November 21, 2002	Thursday	Ramazan 15, 1423

LAHORE, Nov 20: US Treasury Secretary Paul O’Neill on Wednesday urged Pakistan to lower trade barriers with its closest neighbours to enjoy fully the benefits of open regional trade.

Speaking to students and faculty of the Lahore University of Management Sciences (LUMS), he said economic freedom demanded lower trade barriers to regional trade.

Without naming India and Afghanistan, he said trading costs were naturally lowest with one’s closest neighbours. “I hope for a day when Pakistan and its closest neighbours will enjoy more fully the benefits of open regional trade. Neighbours have much to offer and to gain from each other.”

In answer to a question about the possibility of the US playing a diplomatic role in the resolution of disputes between Pakistan and India, he said it was for the two countries to work out their problems.

Mr O’Neill also underlined the need for allocation of more on education “if Pakistan wished to make rapid economic progress”. Education is clearly one of the keys to business success, and, more broadly, for economic development. It is important at every level and every age, beginning in early childhood, for men and women alike, he said.

“Pakistan must devote resources to schools and curriculum throughout the nation, in the cities, and in the countryside, especially to improve literacy among girls and women whose 70 per cent population over age 15 is illiterate. It is one of the highest percentage of female illiteracy in South Asia. Some 41 per cent girls between the ages 11 and 15 are enrolled in schools, a low point among South Asian nations,” he said.

However, Mr O’Neill said, education was not the only requirement for a nation to achieve its economic potential. He said to unleash the potential of an educated people and the private sector, the leadership of the nation must make a strong commitment to ruling justly, encouraging economic freedom, and investing in people. “A just and stable social environment that combines these elements is not an option, it is a necessity.”

The US treasury secretary said ruling justly meant enforcing laws and contracts fairly, respecting human rights and property rights, and fighting corruption. He said any business required capital to grow. “Yet capital is a coward. Investors are reluctant to put their capital into a company if it exists in a place where capital, contracts, and property rights are not respected. As a result, without just rule, the leaders and entrepreneurs who would deploy new ideas, create jobs, and raise standards of living cannot obtain the capital they need, or they must pay an exorbitant cost for that capital. Economic growth falls short.”

“Encouraging economic freedom means removing barriers to trade with neighbours, opening economies to investment and competition, pursuing sound fiscal and monetary policies, and divesting government from business operations. We think trade barriers and subsidies are bad for the people of the country. Investment in people means providing clean water and the best possible systems of healthcare and education,” he added.

FDI: He was of the view that foreign direct investment (FDI) would start pouring into Pakistan if it succeeded in ensuring rule of law, fight corruption and establish sanctity of (international business) contracts.

“President Pervez Musharraf and his team are committed to fight corruption and establish rule of law. There is huge potential in Pakistan. If the government and people show their commitment to these ideas, money would start pouring into the country for its rapid economic growth,” he replied a questioner, who wanted to know if the US had plans to offer Pakistan the MFN (most favoured nation) status in view of its support for the international coalition against terrorism.

Mr O’Neill said the question of MFN status was not a critical issue, adding that two-third of the entire FDI flowing into Pakistan last year came from the US. “While Pakistan received $450 million in FDI last year, the quantum of FDI that went to India stood at $4 billion and to China $44 billion.”

He did not agree with a questioner that Pakistan’s textile exports to the US had come down. “In fact, the textile exports to the US rose by six per cent in value and 20 per cent in volume.” However, he said, the US administration would look into the possibility of increasing Pakistan’s textile quota and slashing tariff barriers in order to help it improve its exports.

DEBT FORGIVENESS: The US treasury secretary said debt forgiveness was delayed because of mid-term polls of Senate and Congress. “The issue needs legislative action by Congress and Senate. It will be taken care of in January when the legislature assemble in Washington for its session. President Bush has promised President Musharraf that the debt (of $1 billion) would be cancelled and, therefore, there should be no doubt about it.”