PAKISTAN’s first generation regulation related reforms implemented under the watchful eye of the IMF focused on the reduction of import tariffs. Unfortunately, revenue considerations rather than instilling of industrial efficiency drove the exercise.

Resultantly, tariff ceilings on finished goods were lowered quicker than those on inputs of raw materials and intermediate goods. Industry was not given adequate notice to adapt to the change and structure its operations in the most efficient ways through redeployment of resources.

However, this is not the subject of this article, because the necessary adjustments are slowly working their way through the system. In the opinion of this writer it is time to look at the institutional aspect of regulation which has become the bane of private industry, and the main impediment to the growth. Getting the government to be an enabler rather than a disabler is the real challenge.

Since the 1970s the failure of the economic system can be traced to a deficiency of governance at one level or another, the most crucial of which was the desire of the state machinery to regulate every activity, a task that it carried out through the creation of both visible and invisible roadblocks. A survey conducted by the World Bank highlights the huge costs of doing business in Pakistan. It reveals that 12% of the time of entrepreneurs is taken up in dealing with the bureaucracy (with 42% feeling that there were far too many regulators and regulations) compared to 5% in Latin American countries.

Similarly, close to 56% complained about the rising costs of doing business because of the government’s tax policies, while 40% mentioned the contribution of corruption to the growth in costs. Small enterprises, in view of their size and limited managerial resources, reported how they suffered more than the larger enterprises from the cumbersome rules and regulations and the taxation systems, their uncertain application and arbitrary changes in the rules of the game with little, if any, redress.

There is an urgent need to dismantle the over-extended regulatory framework and huge regulatory apparatus strangulating private activity and thereby shackling the economy’s prospects for growth. Just to illustrate this point, there are 27 labour laws. Of the 27, 10 were enacted more than 30 years ago. During this period the structure and pattern of the economy has transformed, the employer-employee contractual relationships have been modified or bypassed through other institutional arrangements like the rapid growth of contract labour.

Moreover, these laws are in conflict with each other. For instance, each legislation carries its own definition of the term ‘wages’; each Act providing a different interpretation of what portion of the payments made to the worker would be covered by the definition of the term ‘wage’ for determining benefits to workers or for assessing contributions to be made to the welfare schemes (EOBI and Social Security) run by parastatals established by the federal and provincial governments.

Moreover, the predatory behaviour of government functionaries enforcing these labour laws prompts many enterprises to choose to remain small. To get around the rigidities of labour laws that become applicable to units with 10 or more workers, employers have resorted to a combination of sub-contracting of production, harnessing of capital intensive production processes, hiring of contract labour and/or fragmentation/legal subdivision of production facilities into smaller enterprises. An adverse outcome of these developments is that they have lowered the incentive of the private sector to invest in the upgrading of skills, thereby affecting productivity and profitability of enterprises.

A large part of the regulatory framework exists because of the lack of clarity on the role of government. In several instances, new products and instruments have become available that are better replacements and more effective mechanisms for achieving the objectives underlying the promulgation of existing laws or institutional and administrative arrangements for their enforcement.

Take, for instance, the provincial Boiler Acts dating to 1923, Grade-11 Boiler Inspectors recruited and trained to enforce a legislation that may have been relevant 80 years ago, are today expected to inspect and certify boilers manufactured by multinationals like Siemens. This regulatory role could easily be outsourced to universities and private firms providing engineering services.

Similarly, the government has Building and Electricity Inspectors to ensure the safety and security of private buildings used for public purposes, for example, cinema houses. These services are not required if such buildings are comprehensively covered by private insurance companies. Through this instrument the cinema owners can be spared the frequent visits of these government functionaries, who would be denied the opportunity for extortion on the basis of the regulatory functions mandated to them. Moreover, the security and safety of the public using these buildings would also be assured, since the private insurance companies would ensure the proper construction and maintenance of the property.

At times the regulations actually block private efforts to improve productivity, efficiency and sustainability of operations. For instance, the viability of the sugar industry today requires its restructuring, involving consolidation, merger and closure of many of the large number of inefficient sugar mills with small capacities. Unfortunately, the policies of provincial governments are irrational and inimical to this overdue consolidation and shakeout in the industry. They prohibit the relocation and consolidation of mills required to achieve economies of scale and maintain competitiveness.

The theological principle to regulate economic activity based on complete distrust of the market and a belief in the state’s omnipotence has restricted the space within which the private sector can operate. The role of markets is underestimated in the belief that the state is much more knowledgeable and objective and that markets are often rigged and imperfect and private behaviour shortsighted.

Even civil society in Pakistan is suspicious of markets and provides the bureaucracy with an excuse to regulate. The bureaucracy opts for direct controls rather than market-friendly fiscal rewards and punishments not only because of rent extraction powers that it gives them but also because they prefer certainty of command and understand little about subtlety of induced behaviour.

A friend, Dr. Nadeem-ul-Haque, argues that flawed misconceptions drive small countries to mimic big countries in constructing governments. Complicated state apparatus are put in place. Unfortunately, donors also provide uniform advice, persuading borrowers to set up the same institutions in all countries regardless of size. The result is that regulators are put in place even before markets begin to function. So, we now have a regulator for each market, in some cases there are two regulating the same market — for example the State Bank and the SECP are simultaneously regulating the financial institutions, and in the case of Modarabas there is the third regulator, the Religious/Shariah Board.

Largely owing to the nature and history of Pakistan’s economic development, whereby even the middle class was not the product of a dynamic independent process of growth but was created through public sector employment, we cannot, as yet, seem to visualize economic growth that is not based on state support and patronage. Thus, civil society continues to view the state as an all-powerful paternal entity that is supposed to protect against all risk and provide for all occasions. It is, therefore, not surprising that governments continue to be large and unaccountable and rule rather than serve.

Major reasons for poor implementation of policy and its effectiveness of policy include the excessive and archaic regulations, administrative systems and practices that are inconsistent with the declared policy and a pervasive lack of motivation and efficiency in making policy work. And even when responsiveness and concern is displayed at senior levels of the bureaucracy it is not matched by prompt action at lower levels.

The responsiveness and impact of senior officers are thus adversely affected, even when they are not neutralized by the incompetence and indifference of lower level officials. At times the official, without any fear of being held accountable by the system or his superiors for his highhanded behaviour, openly violates internally issued interpretations of laws and rules and/or simply refuses to accept rulings of superior courts on the subject.

No official can be held accountable for being absent from duty let alone for failing to meet deadlines for task completion. Senior officers are like managers who are trying to market their products to clients, but with little, if any, control over the actual delivery of products.

Every good organization makes periodical attempts to clean up its own house. All procedures and practices are subject to a fresh review. However, the government hardly ever questions its own mechanisms, processes and practices, except to ensure that the interests of the government and public sector employees are protected, which has resulted in the public sector having one employee for every 40 Pakistanis.

Many agencies in the public sector are moribund with little or no accountability for the quality or quantity of their output and even the actual delivery of services. Not surprisingly, ordinary citizens find it easier to obtain a driving licence or the national identity card through the market rather than a government office. Therefore, to get the government to focus on what it should be doing there is a need to redefine its role and the way it carries out its business, which would involve a major reduction in the areas of its activity.

The demands of a globalized economy require the private sector to adopt internationally recognized technologies and management practices to remain competitive internationally. However, the government, which is supposed to facilitate the operations of the private sector, and expects it to become modern in its outlook, sees nothing wrong with its own skills, procedures and work processes being antiquated. This huge contradiction is obviously unsustainable and can only be addressed through adjustments in the present size and skill base of the bureaucracy, 45% of which comprises illiterates.

CROWN Prince Abdullah of Saudi Arabia has extended the Israelis an olive branch that only the enemies of peace would not take. It is also a prescription to stanch the festering wounds of the Palestinians who have long been exposed to Israel’s barbaric atrocities.

In an exclusive interview last week in Riyadh with New York Time’s pro-Israeli columnist, Thomas L. Friedman, the prince authorized him to tell the world that he is prepared to ask his fellow Arabs in the Arab League, whose foreign ministers are due to congregate in Beirut next March 12, to recognize Israel as a legitimate state in the region in return for its total pullout from all the Palestinian lands occupied since 1967.

There could not have been a more appropriate and bold departure from a facile and irresolute Arab stance than this on the 18-month old Palestinian Intifida. The heroic Palestinians resisting Israeli apartheid and brutality have been as much a victim of Sharon’s lust for their blood as their Arab brothers’ wanton apathy to do anything on their behalf.

Abdullah, de facto ruler of the most influential Arab state, may have concluded that enough was enough and the time to bite the bullet had arrived. After all, admitting the legitimacy of a hectoring and arrogant entity like Israel would be as painful to Abdullah as was the decision to cease fire with an aggressor Iraq a poisoned chalice for the late Imam Khomeini of Iran.

It is unthinkable that the cool and composed Prince Abdullah, known for his aplomb, would have tossed a rabbit out of his hat in an act of theatrical bravado. That is not his style. Quiet and well-deliberated consultations with his fellow Arab rulers must have preceded this ground-breaking announcement. After all it is not only a question of the fate of the Palestinians alone. At stake is also the future of the whole Arab world vis-a-vis not just Israel but the latter’s principal patron, the United States.

No doubt that September 11, and the whole litany of events and developments triggered by it, is the catalyst for this radical move. The Arabs in general and the Saudis in particular have been subjected to an incisive and stinging media denunciation campaign in the US. The House of Saud has been faulted for being deliberately lax with the fundamentalists in order to keep the trouble away from the Saudi shores. Prince Abdullah himself has been targeted for turning a blind eye to seething anti-Americanism amongst his people.

The anti-Saudi media tirade has been spearheaded by the Israeli lobby, overly emboldened by the blank cheque that the Bush administration has granted to the hawks of Ariel Sharon to unleash bloody terror against the Palestinians in the occupied lands.

Thomas Friedman is a blazing gun in the media blitz against the Saudis, finding fault with everything, from a flawed and ‘archaic’ education system (because it is heavily religion-oriented) to a foreign policy devoid of ‘innovation and imagination.’ Friedman has written exclusively on the Arabs and the Saudis in his columns since September 11. He lately descended on Saudi Arabia in person to get a feel of the place in the aftermath of the cataclysmic event and find justifications for his media crusade on behalf of his country and his ideal, Israel.

That Friedman is hopelessly hooked on his advocacy of Israel was borne out from his own admission, in his NY Times column of February 25, that he walked out of an educated discussion in Riyadh when people started criticising the US bias for Israel.

It was, therefore, a brilliant tactical move by Abdullah to choose an Israeli tribune like Friedman to be the messenger of his major policy shift. This should take all the American-Israeli sting out that the Arabs are bankrupt of new options on the Palestinian-Israeli impasse.

Indeed, Abdullah’s outline of a bold new peace plan is, as of now, just that — an outline. However, this trial balloon could become a parachute to land all the parties involved in safety provided there is willingness to take advantage of its wind. In a real sense, his initiative challenges the stereotype assumptions on the basis of which all the players involved have been planning their strategies, so far.

For the Americans, it offers an ideal and welcome face-saving to balance their lop-sided sheltering of Israel under their wings. Bush, by some accounts, is said to be increasingly uncomfortable over Sharon’s excessive zeal to finish off the Palestinians with a lot of covert and overt American help in so many different ways. If he wishes to retain some semblance of concern in the future of Arab-American relations, the Abdullah initiative throws him the life-saving rope to swim back to the shore. But the U.S. will have to curb its pro-Israeli enthusiasm in order to force Israel to consider the plan on its merit.

Israel, initially, has welcomed the spirit of Abdullah’s plan but will, no doubt, go through it with a very fine tooth-comb to find faults with it, and leave enough room in it for itself to wriggle out with convenience at any given time.

Of course, in its present form, the plan should be a stick in Sharon’s craw because it negates his Biblical dream of a Greater Israel gobbling up all the occupied lands. He can be counted upon to conjure up all sorts of spanners to be thrown into the works to thwart the scheme. Rest assured that he will insist on his pound of flesh - real Shylock-like — in return for, if at all, his acquiescence in the plan. His track record of using a shot-gun every time the Palestinians throw a fly at him gives little incentive for optimism.

But the biggest test of all would be of the Arab willingness to distil a consensus on the issue, where none is at present in sight. Unity and fusion of ranks has never been a strong suit with the Arabs. The Arab camp is as divided today as it ever was. Negotiating the inter-Arab trap-doors will be the toughest hurdle of them all.

There should be no two opinions on the central Arab demand on Israel to vacate all the occupied lands and go back to its pre-1967 borders in return for its recognition, en masse, by all the Arabs. There is, practically, no room for division or dissent in it. Even a hard line state like Syria stands to benefit with the perceived return of the Golan Heights.

But what about another, equally central, demand of the Palestinian right — of return to the lands from which they were forcibly expelled? The last Camp David effort foundered on this thorny issue, even though Ehud Barak was said to be generously disposed on all others. Have the Palestinians mellowed, in the period since then, on this focal demand? Has Yasser Arafat been consulted on this prickly point in his virtual incarceration under the Israeli tanks? What about the radical groups, such as Hamas and Hizbollah; have they been consulted, too, to make amends in their positions on the issue?

There is, to be honest, little convincing logic in the demand for the right of return to ancestral homes, especially with the prospect of the Palestinians getting a state of their own on the occupied lands to be vacated by Israel. Israel will never agree to it, because this would give an unfair advantage to the Palestinians. And the toughest nut to crack would still be the future of Jerusalem.

It is not conceivable that Abdullah did not take soundings among the Palestinians, as well as Arabs known to favour a tough line against Israel, before floating his trial balloon. The Saudi style of diplomacy may seem secretive to many but it is cautious in the eyes of all. Abdullah is not one to be accused of reckless disregard of Arab sensitivities on a matter of such dire significance. In any case there is still a few weeks before the Beirut conclave gets under way — time enough for the Arabs to crystallize their positions and get their act together.

If for nothing else, for its sheer timing, Abdullah’s move is, simply, exquisite. It deflates Bush’s rhetoric on his latest “axis of evil” mantra, as far as Iraq is concerned. It dooms to failure, even before its take off, Vice President Dick Cheney’s — a cold warrior par excellence with no iota of sympathy for the Palestinians and unabashed hostility towards Iraq — ME safari to garner support for Round Two of ‘War against Terrorism.’ With the Arab capitals and chancelleries buzzing with the echo of the Abdullah initiative, Cheney beating the war drums would look a very naive man, indeed. If he cannot trim his sails to bend to the new wind blowing in the Arab world, Cheney should rather stay home than tax the patience of his Arab interlocutors.

The writer is a former ambassador of Pakistan

DELHI’s most interesting clubs are not the ones that have waiting lists that stretch into generations. The really fascinating clubs are unrecognized, unauthorized and have floating memberships. To start on a note that is properly personal, one such is the club of former editors.

I have been one and can report, with evidence seared on the mind, that there is no zone more arid than the space provided on the political-social space for ex-editors. Regular membership of this club of course comes with the track record; but there is a sort of associate membership grade also, consisting of those who want to be editors. The frustration of those who have been editors is matched only by the frustration of those who want to be editors.

A second such invisible institution is the club of ex-foreign secretaries. The helplessness of those who have ruled the nation and now can only rule television channels, or seek a ride on some diplomatic back-channel, is truly a sight to make strong hearts quiver. The tribe of ex-MPs displays paradoxical tendencies. It is both more sanguine and more hapless. The comfort level comes from the fact that no one can quite eliminate some of the privileges of ex-MPs, like the use of Central Hall in parliament or free railway tickets. The haplessness arises from the fact that no one takes a visiting card with an “ex” on it seriously. A politician stripped off pomposity is a politician denied his fundamental rights.

Nothing compares however with the club of ex-prime ministers. As in the case of editors, there are associate members consisting of those who think they can become prime ministers within their lifetimes. All of them live in Delhi. Most ex-MPs and ex-ministers wander around Delhi after having lost their jobs for a bit, but then wind their way home, back to the constituency that sent them to Delhi. An ex-prime minister has no real home apart from Delhi. There is a reason. Every ex-prime minister’s astrologer has told him that he will become prime minister a second time.

The names of former prime ministers are not a secret. Since the defeat and tragic assassination of Rajiv Gandhi we have had Chandra Shekhar, Vishwanath Pratap Singh, P.V. Narasimha Rao, H.D. Deve Gowda and Inder Gujral. Atal Behari Vajpayee is the only ex-prime minister whose astrologer proved accurate if he predicted that he would become prime minister again. Mr Vajpayee did. He came close to being an ex-prime minister a second time, after he was actually defeated in the Lok Sabha by a famous single vote.

But whether it was his astrologer or just unpredicted destiny, Mr Vajpayee, fuelled by some startling help from his official foes, strode through the ashes towards Kargil and from there marched to a general election victory that was a remarkable exercise in classy opportunism. If politics is the art of seizing the main chance, then chances are not seized better than that.

The associate membership of this club, as we have noted, consists of those who want to become prime ministers. Mrs Sonia Gandhi is the obvious name on this list. But she is hardly singular in that wish. There are gentlemen in her party who would cry murder if their names were mentioned by a columnist as part of that wish-list, but their private dreams are hardly secret. Leaders of regional parties also have aspirations.

The argument in their favour is simple: if Deve Gowda and Inder Gujral could become prime ministers with nothing in their hands except a fateline created by Lord Brahma himself, then why should any Yadav, Mulayam or Laloo, rule out the possibility of occupying 7, Race Course Road?

Every ex-prime minister has only one objective left in life: how to make the incumbent prime minister a member of their club by making him an ex-prime minister as well. Of course no ex-prime minister says this publicly, unless of course he is a Deve Gowda, who has nothing called a private thought. (And if he is a Narasimha Rao then he has nothing called a public thought.) Every ex-prime minister believes that, if the circumstances are right, or can be converted into being “right”, then an eager nation will call out breathlessly for the return of his valued services.

There are moments in the political calendar that tend to make ex-prime ministers in particular, and aspirant ones in general, gasp with hope. The gasping can be heard all the way from Delhi to Lucknow as the results of the elections in Uttar Pradesh finally emerge from the anxiety of the campaign and the darkness of the ballot boxes.

This column is being written before the results have been announced, but that is no issue, really. No theory in Delhi ever needed the ballast of fact to keep it afloat.

However the current heap of theories is based on a surmise that can be considered a fact: that the BJP will not win sufficient seats to be able to form a government on its own.

Even the BJP concedes as much, and only hopes to be the largest party, or the leader of the largest alliance, after the dead have been counted. And what will happen after that? Delhi will use the power of the governor’s office, and the manipulation of political and financial patronage to try and form a government. If it succeeds there will be a fertile reaction among the dispossessed, leading in turn to political realignments. If, on the other hand, the BJP is defeated decisively, then there will be rethinking among its allies, leading once again to new equations that will beget new coalitions. And what will this new coalition do? What else, except ask an ex-prime minister to save the nation.

The seductive power of such theories should never be underestimated. But how do they stand up to the cold touch of common sense?

It is always useful to begin from the beginning. Why did the allies who have ruled India since 1999 come together? They did not unite to usher India into the twenty-first century; or to give the country an annual GDP growth of 8 per cent; or to wipe out every bitter tear from the eye of a sad, starving child; or to pole-vault a Third World nation into the First World at the pace of a China; or to eliminate the curse of communalism or casteism from the body politic.

They came together to share a certain number of cabinet seats, which is what they have done pretty effectively, and with minimum rancour (particularly after the departure of the cross-eyed Mamata Banerjee). They united to win elections and share power. That is the prime and possibly only magnet that keeps them together.

Why should the results of the elections in Uttar Pradesh change this dynamic, irrespective of which way they go? Why should the BJP’s defeat in Uttar Pradesh persuade a Sharad Yadav or a Ram Vilas Paswan to suddenly see the light, declare the BJP to be a communal party and seek their salvation in the arms of Mulayam Singh Yadav, Laloo Yadav and the Congress? How will they get a better deal from their competing Yadavs or a sceptical and suspicious Congress than they have got from the BJP? On the other hand, they might be able to bargain for something better from Mr Vajpayee during the next reshuffle. One prime minister in hand is worth far more than two ex-prime ministers in the bush.

Nor does one expect any froth and turmoil in the BJP either. It would require courage beyond the available average among Indian politicians for any dissident BJP leader to blame the defeat of the party in Uttar Pradesh on the prime minister alone. Nor does it make sense.

The BJP takes decisions far more collectively than any other political formation in the country, so you cannot blame Mr Vajpayee alone for sending the sterile chief ministers that the BJP sent to Lucknow before Rajnath Singh. I do not know how many seats Rajnath Singh will bring to the BJP fold but it is safe to suggest that he will have doubled the number his predecessor would have managed. The BJP was not a three-figure party in Uttar Pradesh before he arrived.

I know that this is not a kind thing to say to ex-prime ministers, particularly those of them with weak hearts, but defeat in Uttar Pradesh might have the paradoxical virtue of actually strengthening Mr Vajpayee’s hand, if, that is, he knows how to play his hand effectively. All he has to do is to tell his allies that on the one side is the prospect of at least two more years in a powerful and possibly lucrative cabinet job; and on the other is at best a coalition government that does not have much hope of stability beyond the standard ten months of competing confusion that will demand its price in the subsequent election.

The only thing that can destabilize the BJP alliance is the construction of a large temple in Ayodhya, and that is a decision which is outside the parameters of the sequence and consequence in Uttar Pradesh. The politics of temple construction is a different story, and there are hints, which one is not yet in a position to convert into decision-lines, that positions are changing across the spectrum. The matter will become clearer as we get closer to March 12, and one is again assuming that March 12 is a serious deadline set by those who are determined to challenge the Supreme Court directive that ensures a status quo at Ayodhya.

Any turmoil over temple construction will only be resolved by a general election. Ayodhya might seriously wound the government, but this parliament will be dead. Of that you can be certain.

Which, alas, is bad news for ex-prime ministers. Sorry!

The writer is editor-in-chief of Asian Age, New Delhi.