October 15, 2001	Monday	Rajab 27, 1422

THE new team of official economic managers is taking its own sweet time to spell out its strategy for the remaining eight months of the current financial year.

To be fair to the new team and its captain, perhaps it is still busy in finding out the real depths to which the country’s economy has fallen or may be it has already measured the damage and is now engaged in evolving policy frameworks for tackling the job. One does not expect miracles from the new team.

At least not within a matter of couple of weeks of its appointment. But one does not also expect the new team to get focused exclusively on medium term planning when the need of the hour is to simultaneously launch damage control efforts as well. Again to be fair to the new team, more than its inaction, the deadline of Nov. 16 which the Chief Executive had announced for the bank defaulters, tax evaders and utility bill dodgers to pay up their long over-due dues, seems to have caused everything , especially on the economic front, to come to a standstill.

Most of the economic activity has entered into a phase of ‘ wait and watch’. This one month-long self-imposed economic holiday has certainly caused massive losses in terms of absolute yields and incalculable opportunities lost.

One hopes that this ordeal would come to an end in the next six to eight weeks and in the process the government would succeed in nabbing criminals and at the same time enriching the treasury enough to meet some of the immediate needs of the budget which could not be undertaken because of serious stagnation in revenue collection. The biggest problem facing Pakistan at the moment is cotton.

The next is rice. Cotton is selling at Rs. 550 per maund while the price fixed by the government is Rs. 825 per maund. Likewise the support price of rice was fixed at Rs. 220 per maund but the same is not getting more than Rs. 150 in the open market. According to one rough estimate by interested parties if the prices of cotton and rice were not improved through government intervention Pakistan would suffer a loss of about 600 million dollars.

None of the members of the official economic team including the finance and commerce ministers and the generals who are watching over them perhaps have had to deal ever in their professional careers with such a situation. Chaudhry Moin Afzal, the secretary general finance, who comes from the landed aristocracy is perhaps the only person in the team with any agricultural background. But it is doubtful if even he has the acumen to grapple with the problem competently.

The lack of professional competence at the highest level to deal with the cotton glut and rice crisis seems to have aggravated the issue even more. And the delay in coming up with a prescription to alleviate the crises is giving rise to a chaotic situation on the farm front.

In the absence of any hard evidence of manipulation it would be wrong to blame one or the other party for the cotton crisis. Still, one has in the past known the farmer, the middleman, the ginners and the manufacturers to have indulged in irresponsible activities to promote their respective self-interests at the cost of overall national interest.

But even for getting the needed evidence of any wrong doing by any or all the parties involved, one would need to bring on board the official economic team at least a couple of professional agricultural experts.

There is a possibility that in order to frustrate the new government’s efforts to catch the bank defaulters, tax evaders and utility pilferers, all of them have ganged up and created the cotton and rice crises with a deliberate design. One cannot ignore the fact that the world cotton prices have collapsed.

But the accuracy of reports of domestic cotton and rice glut should first be ascertained. One estimate has put the cotton production for the year at 11 million bales but there is another report which says that it is no more than 8 million bales. If the second report is correct then somebody is manipulating the market to harm the farmers. However, if we have actually succeeded in producing 11 million bales this year then nature seems to have manipulated things against the farmers.

In both the cases, whether the production is 11 million bales or 8 million bales the farmer needs to be helped and not the manufacturer. The textile manufacturers have been milking the farmers for ages and neither do they pay their taxes or return their bank loans. But then they serve as the engines of our exports.

If they are forced to pay more than their international competitors for the raw materials we would only be killing the very goose which lays the golden egg. The other day the APTMA chief in his open letter has drawn the attention to one more factor which needs to be looked into rather closely to arive at a rational conclusion.

He has said that the cotton farmers cannot have a harvest of 10.5 million bales from the same acreage as last year unless the yield is up by 30 per cent that is, from 16.4 maunds per acre up to 21 maunds per acre. “If so, then their cost of production cannot be Rs. 722 per 40 kg, but will come down to below Rs. 500 per Kg ( including land rent).

Thus, it is not understandable that when APTMA members, despite all odds are still paying Rs. 200 per maund above international prices why this hue and cry has been raised in the national press especially by the feudal lobby?

It could only mean to put unnecessary pressure on the government to get undue concessions,” APTMA chief Humayun Ellahi Shaikh concluded. While only the government would be able to answer the question of increase in the per acre yield, one would like to dispute Mr. Shaikh’s assumption about the clout enjoyed by the fuedal lobby in the national press.

If anything it is the APTMA which has the means and the influence to effectively manipulate the national press. But whatever the factual scenario, the government appears to have been caught in the middle. It can neither let the farmers go down nor can it let the manufacturers suffer.

On the other hand the government is hardly in a position today to intervene on behalf of both with subsidies. And even if the government had the money to subsidise the two, under the IMF conditionalities and the WTO rules such subsidies are out of question.

There is another aspect of the problem. Pakistan is a single crop economy and whenever this crop suffers from crisis of either shortages or glut, the whole economy suffers across the board.

Exports fall, local consumption declines, unemployment rises and bank defaults jump causing the revenues to suffer serious shortfalls which in turn adversely impacts on the entire budget, especially the development budget and that too mainly the social sectors like education and health.

And despite the production of 11 million bales ( if that is true) the overall growth rate would suffer causing the budgetary deficit to balloon beyond the target fixed which in turn would give rise to inflation. With both unemployment and inflation rising the government will have its hands more than full trying to keep the frustration and despondency gripping the nation. Does the dream team led by Shaukat Aziz have an answer to this looming catastrophe?