WITH its focus on economic growth, the National Economic Council has raised the allocation for next year’s public sector development programme to Rs 160 billion, far more than the Rs 152 billion proposed earlier, and the Rs 134 billion allocated for the current year.

But the problem with such a large development outlay is that either the adequate funds are not available in time or that they are not utilized properly by the government’s executing agencies. Hence, the current year’s actual development spending may not exceed Rs 120 billion.

The government is, therefore, now preoccupied with capacity building so that such large amounts could be used in time, and major projects completed as scheduled. The donors, too, want the same enhanced capacity to absorb larger amounts of aid instead of projects dragging on in the way the Ghazi Barotha Hydel power project has.

Larger capacity-building can ensure higher aid as well. Hence, the NEC presided over by the prime minister has decided to meet midway through the year, and its executive committee to meet every quarter to remove bottlenecks and hasten completion of the projects. But how is it that while the development outlay has been raised to Rs 113 billion for the centre the provincial share has been retained at Rs 47 billion? The provinces need more funds for social sector development, and have been asking for increased allocations for quite some time. But finance minister Shaukat Aziz says the federal allocation is not confined only for use in Islamabad but the whole country, particularly for development of agriculture and water resources of which 23 per cent of the PSDP funds have been set aside.

There is also the issue of the funding the local government and of the development funds for MNAs, senators and MPAs and this ought to be clarified. There are also protests from opposition legislators that they had been denied their share of such funds. The legislators have, however, been assured the their development funds would not lapse with the end of the financial year.

It is good to hear that economic growth this year will be 5.1 per cent instead of the targeted 4.5 per cent. For next year, economic growth has been projected at 5.3 per cent. Mr Aziz says last year’s GDP growth has also been raised from 3.4 per cent to 3.6 per cent. This year’s rise in economic growth is said to be caused by an increase in agricultural output which include higher output of wheat in the Punjab, and that of sugar cane which had an all-time high output of 3.67 million tons, with a million tons surplus for export. Industrial output has also risen 8.5 per cent. What matters is that the momentum of growth should be maintained and increased until the higher target of 6 per cent growth is achieved within three years.

But Dr Hafeez Pasha, now assistant secretary general of the UN says, what the country needs if growth with equity so that the poor and the unemployed benefit. He calls for a conscious drive towards this end so that the country will have be able to reduce the proportion of the population that lives below the poverty line, from the current level of 40 per cent.

The fact is that for all the enhanced spending on the PSDP, its share of GNP is only 3.6 per cent, while it should be above 5 per cent in a developing country with 140 million people. Even with this low share of GDP earmarked for development, the budget deficit next year will be 4 per cent of GDP which, and that limit too may be exceeded. The reason for such poor development spending is that 44 per cent of tax revenues still go towards debt servicing, with defence claiming the next largest share. A large bureaucracy, marked for its excessive red tape and pervasive corruption, is the reason for such high current spending and low development outlays.

Meanwhile, external aid is increasing. The World Bank is reported to have tripled its allocation for six major projects and will be providing almost a billion dollars next year. Foreign direct investment has risen by 126 per cent in the first ten months of this year touched $626 million, although that is far short of the expectation of a billion dollars. If the proposed privatization plans come through in the next few months, the rise in FDI will be very substantial, particularly, through the sale of Habib Bank.

Home remittances of overseas Pakistanis have risen to $3.5 billion which is a big leap from the under one billion of the period before 2001. The PTCL chief talks of around 15 billion dollars being invested in the communications sector, but prior to that the new telecom policy has to come out and be accepted.

Meanwhile, the country’s foreign exchange reserves have crossed $10.5 billion. The deputy governor of the State Bank of Pakistan, Tawfiq Hussain, has defended the policy of keeping the reserve in dollars despite its steady depreciation against other strong currencies like the Euro, Anyway, following reports of improvement in the US economy, though marginal, the dollar is rising.

It was earlier reported that Pakistan would be asking for a payment of 8 billion to 10 billion dollars as compensation for the loss which Pakistan suffered by supporting the US in Afghanistan. That loss was reported to be an estimate provided by the US army’s Central Command. But Shaukat Aziz, who will be accompanying President Musharraf to Washington, has denied the report. “We are not going thee with a begging bowl,” he says. Instead he would ask for the write off of the bilateral debt of 1.8 billion dollars, after the US had written off one billion dollars in outstanding debt. If the US agrees to do that, it will be truly helpful.

In spite of the successive write-off of foreign debt, re-scheduling of the left-over loans and reduction of interest on them, the Rs. 1.8 trillion domestic debt will be a major burden. And that problem is sought is to be reduced by slashing the interest rates, much to the horror of those who have saved their money in the various national savings schemes. Shaukat Aziz is now expected to come up with a formula which will reduce the burden of the government and be less unhelpful to the savers particularly to pensioners, widows and other categories of savers.

While it is still uncertain how the budget will be passed, parliament has some far-reaching bills coming before it besides the budget. The IMF expects it to pass the Financial Responsibility Bill which would specify how much money the government can borrow each year and set a ceiling on the national debt. It has also to pass a new pension scheme based more on voluntary contributions by government employees which will cause a great deal of stir in the country, particularly in official circles. The IMF is also expecting the government to come up with financial improvement plans to increase the revenues of WAPDA, KESC, PIA and other large public sector organizations, and this could become controversial.

We expect far more foreign investment, and far more foreigners to buy the major projects to be privatized. We also expect Pakistanis to bring home far more home remittances. And we hope for far more aid from major donors and more write-offs of old debt.

In return for all that, foreigner investors and overseas Pakistanis can expect real political stability in the country, that is now what we are seeing seven months after the general elections following three year’s of military rule. Parliament is not functioning, and the rumpus in the Punjab Assembly with its excess of violence, makes matters only worse.

And in Karachi, which is suffering from acute shortage of water and frequent break down in electric supply, two Mohajir organizations are at war with one another, while the larger group is in power. This is not the kind of environment in which one can attract foreign investment or make Pakistani entrepreneurs invest their money in major industries. The need of the hour is for foreign capital in the manufacturing sector, not only as small-time investment in the gas and oil fields. But to have fixed investment coming in to the manufacturing sector we need more settled conditions and improved law and order.

Meanwhile, privatization minister Dr Hafeez Shaikh says investment is to be made easy by reducing taxes. He has said that excise duties and the import duty on machinery are to be cut. We do not know what more offers the finance minister will come up with in his budget speech. In fact, in such unsettled political conditions investors will try and bargain for more concessions and if the political conditions are not good enough all the fiscal concessions may not produce great results.

The baggage of MMA’s galloping demands in respect of Islamization is also upsetting would-be investors. And there is no certainty that the MMA will not come up with far more demands if its ten initial or minimum demands are met by Gen Musharraf now. And now comes the Shariat Bill in the NWFP.

Donors ask whether we are going to give priority to the welfare of 140 million people, to fighting poverty in their midst, and holding down population growth, and increasing education and public health allocation or to Islamize everything and test whether every official measure is in conformity with the prescriptions of the Islamic Ideology Council. A number of problems have been created by the elected leaders. And the armed forces have not been very helpful in finding solutions for them.

In such conditions sustained economic growth can be very difficult and it becomes tougher to make equity prevail. What matters now is not the volume of money earmarked for development. But how well that is used and its benefits ensured and sustained.

The masses are hoping to gain little from the budget. And if to add to that, the leaders increase their uncertainties and difficulties, we are in for far worse times despite the vastly improved macro-economic indicators and the $10.5 billion foreign exchange reserves.

IT happened during a presentation by the members of an evaluation committee at a board meeting of Pakistan’s largest public sector telecom corporation. The spokesperson for the committee was giving reasons for rejecting the highest offer for a lucrative international contract. The grounds he gave were that although the offer was commercially and technically the best, the top bidder — a US based transnational company — was not acceptable because its managing director was an Indian.

One of the board members leafed through the pages of the evaluation report and commented that from what he could glean, the CEO of that particular company was in fact a US citizen. “That’s true,” the spokesperson replied, “but he is Indian by origin”. The board member looked around the table populated by many of Pakistan’s top professionals and asked: “Gentlemen, is there anyone present here who is not Indian by origin?”

That particular, almost apocryphal exchange occurred in Islamabad. It was amplified in an obverse context and on a much larger scale in New Delhi, when in January 2003, India hosted the Pravasi Bharatiya Divas to recognize the Indian diaspora, an extended disjointed family system of 20 million persons of Indian origin living (some for many generations) in over 110 countries spread across six continents. The convention began on January 9, a date selected to commemorate the return to India in 1915 of one of its most famous migrant sons — a Kathiawari lawyer who studied law at the Inns of Court in London, then practised it in South Africa before repatriating himself to his homeland, where he was in time venerated as Bapu and later canonized by a repentant nation as Mahatma Gandhi.

The idea of studying the Indian diaspora had been suggested in 1977 by Mr Vajpayee, then foreign minister. Twenty-three years later, as prime minister, he appointed a high-level committee, headed by Dr L M Singhvi, an MP and former Indian high commissioner to the UK. The scope of the study was as widespread as its subject materials were scattered. Its primary purpose was to review “the status of persons of Indian origin (PIOs) and non-resident Indians (NRIs) in the context of constitutional provisions, laws and rules applicable to them both in Indian and in the countries of their residence”, and also to study “the characteristics, aspirations, attitudes, requirements, strengths and weaknesses of Indian diaspora and their expectations of India”.

Dr Singhvi and his colleagues spent 18 months collecting information, met every concerned ministry and government department in New Delhi, interviewed officials from states with large NRI populations, and visited 20 foreign countries which had concentrations of PIOs. The foreword to their report begins with a grandiloquent sweep of phrase borrowed from British imperialism: “The Indian diaspora spans the globe and stretches across all oceans and continents. It is so widespread that the sun never sets on the Indian diaspora”.

The final report analyzed the situation and the predicament of PIOs and NRIs across the globe — as oil-boom labour in the Gulf region; as a middle class doomed to remain sandwiched between the blacks and the whites in South Africa; as unwelcome guests in other African nations such as inhospitable Uganda, barely tolerant Tanzania and more accommodating Kenya; as migrants to the United Kingdom where some PIOs have avenged history by becoming British nabobs; in the United States where brown Indians soar above Silicon Valley as high-flying IT millionaires; and in the Caribbean whose Trinidadian-born PIO writer Sir V S Naipaul recently won the Nobel Prize for Literature for authoring books that were contemptuously anti-Indian.

The report covered the countries of South-east Asia, the Asia-Pacific Region including Hong Kong, and the Fiji islands; and Israel, where Indian Jews fled persecution to resettle. (The Singhvi report’s smug assertion that “their ancestors had never faced discrimination in India, unlike Jewish communities in other parts of the world” is contradicted by Paul Johnson’s A History of the Jews which discloses that “independent India was less congenial to them and with the creation of Israel, most chose to migrate”.)

The most telling, in a sense revealing, part of Dr Singhvi’s report is its deliberate exclusion of all Saarc countries save one (tiny Maldives). Pakistan and Bangladesh — India’s immediate neighbours made of over 270 million former Indians — have been left out, untouched. Dr Singhvi, like the chairperson of that telecom evaluation committee in Islamabad, applied his own formula for determining Indian-ness. To the former, naturalized Pakistanis and Bangladeshis are too recently Indian; to the latter, that CEO even though a naturalized US citizen was too distantly Indian. No one reading Dr Singhvi’s report could make the mistake that the abbreviation PIO covered Pakistanis of Indian origin.

The courtship between any home country and its diaspora — whether Indian, Italian, Greek, French, Lebanese, Jewish or Chinese — is less a matter of sentiment than of economics. Persons migrate for better prospects. Having improved their standard of living, they then want to flaunt that affluence where it will be envied most. Reciprocally, home economies need the intellectual and financial capital that a diaspora can be persuaded to divert in their direction. Many governments formalize this by establishing departments solely to remind former nationals of their ethnic origin and to coax out of them a tangible expression of that consanguinity.

How long will it be, one wonders, before PIOs (Persons of Indian Origin) and their counterpart PPOs (Persons of Pakistani Origin) look at investment opportunities in the subcontinent as a whole? Or will they always be bound like the turbanned Canadian Sikhs who accompanied the Canadian Prime Minister Paul Chretien during the second prime ministership of Benazir Bhutto, restrained and held back by previous sadnesses instead of being encouraged by prospective gladnesses? Will third-country nationals of Pakistani and Indian origin be ever bold enough to take the plunge and consider making transborder investments? Will they be shown an evenhanded hospitality, regardless of their origin, by the host governments?

For the foreseeable future, one has to admit that a Canadian or Californian Sikh will understandably still prefer to invest his dollars in Indian Punjab rather than buy equally fertile but less productive land in Pakistan’s Punjab, just as a Pakistani Briton will feel more comfortable investing his pounds in Sialkot instead of in Chennai. As long as the depth of one’s Indianness remains the measure of one’s acceptability in all three countries — India, Pakistan and Bangladesh — their economies will continue to be shackled to three separate engines of growth, steaming at their own individual pace on their own individual tracks.

Reading between the lines of the Singhvi report, one detects a tone of envy in the Indians when they compare the Chinese diaspora experience: “The committee concluded that while ethnicity was a factor in China’s success in attracting investments from its overseas Chinese, economic imperatives, including the booming Chinese economy, and sound government policies, including flexible labour laws and efficient administrative procedures, were the major factors responsible for this phenomenon.”

The Singhvi committee disclosed that although 70 per cent of all inward foreign direct investment in China came from the Chinese diaspora, the Chinese government did not accord any special privileges to investors of Chinese origin who wanted to put their money in China. These were available to all investors regardless of their ethnic origin. It was as if the Chinese recognized that attracting foreign investment was more than a matter of genetics; blood can never flow thicker than a positive cash flow.

If reciprocally, the Chinese are jealous of anything Indian, it is of India’s spectacular success in the IT sector. The Chinese feel they came in too late and in the wrong language. “India has been very fortunate,” a Chinese diplomat once commented to his Pakistani companion. “They were able to make a breakthrough in IT because they were fluent in English. You in Pakistan can help us,” he continued: “You speak English. If you send your people to China, you can help us learn English,” and then, dropping his voice to almost a whisper, he gave a new twist to the traditional perception of a diaspora, “We will be able to spread throughout the world... and teach everyone else Chinese.”

CALL me cynical, but the current flurry of summit meetings on the proposed ‘roadmap’ for Mideast peace looks like another dead end in the half-century conflict over Palestine.

I have been steeped in Mideast affairs since the early 1950s, when my late mother, Nexhmie Zaimi, was one of the first female American journalists to cover the Arab world, interviewing Egypt’s President Nasser and Anwar Sadat, Jordan’s King Hussein, and Iraq’s strongman, Nuri as-Said. She began reporting the plight of 750,000 Palestinian refugees driven from their homes by the newly created state of Israel.

Few Americans had ever heard of Palestinians. They were told Israel was “a land without people for a people without land”. My mother’s newspaper articles and lectures brought her much attention and constant death threats and attacks on our New York City home. The newspapers for which she wrote were pressured by major advertizers to drop her columns. A courageous, outspoken woman, Mrs Zaimi continued public speaking until she was finally silenced by threats to throw acid into my face.

Fifty years later, after living in Egypt and a lifetime travelling across the Arab world and Israel, I am an ingrained pessimist. I would like nothing better than see a just Mideast peace, with Arabs and Jews living together peacefully and productively in a secular, non-racist state.

But President Bush’s ‘vision’ for Mideast peace, backed by Europe, Russia, the UN, PLO, and accepted by Israel with key reservations, appears unlikely to succeed because it blurs or evades so many major problems.

Under the plan, the US-installed and financed Palestinian government of Prime Minister Mahmoud Abbas must first end attacks on Israelis and shut down the extremist movements Hamas and Islamic Jihad, then renounce the right of return of 1.5 million Arab refugees. The democratically elected PLO leader, Yasser Arafat, is to be sidelined. Then Israel will consider withdrawing troops from some areas, and accept within three years the ‘concept’ of a provisional state of Palestine with provisional borders. The most thorny issues — Jerusalem, water rights, final borders, Arab and Jewish refugees — will be decided “in the future”.

The UN awarded Jews 55 per cent of the original British Palestine Mandate in 1947; Palestinians the remainder. After the 1948 war, Israel gained 78 per cent of Palestine; Jordan grabbed the remaining 22 per cent in collusion with Israel, which Israel then conquered it in 1967. Now, Ariel Sharon’s Likud government is reportedly offering to return about half of the occupied 22 per cent territory. Under the roadmap, Israel may retain major Jewish settlements, over 80 per cent of the West Bank’s water reserves, and may surround and isolate any newborn Palestinian statelet from the outside world. In addition, Israel is to continue settling millions of Russian Jews while refusing to admit more than a token handful of Palestinian refugees.

Israeli sources say the massive ‘Berlin Wall’ being built by Sharon could extend to 600 kms, cutting off Palestinians from Israel, from neighbouring Jordan, and annexing large chunks of former Palestinian lands. Israel reportedly plans to retain the Jordan Valley and Syria’s Golan Heights.

The most important “fact on the ground” is Israel’s settlements. Since the 1993 Oslo Peace accord between Israel and the PLO, which called for an end to Israeli settlements, the number of Israeli settlers on the West Bank and Gaza doubled to 240,000. More striking, by simply expanding Jerusalem’s municipal borders to include a ring of new settlements built around the city, the actual number of Jewish settlers on the West Bank is closer to 470,000 rather than 240,000.

Sharon offers to dismantle ‘temporary’ settlements, mainly mobile homes, erected since 2001, but has assured settler groups, his political core support, they will not be relocated. Israeli critics say Sharon intends to continue the plan of predecessor, Ehud Barak, dividing Palestinians into three separate cantons, surrounded by Israeli security forces — what South Africa used to call ‘Bantustans.’ Palestinians are unlikely to accept a truncated mini-state that is essentially a tribal reservation.

Sharon recently stated that Israel must end its military rule of 3.5 million rebellious Palestinians, but his plan seems aimed at annexing the most useful parts of the West Bank and Golan Heights while getting a tame PLO to police the rest and repress militants. That’s what Bush and Sharon mean by a ‘democratic’ PLO. A rare positive note, however, came with last week’s grudging, first ever acceptance of a Palestinian state by Israel’s cabinet.

Sharon owes Bush for crushing Israel’s enemy Iraq, and assuring Israel’s continued Mideast monopoly on weapons of mass destruction. Hence Sharon’s sudden flexibility. Critics on Israel’s left insist Sharon is merely playing for time while locking up the occupied territories, a process that has continued since Oslo.

Most Palestinains will reject such a deal as a sell-out. Hamas represents more Palestinians than the toothless, corrupt PLO, which cannot control the militants. Arab extremists will undermine any accord with more suicide bombings. Palestinian refugees will clamour for the right of return. A lopsided deal that is only good for one side is a deal doomed to distress or failure.

Maybe I’m too pessimistic. Maybe a tough Sharon will become an Israeli DeGaulle, ending the bloody West Bank/Gaza colonial war and creating a viable Palestinian state. My instincts tell me otherwise.—Copyright Eric S. Margolis, 2003.