PAKISTAN YOUNG LEADERS’ CONFERENCE

P
Y Committee of Finance
L Chairperson: Madeeha Shahid Rana
C Co-Chair: Aleena Naseem
2011

DRUMBEAT OF RELIEF, RELIEF, AND RELIEF

GET ME HOME-BE IT TRADE, AID OR RELIEF’
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Contents
Research Guide Topics ........................................................................................... 3
Debt Relief and Trade vs. Aid (In wake of Floods) .................................................. 4
Debt Relief ....................................................................................................... 5
Arguments against debt relief ......................................................................... 5
Trade ............................................................................................................... 6
Aid ................................................................................................................... 6
Research Guidelines........................................................................................... 7
Reference Material ............................................................................................. 8
How to revive public enterprises of Pakistan?........................................................ 9
Background ........................................................................................................ 9
Privatization: Implications and Gains ................................................................ 9
Restructuring of public enterprises ................................................................ 10
Research Guidelines......................................................................................... 12
Reference Material .......................................................................................... 12

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Research Guide Topics

 Debt Relief and Trade Vs. Aid;

 How to revive public enterprises of Pakistan?

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Debt Relief and Trade vs. Aid (In wake of Floods)
Pakistan has seen inscrutable crises and natural
calamities in forms of deadliest earthquake,
questionable militancy operations, speedy relief
challenge to underprivileged class through
Benazir Income Support Programme (BISP)
Initiative and lately the devastation caused by
Floodwaters. The international Community and
Donors have been aggressively involved in these
National Engagements when there was and is
constant drumbeat for quick relief, relief, and
relief. All the stakeholders emphasize for footing
transparency and efficiency fundamentals in an
attempt to reach out to maximum splinter group.

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One-fifth of Pakistan or an area about the size of
Florida has been flooded in relentless monsoon rains, according to the United Nations.
Millions of people are still at peril as the bloated Indus River is cresting this weekend in parts
of Sindh province. In some areas, the Indus has expanded from its usual width of one mile to
as much as 12 miles. Homes, crops, trees, livestock, entire villages and towns have been
transformed into vast lakes, forcing thousands of flood victims to huddle in sludgy camps or
in jam-packed public buildings. Others are sleeping under the stars next to the cows, sheep
and goats they rescued from rising waters.

The deadliest floods striking an area completely unanticipated obliterated the country
claiming 2,000 lives and leaving millions affected. Survivors who have been partially or fully
affected had no water, no food, and no essentials. In this wake, a cycle of endeavors began
by Government of Pakistan to procure Debt relief, Aid and relaxation in Trade.

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www.lalqila.wordpress.com

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Pakistan floods, disaster of epic proportions raises the spectre of systemic collapse; 3.5
millon children at risk , economy and exports to contract as losses could exceed $10bn.
Pakistan seeks restructuring of $10bn IMF loan as the United Nations urges help and raises
$500 million. Given the initial reports about crop and other losses, it now appears that
Pakistan’s economy may contract in the next twelve months and total output, property and
other losses would exceed $10 billion and Pakistan could borrow as much as $8bn in new
loans in the next six months. This would be another mistake. Pakistan’s lenders must start
considering debt cancellation as a form of assistance because it might be a more effective
and sustainable solution. Adding the debt burden is unlikley to prevent another default or
restructuring in the next couple of years. The US and the European Union should also
eliminate all tariffs on imports from Pakistan to help its hard-hit and critical textile exports.
The destruction in the agriculture sector would seriously hurt cotton and textile sector that
accounts for over 50 percent of Pakistan’s exports. Pakistan will need to mobilise all
international and local resources to face the catastrophe which has caused the greatest
damage to the country since 1971 war.

However what remains of significance is whether in an already existing state of debts and
parallel come around of floods in the country, what strategy needs to be envisioned to build
the Human Institutional Development and Community Infrastructure Development:

Debt Relief
is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed
by individuals, corporations, or nations.

Arguments against debt relief

Opponents of debt relief argue that it is a blank cheque to governments, and fear savings
will not reach the poor in countries plagued by corruption. Others argue that countries will
go out and contract further debts, under the belief that these debts will also be forgiven in
some future date. They use the money to enhance the wealth and spending ability of the
rich, many of whom will spend or invest this money in the rich countries, thus not even
creating a trickle-down effect. They argue that the money would be far better spent in specific
aid projects which actually help the poor. They further argue that it would be unfair to third-

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world countries that managed their credit successfully, or don't go into debt in the first
place, that is, it actively encourages third world governments to overspend in order to
receive debt relief in the future.
Others argue against the
conditionalities attached to debt
relief. These conditions of structural
adjustment have a history, especially
in Asia America, of widening the gap
between the rich and the poor, as well
as increasing economic dependence
on the global power.

Trade
The buying or selling of goods and
services among companies, states, or countries, called commerce. The amount of goods and
services imported minus the amount exported makes up a country's Balance of Trade.
Pakistan’s trade is concentrated in a limited region. The commodities sent outside the
country have components that are imported from many countries in an extended region and
these imports amount to costs significantly more than costs of exports.

One of the reasons for trade is specialization of production. This principle of trade is what
Pakistan is conveniently ignoring and working against. Pakistan seeks restructuring of $10bn
IMF loan as the United Nations urges help and raises $500 million.

Aid
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The provision of resources from developed to less developed countries. This is usually from
the Western democracies to the Third World and, more recently, to Eastern Europe. Aid may
take the form of finance or credit, or other forms such as expertise, education and training,
and advanced or intermediate technology. Bilateral aid is aid from a donor to a recipient
country, while multilateral aid is provided by a group of countries. Emergency aid is short-
term aid, generally given as a response to disasters, while structural aid is given to promote
long-term development.

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http://www.answers.com/topic/aid#ixzz19Foa6TYz

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Ostensibly, the provision of aid is to encourage development but donors of tied aid are
rewarded, perhaps by interest payments from the receiving nation, access to new markets,
or by political allegiance. Furthermore, agencies such as the International Monetary Fund or
the World Bank may impose structural adjustment of the economy as a condition of
receiving aid. The ‘charities’, or
non-governmental organizations,
also provide aid but with fewer
conditions and more emphasis on
development.

Research Guidelines
The finance committee has to
adopt a resolution to determine
the way forward and how the
PYLC forum delegates can help
give an insight to Government,
International Community and Donors into measures and framework to gauge loopholes and
give real time solutions.
So your research should be a reflection on tools that helped countries to deal with natural
calamities under a state of heavy debts; what did they do; what can be done. You are
required to tailor those solutions and ways to help Pakistan build itself out of the
devastation caused by the floods. Also, keeping in mind and through your research the
already pending loans, debts and global credit crunch and limitations of Donors.
Your Resolutions have to revolve around the two categories:
Debt Relief & Trade;
And Aid.
In the current situation what strategy will benefit Pakistan the most between the two
mentioned above. How can either Debt Relief or Changes in Policy and Procedures in
Pakistan’s Trade and Aid help build Pakistan in all Economic, Social, Political and Democratic
Development Sectors.

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The delegates can choose one area and work extensively on it, emphasis should not be laid
on producing volumes of pages but genuine effort in getting to solutions or reflection of
current state of affairs.

Reference Material
Reference Material to facilitate you people for a background study can be obtained from
here, do not restrict yourself with the following references only:

 www.foreignpolicy.com
 http://www.jadaliyya.com/pages/index/219/american-innocence-and-its-victims-%28part-
2%29
 http://www.answers.com/topic/trade#ixzz19FSdzrdv
 http://www.globalissues.org/issue/28/third-world-debt-undermines-development
 http://web.worldbank.org/WBSITE/EXTERNAL/
 http://www.unisdr.org/eng/mdgs-drr/review-8mdgs.htm
 http://www.answers.com/topic/debt-relief#ixzz19FFjS4YM
 http://www.answers.com/topic/debt-relief#ixzz19FEwICTO
 http://www.unisdr.org/eng/mdgs-drr/summary-countries.htm
 http://www.answers.com/topic/trade#ixzz19FR3qfVw

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How to revive public enterprises of Pakistan?
Background
“Public enterprises present a depressing picture of
inefficiency, low productivity, losses, budgetary
burdens, poor products and services”. A view
expressed by a distinguished economic historian,
Gershenkron, in his seminal article 4“Economic
Backwardness in Historical Perspective1”.
Gerschenkron’s argument is that in those states
which start late in the race of development, the
public sector has to play a vital role in accelerating
the pace of economic growth. In Pakistan,
privatization is emphasized but we need to
understand that changing mere the ownership
from public to private does not ensure efficiency
and growth. But what is interesting is that political interference leading to over-staffing
results in poor performance of Public Sector enterprises. So it is an opinion of the
Economists of the Country to go for privatization, as the sales and massive profits help to
eliminate the national debt.

Privatization: Implications and Gains

Most of the developing countries are moving with this new wind of privatization of the
public enterprises and are getting rid of the so called beacons of light-Public Enterprises. The
performance indicators of privatization include output, dividend policies and capital
structure for each enterprise included in the sample. Using the efficiency, financial and
distributional impacts of privatization as indicators, and the impact of privatization on
private sector development will be obtained.

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Gershenkron, Alexander, Economic Backwardness in Historical Perspective, Praeger, London, 1962

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The immediate effect of most privatisation instances has been that of employment loss not
only because there tends to be substantial overstaffing in public enterprises, but also
because new owners typically prefer to begin with less then ideal levels of employment to
allow for greater flexibility in both the number of workers and the contracts under which
they are employed. In other words privatization is assumed to have negative effect on
employment in the short-run but expected to have positive effect in the medium and long
run.

Restructuring of public enterprises

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It would be more cost effective to restructure the public sector enterprises and attempt to
turn them around before privatization. There may be restructuring before privatization, and
additional restructuring may take place during and after privatization. Several approaches
have been tried for restructuring public enterprises.

• Management Contract

• Performance Contract

• Unbundling of public sector undertaking

•Consolidation of activities

Professional managers from private sector

could be contracted to turn around the
public sector undertaking without
divesting the equity. On the other hand,
performance contract has been tried in
many cases with the existing
management of the public sector. Many
times organizational restructuring in the
form of either unbundling of the public
sector undertaking or consolidation of activities may take place. Worker managed

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Overview of Privatization in South AsiaGOPAL JOSHI

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companies or outright buyout is another scenario. However, the effectiveness of all these
activities would ultimately rest on non-interference by the bureaucracy and politicians.
Performance contracting and management contracting have not necessarily yielded
intended desired results so far in South Asia, as attested by the experience in Nepal. The
results of pre-privatization restructuring in Bangladesh were also at best mixed although
some improvement in labor productivity in the enterprises placed under performance
contract in the early nineties was reported.2 Political instability has also added the
complexity and difficulty in attempting to restructure the public enterprises.

Seemingly, the situation is hopeless. If the public enterprises are sold off in the loss-making
state without turning them around, then the social consequences are high. If the attempt is
first made to restructure them, then the bureaucratic and political interference derail such
efforts. What is the solution available in such a seemingly no-win situation? There are certain
steps that can be taken to restructure with less interference and then privatize the
enterprises that have been turned around.
• Creation of a transparent, accountable and representative system of regulating the
enterprises.
• Involvement of employers and workers even before the turnaround and privatization
begin.
• Development of a system of independent monitoring of the public enterprises by people
other than the bureaucrats and politicians during the time bound period of turnaround.
• Privatization of profitable enterprises so that all the concerned parties would have faith

in the process.
Effective regulatory reform and social dialogue are needed for implementing above
strategy with desirable results. Although both have been weak in South Asian countries,
improvements in these mechanisms are not difficult.

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Research Guidelines
The Delegates should adopt resolution reflecting and revolving upon the following
domain(s):

 Reasons for Privatization of Public Enterprises;

 Social effects of privatization;
 What Restructuring Efforts should be made for Public Enterprises;
 Should there be a social dialogue for consideration of privatization;
 What regulatory Reform(s) should be drafted for evaluating performance of Public
Enterprises;
 How can Public Sector Enterprises be revived, study the methodologies of countries
where it has been done; tailor it down to Pakistan’s Public Enterprises;
 Develop a Policy and Procedures to assess and reform performance of public
enterprises.

Reference Material
 Aharoni, Y. (1997) “On Measuring the Success Of Privatization” Privatization and Control of
State-Owned Enterprises, Washington, D.C Economic Development Institute of the World
Bank

 Banker R.D. and Morey, R.C. (1986) Efficiency analysis for exogenously fixed inputs and
outputs, Operations. Research, 34, 513-521

 Boubakri, N. and Cosset, J. (1999), "Does Privatization meet the Expectation? Evidence from
African Countries" Plenary on privatization and Corporate Governance, African Economic
research Consortium, Nairobi

 Boycko, M.A., Shlelfer and Vishny, R. (1996), “A Theory of Privatization”, Economic Journal
Vol. 106, pp. 309-319

 Bureau of Public Enterprises October (2002) and February (2003), Status Report

 Central bank of Nigeria (CBN) (2001), Annual Reports and Statement of Accounts and
Statistical bulletin (1999)

 Charnes A., Cooper W.W. and Rhodes E. (1978) “Measuring the Efficiency of Decision Making
Units, European Journal Operational. Research 2, 429-444

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DRUMBEAT OF RELIEF, RELIEF, AND RELIEF
GET ME HOME-BE IT TRADE, AID OR RELIEF’
Madeeha_shahid@hotmail.com
Cabinet Minister, Youth Parliament Pakistan 2009-10
Faculty NUST Business School, 2009-10
Training Coordinator, NADRA HQ

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