at the City Council stole the show during the budget presentation session on Saturday by making good their promises of staging a spectacular protest. They had brought along banners and placards inscribed with slogans calling for the city Nazim to remove his partys offices from parks, demanding the release of UC funds, and fair allocation of development resources. Even though the session was supposed to begin at 05:30 p.m., it started almost an hour late, reportedly due to negotiations between City Nazim Mustafa Kamal and treasury members, and the opposition. As soon as the session begin (at 06:35 p.m.), leaders of the opposition stood up and demanded to know the reason for the delay in the release of union council (UC) funds. Treasury member Asif Siddiqui cut them off and requested a Fateha for Dr Adeeba Sultana, the cousin of Muttahida Qaumi Movement (MQM) chief Altaf Hussain. Dr Sultana had passed away recently. Right after this, the session was adjourned for 40 minutes for a prayer break. More negotiations between the treasury and the opposition reportedly took place during this time as well. When the session reconvened at 07:25 p.m., Kamal walked in to present the CDGK budget for the 2008-09 fiscal year. Members of the opposition, however, led by Dilawar Khan, chanted slogans demanding UC funds, and brandished placards and banners. Saeed Ghani presented a list of technical violations that had been made during the presentation of the budget. Masood Mehmood from the treasury benches countered this by saying that Ghani et al. had made the same omissions when they were the ruling party in the City Council. We learnt from our seniors, including Ghani, he said. An opposition member made a loud comment at this point about why Mehmood had learnt about violations from his seniors, but not about the timely release of UC funds. The major bone of contention was the oppositions claim that no allocation has been made in the 2008-09 CDGK budget for UC funds, while even the allocations which had been announced in the 2007-08 budget had not been released.

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They continuously interrupted Kamals speech, and demanded answers to their questions. The Sindh Local Government Ordinance (SLGO) does not call for the CDGK to hand over development funds to the UCs, the city Nazim said, leading to vocal protests from the opposition benches. He said that the current CDGK leadership had also provided water to Lyari. This was refuted by the opposition and slogans calling Kamal a liar rang through the air. I have letters of appreciation from all of you. I understand that you are politically forced to discount our contributions right now, the city Nazim said. We negotiated in a room earlier, and agreed to listen to each other. If you need to stage a drama in front of the cameras, say so. From this point onwards, the situation in the House deteriorated and the opposition almost continuously resorted to sloganeering against the city Nazim and the current CDGK leadership. Contrary to your claims, we have allocated Rs1 billion for UC funds in the CDGK budget. We can increase this to Rs2 billion if you identify the heads for us. We will concede before the budget is approved, Kamal said. The treasury members tried to drown the opposition out by thumping their desks, while the opposition members continued sloganeering and desk-thumping as well, and both groups effectively managed to drown Kamal out. Some members of the opposition also tore the budget books into pieces and threw the pages into the air. Ten minutes after the pandemonium started, with the opposition in revolt, and the city Nazim determined to continue with his speech, members of the opposition walked out of the session. Kamals speech proceeded calmly from that point onwards, interspersed with jubilant desk-thumping by treasury members when he recounted the achievements of the CDGK over the past year. After Kamals speech, a resolution approving the CDGK budget, and demanding a presentation of the KWSB budget as well, was passed by a majority, in the absence of the opposition. Another resolution demanding the appointment of a sound system operator (BS-12) and an assistant sound system operator (BS-9) for managing the sound during Council sessions was also approved. The session was then adjourned by the Convener. (By Urooj Zia, The News-13, 29/06/2008)

Sindh Assembly approves Rs267.7bn budget

The Sindh Assembly approved the provincial budget 2008-9 unanimously on Saturday by enhancing the tax on luxury cars, station wagons and jeeps, and increasing Sindh Infrastructure Cess from 0.5 percent to 0.8 percent on imported raw material. The one percent duty from central depository companies (CDCs) on transferring shares through electronic process was withdrawn. Chief Minister Sindh Syed Qaim Ali Shah presented Rs267.7billion budget for 2008-09. The amendments in the duties and taxes were carried through the Finance Bill moved by the chief minister and the opposition also extended its support to the bill. Opposition leader Jam Madad Ali said that the opposition supported this because it would not affect the poor people of the province. The luxury tax has been divided into four categories through amendment and this tax would be collected one time. According to amendment Rs5,000 luxury tax would be levied on locally assembled 1500cc cars, Rs5,000 on imported 1500cc to 1999cc cars, Rs50,000 on imported 2000cc to 2999cc cars, and Rs100,000 on 3000cc imported cars. Shah told the house that there was a justification for increasing Sindh infrastructure cess, saying that roads and other infrastructure of the province were being used for the transportation of imported raw material to other parts of the country. He said this cess was being used for the development and repair of roads and other infrastructure. The oppositions Arif Mustafa Jatoi opposed the withdrawal of one percent duty on CDCs for transferring shares through electronic process and said that the investors have been earning billions of rupees daily through shares and this relaxation would be in their interest. He demanded that this duty should be continued as this would not help the poor. Minister for Board of Revenue (BoR) Syed Murad Ali Shah replied that this duty was withdrawn just to promote the capital market and investment because most of the countries in the world have withdrawn this duty. The chief minister told the house that the federal government has accepted Sindhs right on Thar coal reserves and allowed the province for mining. He said the main hurdle has been removed from this project and now the province was negotiating with the local investors and experts for generating electricity through coal. Shah said the government would talk to foreign investors if needed and added that the power to be generated through coal would be provided to the whole country. During the question-answer session, most of the treasury members criticized the previous regime for shelving this project. The chief minister said that Sindh has 185 billion tones coal reserves and the government was attaching priority to this project. He said the previous regime had signed 15 memorandums of understanding (MoU) but to no avail, while his government was taking steps to attract foreign and local investors. Shah claimed that most of the investors have shown keen interest in this project as this coal happens to be of best quality to generate electricity. Late Benazir Bhutto had initiated this project but the previous regimes stopped it and this resulted in the worst-ever power crisis in the country, he added. Earlier, the proceedings were started one-an-a-half hours behind schedule. Sindh Information Minister Shazia Marri raised objection that important historical documents had been shifted to Punjab at the time of one unit and demanded that the record should be brought back as it was the right of Sindh. Opposition leader Jam Madad and oppositions Arif Jatoi also supported the minister, while Speaker Nisar Khuhro disclosed that most of the historical record had been shifted abroad. Later, Minster for BoR Murad Ali Shah introduced an amendment in Sindh Land Revenue Act-1967. This amendment would enable the government to change the name of any district and talukha for which the assembly passed a resolution. Sindh Assembly has already passed a resolution for naming District Nawabshah after Benazir Bhutto.

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Pakistan Peoples Party (PPP) MPA from Nawabshah, Ghulam Qadir, told the house that the city and talukhas name would remain Nawabshah but the district would be named as Benazir Bhutto Shaheed District. (By Tahir Hasan Khan, The News-13, 29/06/2008)

Sindh Finance Bill 2008-09 New luxury tax for imported cars
KARACHI: The Sindh Assembly unanimously approved on Saturday the Sindh Finance Bill under which the government has imposed a luxury tax on some imported and locally manufactured vehicles, and withdrawn the central depository tax on the transfer of stock market shares. The House has also granted an amendment to the Sindh Tax Ordinance, 2000, by increasing the general sales tax from 15 to 16 percent, and gave its approval for an increase in the Sindh infrastructure cess from 0.5 to 0.8 percent. The luxury tax has been imposed on imported cars of 1500cc to 3000cc and above, and on locally manufactured or assembled cars of 1500cc and above. All vehicles purchased by the government and commercial vehicles have been exempted. All members, including the Opposition, supported the Finance Bill, and it was passed unanimously. An Opposition member, Arif Mustafa Jatoi, raised an objection over the withdrawal of the central depository tax on stock market shares, saying that the government was facilitating businessmen who earned millions and billions of rupees daily. He opined that common people were facing a food crisis and the government was facilitating the investors. Defending the decision, Revenue Minister Syed Murad Ali Shah said that a stamp duty was imposed in 2006, but no collection was made. The information minister said that the government wanted to encourage investors. She criticized the previous government, saying that it did not do anything practical to attract investment therefore there was no difference in unemployment. Shazia Marri supported the increase in the infrastructure cess, saying that it was reasonable, and would help the government manage infrastructure facilities. Law minister Ayaz Ahmed Soomro introduced a bill, the Sindh Land Revenue (Amendment) Act, 1967. Speaker Nisar Ahmed Khuhro announced that the government could present it for the Houses approval on Monday. The government wants to have approved an amendment in the Act, which would enable it to change the name of a district, taluka if approved by the Assembly. The Sindh Assembly had recently passed a resolution, demanding the government change the name of district Nawabshah to after Benazir Bhutto. According to a treasury MPA belonging to Nawabshah, Ghulam Qadir Chandio, the name of the city or taluka would remain the same, only the name of the district would be changed. (By Razzak Abro, DailyTimes-B1, 29/06/2008)

Improving public debt management

The government plans to improve its management of the public debt. Thatis good news, but the vague strategy emerging from media reports isnt. Initially, it was reported that the federal government may shift the accounts of its ministries and public sector non-financial corporations (PSNFC) to the SBP to facilitate netting of surplus and overdrawn bank balances to limit its borrowing to the net shortfall. Later, the government denied this strategy. The strategy seemed logical because, instead of borrowing more, credit balances in some accounts of the state could be utilised to fund shortfalls in others. But, going about achieving that objective requires visualising the consequences it may entail. A sudden move could damage the financial system that, fairly or unfairly, is benefiting from cheap surpluses in bank accounts of the state offices. The issue requiring examination is the possible reduction in public borrowing the move could lead to. According to the Analytical Accounts of Scheduled Banks posted on the SBP website, at the end of April 2008 the position was as shown in the table. If these statistics are correct, they indicate a net overall surplus of nearly Rs436 billion in the accounts of federal ministries and PSNFCs, though not every federal ministry or PSNFCs had a surplus. Many of them were net borrowers; this is reflected in the overall bank borrowing (Rs378 billion) of the federation and PSNFCs, proving that banks were not only benefiting from state funds but were also funding the states borrowing needs. Funds lying in saving, current, call and other deposit accounts represent liquidity that state entities consider appropriate for making their routine payments. In some, cases these balances may have been excessive but it is undeniable that the state and the entities it guarantees (conventionally assigned zero risk) cant afford to fail in their payment commitments and therefore must carry requisite liquidity. Of the total deposits (nearly Rs714 billion), fixed deposits of the PSNFCs amounted to Rs149.4 billion. A similar break-up of the federal government deposits has not been provided but, surely, a part of the total were fixed deposits. Given the huge federal debt, keeping funds in fixed deposits seems odd. But in that respect too the tenor of the deposits is of essence. Based on their experience of delays in acquiring back the unutilised funds temporarily surrendered to the ministry of finance may have induced some ministries and PSNFCs to retain these funds in fixed deposits rather than surrender them. Funds placed for periods of up to three months may therefore represent their profitable investment until the funds are spent.

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However, keeping surpluses in longer-term deposits was inadvisable because temporarily surrendering such funds to the ministry of finance could help contain governments short-term borrowing seemingly, a lapse on the part of the Debt Management Office. However, in the absence of an explanation thereof, the conclusion may be unfair, though reasons behind such deposits need looking into. Although reducing federal debt to the extent of governments net funding need is valid, the process of going about achieving this aim calls for a practically implement-able policy on shifting balances from one state office account to another, establishment of an authority to effect such fund transfers, and a reliable communication system that ensures timely transfers, to protect state offices against dishonour of their payment commitments. While the government may shift the accounts of its ministries to the SBP, shifting PSNFC accounts to SBP will not be viable, firstly because, to stay connected to the markets they serve, these entities require banking services that SBP cannot provide and, secondly, many of them are net borrowers. Even while shifting ministries accounts to the SBP the impact thereof in terms of the demands it will create on SBP, and the convenience of the entities inter-acting with the ministries, must also be taken into account. In the context of reducing its borrowing from the SBP, federal government moves to mobilise resources (two per cent hike in profit rates on National Saving Certificates, quarterly revision of these rates to continually align them with market rates, and flotation of short-term commercial paper for investment by the public), are significant for banks because unless they devise competing deposit products, they could lose a significant part of their deposit base to the government. These developments have serious implications because banks that hold federal government and PSNFC deposits have used them to sustain liquidity (and credit flow) in Pakistans financial markets. Even if implemented partially, shifting of state accounts to SBP could substantially reduce market liquidity and credit availability to the private sector. This could also push up mark-up rates very significantly. This impact must not be overlooked because sustained market liquidity (to meet legitimate borrowing needs of the private sector) is essential for achieving the targeted 5.8 per cent GDP growth. High mark-up rates could fuel inflation domestically, and price the export sector out of the markets it has so far held on to, with considerable difficulty. This development could escalate rather than contain trade and current account deficits. Simultaneously, banks must re-visit their lending ratios (imprudently high in some cases) and hasten the development of innovative deposit products (not taken seriously) to hold on to their deposits. More importantly, banks that hold government deposits must jointly work on a strategy to assure the government about quick movement of funds in its various accounts to visibly reduce its borrowing, with minimum shifting of accounts to the SBP. Finally, it wasnt wise on the part of banks to rely for cheap liquidity on lapses in public debt management. It was unethical to use this liquidity to increase bank earnings and unwise too because it induced banks to pay scant attention to developing need-based deposit products to inculcate a saving rather than a consumption culture which is now the countrys biggest weakness. The responsible course was to voluntarily advise the state to reduce its debt by utilising surpluses available in its bank accounts; such conduct would have manifested a high sense of social responsibility that, unfortunately, the banks did not realise. (By A.B.Shahid, Dawn-Economics & Business Review, Page-1, 30/06/2008)

Political economy of poverty reduction

Poverty reduction has been a major official development objective for most developing countries since the 1970s, when it dethroned growth from the high pedestal of development policy. In Pakistan, the economic discourse on poverty did not receive serious attention until much later, although it entered the political discourse with the populist politics in the wake of the backlash against Ayub Khans growth-centred and elitist policies, which were partly responsible for Pakistans dismemberment in 1971. The PPPs roti, kapra, makan, echoing the gharibi hatao slogan of Indra Gandhi in India, brought poverty to the fore of the political agenda. However, the issue did not enter the academic and research mainstream until much later, save a few pioneering efforts to focus on a subject which along with other issues of distributive justice was largely considered a taboo to discourage distraction from more fundamental development issues, centred around the neoclassical shibboleth of economic efficiency. The political discourse on poverty, however, remained confined largely to rhetoric and as a means for putting down political rivals in electoral politics occasions for which were few and far between in the case of Pakistan. Politics remained dominated by powerful groups, including the large landlords, the emerging capitalists, the influential bureaucrats and, increasingly, the upper echelons of the military none of whom had an intrinsic interest in the removal of poverty, except of those who were close to them in economic or social terms. It was, therefore, even harder for poverty removal to be considered as a serious political issue than it was for it to be meriting attention as an economic and social objective. Its main access to the corridors of power and policy making was principally through the foreign donors who, in the pursuit of their own global vision of development, found poverty reduction as a necessary sweetener for swallowing the bitter pill they had designed to cure under-development. Once again, poverty reduction has been catapulted to the forefront of development policy through a confluence of domestic and global factors which have made it an urgent and non-deferrable item on the development agenda. External shocks have often caused massive increases in global poverty. The first oil shock of the 1970s, the debt crisis of the 1980s, the dismantling of the social security system in the former Soviet Union in the early 1990s and the East Asian financial crisis of the late 1990s were among the most cataclysmic episodes which caused enormous increase in poverty incidence in various parts of the globe. The third oil shock, whose full force has yet to be unleashed, along with the steep rise in the price of food grains and

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other essential items consumed by the poor, is going to cause a much more severe increase in poverty, jeopardising the achievement of the already threatened defaults in the upbeat MDG programme aimed at halving poverty by 2015, launched at the beginning of the new century at the initiative of the Bush administration. The new US President will have a job on his hands if he wants to fulfil the promise of perhaps the only laudable global initiative of the outgoing administration. Nearer home, the debate on poverty has been re-ignited with the return to democracy and the return to competitive populist politics in which each party (including the kings) claims to be doing more for poverty reduction than the rest. This has elevated the status of poverty research from a cottage industry in the past to that of rocket science (no fun intended) involving a bureaucratic rat-race in which numbers are constantly churned out to show which partys regime had performed better in terms of poverty alleviation. Since the political situation itself is fluid, the numbers are often used with a view to climbing the bureaucratic hierarchy through manipulating them in favour of those who are likely to be important in the ultimate contest for power. A particularly eerie situation seems to have developed in the Planning Commission which has been a rudderless ship with an inept crew at the helm for almost a decade and the recent changes are hardly uplifting where earlier a Chief Economist was fired reportedly for producing poverty numbers which were too high to make the claim of strident growth in the economy less than credible. More recently, the author of the poverty chapter of the governments Economic Survey, published just before the new budget, was fired by the Planning Commission for reporting too low a poverty number, which the government has since disowned. In both cases, the abrupt administrative actions seem to have been the result of in-fighting about jobs and seniority, in which substantive or methodological issues have been used as a smoke screen. However, there seems to be more than meets the eye and the events seem to be connected with a World Bank loan of $4.5 billion with substantial policy conditionalities which would become more palatable if poverty incidence was seen to be falling which was the main conclusion of the poverty chapter in the Economic Survey. Such a conclusion, despite its usefulness attracting substantial foreign capital inflow, however, is in conflict with the ground reality of high inflation of essential food and fuel items, which is pushing millions of people below the poverty line. The new mandarins in the Planning Commission are not ready to lose their shirts so early in the game and have settled on making the author of the report a scapegoat. These recent incidents need to be viewed in the context of the chequered history of the political arithmetic of poverty and its role in the economic discourse and management. The poverty incidence, along with growth performance, which in Pakistans case have tended to move in opposite directions, have often been juxtaposed with the dichotomous periods of civilian or military rule which the country has experienced in the last six decades. Admittedly, any such analysis is likely to be broad-brush in character and does not stand detailed scrutiny. Nonetheless, the temptation to use these numbers in a political debate will remain as long as the political environment is heavily charged. The stylised facts about poverty reduction are generally well-documented and by now there is a high degree of consensus about the broad pattern along with sharp differences on details, even though there is discontinuity in the household data series, which makes inter-temporal comparisons problematic. It is generally recognised that people living in the areas that now constitute Pakistan benefited a great deal from the partition in terms of rise in per capita incomes and decline in poverty incidence more by default than by design in the first two decades of a united Pakistan, although those living in areas which are now part of Bangladesh shared this experience to a much lesser extent. Despite the absence of detailed studies on growth, income distribution and poverty incidence for the period before 1971, it is generally surmised that in areas which now form Pakistan poverty decreased quite rapidly in the 1950s, despite high population growth. It was in 1960s, when Ayub Khans aggressive industrialisation strategy, with substantial aid from the US, was carried out that problems of poverty and income distribution arose, both within West Pakistan, as well as between East and West Pakistan. Most narratives of poverty reduction in the 1970s and 1980s agree on a substantial reduction in poverty, although the causes and extent of such reduction differ. The 1990s and 2000s are periods where the greatest controversies about poverty reduction are located. While space limitations do not permit a detailed evaluation, it needs to be pointed out that official sensitivity about the poverty numbers increased in this period as a result of two major factors. First, despite strong official commitment to the goal of poverty reduction objective, there was an increasing realisation that its pursuit was inevitable for political survival and public perception of the achievement of this goal played an important part in gaining public approval and legitimacy. Second, the foreign donors/lenders, while espousing the cause of poverty reduction, were much more sanguine about carrying out their agenda of economic reforms and were often willing to sacrifice the former objective at the latters altar. This increased the temptation to interfere with the production and dissemination of poverty data and analysis. The World Bank, with its vast resources and experience in this area, continued parallel research on Pakistans poverty situation, whose results were often at variance with those of the government. In an apparent attempt to meet the criticism against such official interference and to give some semblance of respectability and credibility to official figures, the government established, with the help of UNDP and other donors, a Centre for Research in Poverty and Income Distribution (CRPID) in the Planning Commission in 2002. However, the result has been almost the opposite and, in effect, it has nationalised the poverty research industry. From the outset, the centre was turned into a handmaiden of the Planning Commissions officialdom, defeating the very purpose of conducting independent research for which it was created. Its first director was a retired Chief of the Nutrition and Health Section, with little expertise in poverty analysis. His successor, was a macroeconomist, with little familiarity of detailed analysis of statistical data. The centre lacks enough resources and competent staff to do the kind of comprehensive research needed for

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understanding and remedying the complex problem of poverty reduction.. Much more than all this, the centre lacked the environment in which basic and independent research could be undertaken, such as a university or a research institute. It would have been much better if the centre had played a co-ordinating role to provide research facilities to various institutions engaged in poverty research and help them draw a comprehensive and continuing agenda of research, including periodic reporting on the current poverty situation. It is unlikely, however, that such radical changes will take place unless the new government can put its act together in mapping out a comprehensive long-term strategy for economic and social development. (By S.M.Naseem, Dawn-Economic & Business Review, Page-VI, 30/06/2008)

Deep concerns about provincial budgets

Provincial budgets of four provinces despite being quite generous to help marginalised segments of society through subsidies, pay rise and other cosmetic measures in hard time of food and energy crises and high inflation reflect that their fiscal states are hardly sound to meet even genuine fiscal needs essential for development and welfare of people. They have to look up to Islamabad for their share in the divisible pool to ride over their fiscal woes whose root causes are over centralised fiscal system that favours Islamabad despite the fact that a big chunk of financial resources is generated by the provinces, high provincial debt stocks taken from multilateral organisations and the federal government and limited capacity of the provinces to generate revenue. Total fiscal dependence of the provinces on federal government and inability of latter to come to their rescue particularly of three smaller provinces is a matter of deep concern for any observer of fiscal management in the country. Thrust of provincial budgets A profound look at the provincial budgets at first instance explicitly points out that there is a visible shift in budget making this fiscal year over previous years: the budgets are generous to allocate funds to help salaried, poor and marginalised segments of society through 20.0 per cent hike in salaries, subsidies on food items and higher allocations for agriculture, education and healthcare specific projects. This approach is in direct contrast to the demand of foreign donors that are opposed to subsidies of any sort not only to keep federal and provincial fiscal deficits low but also to let market forces operate to maximum according to rules of free market economy that have their own limitations to deliver in a developing country like Pakistan. The provinces have taken a clue from the federal budget that has set such a trend. It became quintessential in the wake of rising expectations of the people because of food and energy crisis and high rate of inflation that has persisted for quite sometime from now. This would obviously increase over all fiscal budget of the economy that the federal government is keen to reduce as its budgetary proposals suggest. Provincial budget of the largest province of the country, the Punjab is of Rs389.8 billion, 9.0 per cent higher than last years fiscal budget. Provincial expenditure is estimated to be Rs257 billion, five per cent higher than last years original estimate of Rs243.5 billion. In case expenditure on subsidies is put aside then expenditure is reduced by Rs4.0 billion compared to the estimates expenditure of last fiscal year. It is a surplus budget of Rs1.22 billion and is quite generous to provide pro-poor subsidies of Rs17 billion. Out of it, subsidies of Rs4.0 billion are meant for agriculture and transport in six big cities of the province. Remaining Rs13.0 billion subsidy package includes cash handouts, subsidy on food items and healthcare for poor segments of society. Provincial government employees and pensioner have been provided a relief of 20.0 per cent according to their salary structures and pensions. Allocation for ADP is Rs160 billion that is 6.6 per cent higher than last years allocation of Rs150.0 billion. This is in addition to the development projects that the federal government is to take in the province according to its priority in consultation with the provincial government. The province is highly dependent on NFC award granted by the federal government from the divisible pool. Being the largest province in population, it receives a big share compared to other three smaller provinces. It is to get Rs285 billion, 25.0 per cent higher than last years federal transfers because of revised NFC award and projection of higher tax revenue of the federal government. The provincial government is satisfied with this award whereas the smaller provinces have been voicing their concern and demanding that award from divisible pool should be granted taking into consideration three other major factors namely, level of development, revenue generation capacity and area of the province. The federal government remained oblivious to the demand in the past but there is a greater possibility that the political government might take an initiative to satisfy smaller provinces. The province has limited capacity to collect tax revenue. According to budgetary estimates it is likely to collect Rs40.4 billion in tax revenue, 6.0 per cent higher than last years collection and Rs64.5 billion in non-tax revenue. Not with standing the fact that the province of the Punjab is the largest and richest province of the Federation and the largest beneficiary of NFC it is unable to bear its development expenditure and is to do borrowing from the federal government and foreign donors. According to budget documents, the province has thus far stocked debt liability of Rs304 billion including a foreign exchange component of Rs253 billion. The provincial government is conscious of this fact and according to the provincial finance minister, the government is to be financially self-reliant to finance development expenditure, and it has successfully managed to reduce foreign assistance by Rs23 billion for the current FY. It is certainly a good beginning but there is a lot more to do in this area of fiscal management. Sindh government presented a budget of Rs267.7 billion with a deficit of Rs14 billion. The government plans to partially meet the fiscal deficit by adopting austerity measures and transfer of gas development surcharge from the federal government. Budget estimates reflect a current revenue expenditure of Rs189.9 billion and a development expenditure of Rs77.31 billion. The government has granted 20.0 per cent increase to its employees and pensioners that are to cost provincial exchequer Rs10.0 billion. Like the Punjab province, Sindh province has limited capacity to generate tax revenue. According to budget estimates, it is to generate Rs30.0 billion under this head and is to meet fiscal needs from NFC award of Rs177.5 billion. The province has accumulated substantial amount of debt that includes foreign loans as well. It is looking up to ADB for loan to implement its development projects for current fiscal year. The provincial government is overtly keen to expand revenue base and approached the federal government to let it impose GST on ever expanding service sector particularly its those sub-sectors that have not been taxed thus far but centralised fiscal management done by the federal government did not oblige. Sindh government has remained in the forefront for revising NFC award formula and giving substantial weight to revenue generation capacity of a province. It is confident to earn a better NFC award if this factor is given its due weight. Karachi

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is the financial capital of the country that should fetch better NFC award to enrich financial resources of the province for better fiscal management and meet its expenditure on maintaining law and order in the province whose cost is ever increasing. NWFP presented Rs170.9 billion budget with surplus amount of Rs345.5 million. Current expenditure is projected to be Rs67.3 billion and ADP expenditure is projected to be Rs45.5 billion with external component of Rs4.6 billion. The province will get Rs59.684 billion under NFC award in addition to getting Rs7.4 billion from collection of GST, Rs6.0 billion in net hydel profit and Rs4.5 billion in royalty on crude oil and gas. The government has increased expenditure on education and healthcare by around 10.0 per cent and allocated Rs21.7 billion Rs6.4 billion respectively. It has also increased salary of its employees and pensioners and allocated huge funds to provide subsidy on food items to manage food crisis to which the province is quite vulnerable and suffered quite a bit. NWFP is faced with serious law and order problem and needs huge funds to maintain satisfactory law and order situation. It also needs huge funds for development for which it is highly dependent on NFC and the hydel profit to which it is entitled according to AGN Qazi commission. The provincial government claims outstanding hydel profit of Rs110 billion that the federal government has not paid thus far. It wants to negotiate. It is doubtful if the federal government would be in a position to pay such a huge amount. Balochistan presented a budget of Rs71.1 billion with a deficit of Rs8.80 billion. It is the most cash stared province of the federation. It last FYs development expenditure of Rs13.0 billion could not be met because of resource gap of Rs10.0 billion. Resource gap for development expenditure for current fiscal year has been partially met by a special grant of Rs3.0 billion given by the PM. The resource gap now stands at Rs5.8 billion. It is to be seen if the province will be in a position to fill in the resource gap or not. By the end of last FY it had accumulated an overdraft of Rs19.0 billion that it wanted the federal govt to write off. The province has least capacity of generating tax revenue resources because of practically no industrial and extremely low agriculture out put. It has therefore, to depend upon receipts of gas surcharge, NFC award and loans or special grants from foreign donors and the federal government. Because of low level insurgency that has been going on over past a few years, foreign investors are reluctant to come forward to explore its mineral wealth. Gwader port project despite huge investment has not picked up and is unlikely to pick up in near future. Consequently, the province is seriously handicapped to execute limited number of development projects that it envisages to execute during a financial year. According to the provincial finance minister, the province is likely to get foreign assistance of Rs4.62 billion, Japanese cash assistance of Rs11.50 million, revenue collection of Rs2.30 billion, NFC award of Rs48.05 and special grant form the PM to manage its fiscal commitments during current fiscal year. The province like the provinces of Sindh and NWFP has been demanding review of NFC award. It asserts rightly that because of over centralised fiscal system that has been prevailing in the country since its inception, the province has suffered the most. There is a strong feeling among the leaders and general public in the province that by refusing reasonable royalty on gas to the province, the federal government has been, since long doing development in other parts of the country at the cost of Balochistan province. Conclusion Federal and provincial governments being coalition governments have brought a visible shift in the budget making that have pro-poor bias. Huge allocations have been made for providing subsidies to help poor and marginalised segments of the society. These popular measures despite having some benefits are not the solution to the problems that arise because of centralised fiscal system. In order to resolve fiscal problems of the province, the federal government should overhaul the existing over-centralised fiscal system. It must execute devolution of fiscal powers to the provinces, review NFC award formula in accordance with the wishes and needs of the provincial governments and should focus on crossprovincial projects rather than executing the projects at its own where some sort of discriminatory treatment is meted out to the provinces. Finally, the claim of smaller provinces to their natural resources should be respected and they should be given financial advantage to enable them to give impetus to development projects. (By M. Sharif, The News-15, 30/06/2008)

Nazims to move SC against Punjab govt

LAHORE: Twenty-one district nazims, expressing their serious concern over a cut in funds for district governments in fiscal year 2008-09, said on Sunday they would move the Supreme Court to protect the local government system. They expressed these views during a meeting at a local hotel. The meeting lasted for almost three hours, but no resolution could be passed. The participants accused the provincial government of trying to twist the arm of local bodies. They pledged to adopt a uniform course of action to counter the situation. They discussed issues, including the audit of district governments, reduction of district government funds and powers of district nazims and DCOs. They said the provincial government should work within its constitutional limits, instead of interfering in district government affairs. They also decided to hold another meeting on July 1, to chalk out a joint strategy. The participants demanded the provincial government establish the writ of law in the province. The meeting also lauded President Musharraf for efforts for introducing the local government system. They also decided to move the Supreme Court to protect the local bodies system. Talking to newsmen after the meeting, Sheikhupura District Nazim Mian Ahmad Sharqpuri said no one should be above the law. Chakwal District Nazim Sardar Ghulam Abbas said federal, provincial and district governments should work within their constitutional limits. Attock District Nazim Maj (Retd) Tahir Sadiq said they would not allow the provincial government to interfere in their affairs. The provincial rulers want democracy at the federal and provincial level, but they are working against its spirit at district level, he claimed. Lahore District Nazim Mian Amer Mahmood, Gujranwala District Nazim Fayaz Ahmad Chattha, Sheikhupura District

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Nazim Mian Ahmad Sharqpuri, Khuhshab District Nazim Ghulam Muhammad Tiwana, Attock District Nazim Maj (retd) Tahir Sadiq, Fiasalabad District Nazim Zahid Tauseef, Rajanpur District Nazim Barrister Raza Dareshak, Chakwal District Nazim Sardar Ghulam Abbas, Hafizabad District Nazim Mubashar Abbas Bhatti, Multan District Nazim Faisal Mukhtar, Nankana Sahib District Nazim Pir Mumtaz Shah, Sargodha District Nazim Inamullah Paracha, Jhang District Nazim Sahibzada Amir Sultan, Lodhran District Nazim Abdul Rehman Kanju and others attended. Reacting to the district nazims meeting, Special Assistant to the Punjab Chief Minister, Pervez Rasheed, said the aim of the special audit of local bodies was to determine whether the amounts provided to the institutions were used on the welfare of people, according to the rules and regulations, or public resources were looted by committing irregularities. He said statements of the nazims that they were being pressurised or harassed through the special audit were mischievous and baseless. He said there were nazims of some districts in the Punjab who belonged to the Pakistan Muslim League. He said the government would make a special audit of all local bodies, without any discrimination and where-ever proof of plundering or favourtism was found, it would be brought before the masses. He said nazims who had spent government funds on the welfare of people should not be afraid of the special audit. He said those objecting to it were not aware of its importance for strengthening the local bodies system. He said they had no trust in themselves or were trying to give it a political colour to hide their irregularities. He said the other important object of the audit was to remove shortcomings in administrative affairs and use of funds. He said the government believed in the continuity of the system, however, it also wanted to remove shortcomings in it. He said it would also be ensured that the funds provided to the institutions or collected through the local tax were used in a fair manner in the future. (The News-5, 30/06/2008)

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