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DINA
DAWN - the Internet Edition


June 10, 2003 Tuesday Rabi-us-Sani 9, 1424
Features


Opium blossoms again amid rumours of US fumigation campaign
No end in sight to local-provincial governments tussle
Redefining army’s role and status
Police housing society
Planning Commission to monitor progress of projects
The budget and I



Opium blossoms again amid rumours of US fumigation campaign


By Luke Harding

ZAFAR KHEL (Afghanistan): Mohammed Hussain was sitting on the roof of his house listening to the radio when he heard the sound of helicopters flying low over his village. He thought nothing of it. The American military frequently swooped over the area, and had spent hours hunting in the nearby snowy mountains for Taliban suspects.

It was only when he inspected his opium field the next morning that Mr Hussain noticed something was wrong.

“The previous evening, my poppy plants were green and healthy. By the next morning they had completely dried out,” he said. “I’ve never seen a disease like it.

“They were circling above us. They woke the children up. It was about nine or 10 o’clock at night. The helicopters had their lights turned off. They were definitely Americans.”

Mr Hussain lives in Zafar Khel, a village of high, mud-walled houses and shady mulberry trees in eastern Afghanistan. The village is two hours’ drive from the sweeping Tora Bora mountains, where Osama bin Laden disappeared.

It is here, against a landscape of dusty boulder-strewn plains and lush oasis villages scented with orange blossom, that much of Afghanistan’s opium is grown.

Mr Hussain and other locals are convinced that the American military secretly tried to wipe out their crop two months ago. The farmers believe that, operating in darkness, US forces sprayed their fields with herbicide.

The US has been heavily involved in funding and carrying out crop-fumigation programmes in countries in South America, but the agreement of the governments concerned has been integral to the process.

Crop spraying in Afghanistan would be a different matter — effectively an attempt at bio-sabotage in a country where the approval of the population’s representatives had not been sought.

FLOURISHING: “I still managed to salvage a third of my crop,” Mr Hussain said, showing off a kilogramme of black, gooey heroin wrapped in leaves and tied up with twine.

“I’m going to save this to pay for my wedding,” he said.

Western diplomats have dismissed the allegation of sabotage as “rubbish”. Not, though, that any such tactic appears to have made much difference. Eighteen months after US-led forces evicted the Taliban, Afghanistan has just enjoyed another bumper heroin crop.

The Taliban’s leader, Mullah Mohammed Omar, successfully banned opium production in virtually all of the country. But since Afghanistan’s pro-American leader Hamid Karzai took over, poppy cultivation has flourished again.

Last year, Afghanistan retook its place as the world’s leading producer of heroin, supplanting Burma. The amount of land used to cultivate opium poppies shot up from 1,685 hectares in 2001 under the Taliban, to 30,750 hectares.

International efforts led by Britain to reduce poppy cultivation in Afghanistan this year have failed spectacularly. In Kabul, senior Afghan officials are now grumbling that Britain has no anti-drugs plan. Meanwhile, 90 per cent of the heroin that reaches Britain comes from Afghanistan.

Wiping out Afghanistan’s opium crop is clearly going to be an epic task. Driving across Afghanistan’s eastern opium heartland last week, the Guardian discovered dozens of poppy fields that had just been harvested. It wasn’t difficult to find an opium farmer, since the term could be applied to just about everybody.

Sitting in the shade of a mulberry tree, Abdul Ahad the other day showed off the field where he had grown opium, close to the main road in the dusty cricket-loving village of Kochiano. He had just sold 15kg of heroin in the local bazaar. Each kilogramme sells for $360. After expenses, he had made $5,000 profit — a fortune in a country where the average monthly wage is about $20.

Mr Ahad said he was unimpressed by western efforts to eliminate Afghanistan’s poppy crop. “The Americans destroyed my country,” he said. “I hope Bush and Blair sink,” he added, calling for a tray of green tea for his British guests. The entire village had joined in collecting the opium resin last month, he said.

President Karzai, meanwhile, has called for poppy production to stop. But his local officials fail to inspire the same dread that the Taliban did, and his interim government in Kabul is virtually bankrupt.

Earlier this year, government officials carrying Kalashnikovs arrived in Kochiano with six tractors and ploughed up several opium fields. One belonged to Zarma Jan, a 35-year-old farmer. Mr Jan waited until they had gone, and then promptly replanted his jerib — an Afghan term for a fifth of a hectare — with opium.

Asked why they grow opium, Afghan farmers give a half-truthful reply: they don’t have any alternative.

“I know that what I’m doing is illegal,” Mr Jan said. “But we are poor. There are no jobs. There is nothing for us. I have five children and a wife to feed.”

Elsewhere in Afghanistan’s Nangarhar province, which adjoins Pakistan, there have been angry clashes between “campaign-wallahs”, as the anti-drugs officials are known, and farmers. There have been injuries on both sides.

When officials turned up in Zafar Khel, the villagers pelted them with stones. They eventually withdrew without destroying the opium crop, but taking four men whom they put in the cells in nearby Jalalabad for several days.

In other provinces, farmers have simply bribed officials to go away. Anti-drugs experts concede that many Afghans are desperately poor and have little choice but to grow opium to survive.

On Sunday, one western diplomat in Kabul responsible for drugs strategy admitted that getting rid of opium was going to be an uphill struggle.

The crop has flourished in large parts of Afghanistan since the time of Alexander the Great. Unlike wheat, it requires little water and is ideally suited to arid valleys and unreliable rivers.—Dawn/The Guardian News Service.

Top



No end in sight to local-provincial governments tussle


By Aileen Qaiser

THAT the controversy over the local governments should eventually come to a head in the NWFP is not surprising. The clash between the provincial government and the district governments was bound to happen sooner or later, given the features of the devolution plan. In fact, the relationship between the local governments and provincial authorities in the other “non- opposition” provinces has not been a bed of roses either.

The question is: why was something not done in time to forestall the looming crisis when it was clear that the controversy over the local governments issue that developed as soon as the elected provincial governments came into place was growing? Rather in March, it was reported that the NRB had told the IMF that the local governments were functioning smoothly.

It was only in early April that a conference was officially organized at Bhurban to thrash out the problems of the local government system. On May 20, the NRB chairman was reported to have said that the Local Government Ordinance 2001 would be amended to make it more effective after recommendations from all the provinces were presented to the federal government. But on June 2, crisis hit the NWFP government when all 24 district Nazims threatened to resign.

That the devolution plan 2000 left much to be desired was evident from the beginning. Although, its objective - participatory governance at the local level - was unassailable, there was considerable criticism from non-government quarters, political parties and the bureaucracy about the devolution plan when it was unveiled.

The key misgiving about the devolution plan was the erosion of provincial authority and autonomy. Under the plan, the district Nazim is the executive and political head of the district, and the local government institutions transformed into autonomous, self-governing bodies with marked areas of jurisdiction.

On top of that, the fact that the plan did not provide for any role for the elected members of the national and especially the provincial assemblies, annoyed these parliamentarians who were previously involved in the development activities in the districts.

These misgivings could have been neutralized somewhat if the local governments had been put in place after the national and provincial elections by the political governments at the provincial and federal level. But this was not what happened. Since the local government elections took place well before the general elections, it was the then chief executive - rather than the upper two levels of federal and provincial political governments - who actually empowered the indirectly elected district governments.

A prominent NGO, which conducted research studies into all five phases of the local government elections from December 2000 to August 2001, had pointed out this anomaly in one of its published reports dated August 2001. It also questioned whether the devolution plan would be executed in a manner that would ensure its success.

Problems between the two levels of governments surfaced as soon as the provincial governments were in place. In December 2002, the NWFP assembly had tabled a motion on reforming the local government system and a commission was constituted to look into it. In Punjab, the chief minister also remarked in the same month that changes were necessary in the local government system to improve its working. In February 2003, it was reported that he had formed a special committee to “improve” the Local Government Ordinance 2001.

The main problems were clashes over authority, jurisdiction and fund issues between the provincial and district authorities. In Sindh, for example, a tussle developed between the provincial government and the Thatta district government over jurisdiction of Keenjhar Lake, an important source of water supply for the city of Karachi, which also serves half the irrigation needs of the district.

The local district council had unanimously passed a resolution in its last session demanding handing over of the lake to the district government. The provincial government resisted this move, with the provincial minister for culture and tourism reported to have said that the lake would not be entrusted into the custody of the district government.

Similarly in the Punjab, a tussle rose between the provincial Communication & Works Department and some district governments over the jurisdiction of roads and hence, the right to impose toll levy. The district governments wanted the main roads located within their administrative jurisdiction to be transferred to their control also, and some district governments had reportedly started imposing toll on these main roads, which are supposed to be maintained by the provincial department.

Another obvious tussle between the provincial authorities and the district governments is the jurisdiction over the schools, and hence over the power to hire and fire teachers. One of the demands of the thousands of teachers protesting in front of the Parliament House in Islamabad last week is that educational institutions should remain under the control of the provincial governments rather than the district governments.

Meanwhile, practically all the provinces came under complaints by Nazims and naib Nazims that provincial ministers were trying to sabotage the devolution plan. Some district councils complained that they were not being consulted on transfers of government officials made by the provincial governments and termed such transfers as a violation of the Local Government Ordinance 2001.

In NWFP, the tension between the provincial and district authorities was made worse by the fact that the district governments there were given a say in certain matters where in the other provinces it is the provincial government which hold sway. For instance, while it is the district Nazim, who chairs the meetings of the district development committee (DDC) in NWFP, Punjab and Sindh, the DDC is chaired by the district coordination officer. Similarly, while the district Nazims have been made chairmen of the Regional Transport Authority (RTA) in the NWFP, in the other provinces the district coordination officer is the chairman of the RTA.

It is surprising that the district governments in NWFP have been given even more powers in this manner than their counterparts in the other provinces. Shouldn’t the local government system have been consistently implemented in all the four provinces for a smoother implementation?

Although the crisis in the NWFP appear to have been subdued somehwat with the NRB and the NWFP government reported to have made progress in working out some “new rules of business” for the district governments, whether these “new rules of business” will permanently put to rest the tussle between the two levels of governments in the NWFP only time will tell.

It can be expected that once the district governments perceive that the establishment can no longer “protect” them, they will start looking towards other political entities for support. Since mainstream parties who are in power in the provinces are unlikely to oblige, the district governments are likely to look towards the smaller political parties who are not in power, like the Qaumi Jamshori Party which has been actively supporting the district nazims in the NWFP against the MMA government.

The local government issue may thus become the peg on which such hitherto politically insignificant parties can build their power base and gradually rise to national prominence. Whatever “new rules of business” that are made to the present local government system which are in favour of the current NWFP government, these can easily be reversed once the next government installed at Peshawar is one that has the district governments as its power base.

So it looks as if the controversy over the local government system has only just begun. It will be here to stay so long as the local government system in its overall present form exists and so long as there exist entities ready to back (or ditch) the district governments vis-a-vis the provincial government for their own interests.

Perhaps this is the reason why local governments elections have not been held so far in the Federal Capital Territory and the Military Cantonments.

Top



Redefining army’s role and status


By A.R. Siddiqi

PRIME Minister Zafarullah Khan Jamali’s statement (May 29) in response to the on-going debate concerning the army chief’s uniform may well tend to throw open the role, function and status of the army to a sweeping redefinition.

Joining issue with the opposition demanding that the army chief General Pervaiz Musharraf should step out of his uniform as an essential pre-condition for completing his tenure as president — 2002-2007 — the prime minister pleaded his and his government’s inability to do anything about it. He said: “Neither you nor I gave him the uniform. It was given to him by an organization (army) and only that organization can decide about that.”

Whether the army is the sword-arm of the government of the day or an autonomous body practically out of the ambit of supreme civilian controls calls for a reappraisal. This is not, in any way, to compromise on the unquestioned autonomy of command, in matters professional, of the army (or any other service) chief so much as to evaluate and assess its impact on the very nature of its subordinate status to the civil authority and leadership under the Constitution.

The prime minister’s observation holds the potential of tipping the delicate balance of the civil-military relationship even more heavily in favour of the military establishment.

Regardless of the de facto power and authority the army has arrogated to itself by outright imposition of martial law and successful coups d’etat or through covert manipulation, the de- jure subordinate status of the military establishment vis-a-vis civil authority remains unchanged. No military coup, overt or covert, would be legitimized unless validated by the courts and indemnified by parliament.

While Gen Musharraf’s constitutional amendments, as embodied in the LFO, are nothing shockingly new or novel, these are yet to be validated by a two-thirds ‘yes’ vote of parliament. The government would, however, not see much point in putting a law to vote that is already a part of the Constitution, as well as the repository of the oath taken by all the newly-elected and inducted MNAs, MPAs, central and provincial ministers. Hence the on-going constitutional stand-off between the opposition and the government dominated political parties.

The deadlock will end only if and when Gen Musharraf agrees to shed his uniform to become a civilian president. However, the uniform being his only source of power and authority (as opposed to legitimacy under the 1973 Constitution) - and he admits that too in no uncertain terms - Musharraf declines to doff his charmed costume. In his resolve to stick to his uniform, ‘in the supreme national interest’, he is said to enjoy the full trust and ungrudging support of his corps/formation commanders and principal staff officers (PSOs) at the GHQ.

Now, collegial support to a president-in-uniform is one thing, but the publicity-stated stance of the prime minister that he, his government and parliament can do nothing even to persuade the army chief to shed his uniform, in practical terms to retire from the army, is quite another.

Unless stated in a casual, off-the-cuff and lighter vein, the prime minister’s words would seem to underline the rapidly eroding civilian supremacy or whatever is still left of it — over the military establishment. This should apparently transform a de facto truth into a de-jure fait accompli. Even if interpreted beyond its real intent, or plainly misinterpreted, the prime minister’s statement is sui generis - one of a kind - and without a parallel as a move towards redefining the nature of the civil-military relationship, even re-writing it.

Historically, civil power is known to have exerted itself decisively and forcefully in the matter of the appointment and summary retirement of service chiefs. Almost all army chiefs - from Ayub to Musharraf - were promoted out of turn over the heads of their seniors and at the command of the civilian chief executive.

The promotion of Lt-Gen Ziaul Haque to full general over the heads of nearly half a dozen of his seniors by the then chief executive, prime minister Zulfikar Ali Bhutto, stands out in the category. This is the best example, and by no means the only one, of the absolute assertion of civilian authority over the military.

Earlier, in a devastating display of his authority, Bhutto had retired two of his own hand-picked service chiefs and close collaborators through the traumatic 1971 crisis, Army Chief Lt-Gen Gul Hassan Khan and Air Chief Air Marshal M. Rahim Khan, killing two birds with one stone.

Several years later in 1999, prime minister Nawaz Sharif retired Army Chief Gen Jehangir Karamat on the spot for a free expression of his views in support of his concept of the national security council as a sort of a balancing agency between the civil and military establishments. Nawaz Sharif’s coup de grace in the case of Jehangir Karamat, one of the most highly-rated army chiefs, demonstrated the absolute power of the civilian establishment over the military, should the civilian chief executive choose to exercise it. Thus, the ultimate supremacy of the civilian executive, as much in the case of Zafarullah Khan Jamali as any of his predecessors, has stayed historically sacrosanct and practically operative. Nonetheless, Mr Jamali’s formulation, even if unintended, may well create an environment to establish the armed forces as a sort of a corporation under the normal laws of the land but way beyond government control.— The writer is a retired brigadier of the Pakistan Army.

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Police housing society


By Shamsul Islam Naz

THE district police officer has evolved a unique method to collect money from his subordinates. He has with the cooperation of a known city trader decided to form a “police welfare society” apparently for providing housing facilities to subordinate police officials of the district.

Inquiries revealed that a local yarn merchant, Abdul Majeed Puri, had purchased a piece of land in Chak 123-JB, Sidhupura, adjacent to the Punjab Industrial Estate. The land is said to measure about 83 kanals, 16 marlas and six sarsais. It is situated in Sidhupura, considered one of the notorious suburbs of the city, with a history of old enmities and murders.

The inhabitants of this area are also known for being short-tempered and drawing the gun over minor altercations and petty disputes. This culture has ruined the chances of prosperity of the people who have to sell their lands to pursue murder cases.

Abdul Majeed Puri, apart from running an industrial unit, is a leading estate investor who succeeded in purchasing a sizable chunk of land of this area at a very cheap rate. He reportedly tried to sell this land for industrial purposes, but his efforts proved futile because of the gun culture of the area.

Three years ago, Mr Puri conceived the idea of converting his land into a housing scheme under the name of Yousaf Town. But the strong-armed Sidhupuris frustrated his plan by removing signboards and banners from the site.

Insiders revealed that recently Abdul Majeed Puri, through a close friend, contacted DPO Zafar Abbas Lak and sought his assistance to fulfil his longstanding dream of selling the land at market price. Both, instead of inviting the public to purchase plots in Yousaf Town, decided to form a police housing society with a sole objective of selling plots to police subordinates through terror. This development came to light when the Elite Force, despite repeated raids and picketing, could not tame the Sidhupuris and keep them away from Yousaf Town. But this policy has created a bad impression and spread harassment among the people about investing in the area.

Inquiries revealed that the DPO and his companions neither sought permission from the police department nor obtained any instructions in the matter from the Home Department and other agencies concerned. Similarly, no society was got registered with the Social Welfare Department, which is supposed to be a pre-requisite for the formation of any type of welfare society.

According to an area estate dealer, the actual price of the land declared as “Police Housing Society” is not more than Rs10 million because the site is disputed due to the tussle between the registered owners and armed men claiming to be its previous owners. But due to interference by the police brass, the armed men chose to retreat. The total area is 1,676 marlas which would be sold at a rate of Rs30,000 a marla by the local police, which means that a huge amount of Rs50 million would be collected. If the project is completed successfully, the DPO would get Rs30 million as his “share” while Rs10 million would be paid to real owners of the property. The remaining amount of Rs10 million would be spent on the development as well as share of some police subordinates.

The local District Officer (social), Muhammad Iqbal, admitted that no such society existed on record. Although there is no provision in the Police Order allowing any police chief to form welfare societies, the question is who cares and who checks.

The announcement of offering plots to police personnel by the DPO is somehow a very interesting one. All police subordinates of the district at the first instance were forced to purchase an application form for a plot by payment of Rs100. The DSP headquarters has been assigned the task of selling the application forms and collecting applications with 20 per cent of the total amount as advance payment, with the rest to be paid in six instalments within one-and-a-half year. Four types of plots have been offered including 3.5 marlas, 5 marlas, 7 marlas and 10 marlas at cost of Rs105,000, Rs150,000, Rs210,000 and Rs300,00, respectively.

An assistant sub-inspector on condition of anonymity told that no police personnel could invest such a huge amount to purchase a plot and develop a house from his meagre financial resources. Moreover, the location is far away from the city. It is not a sound proposition from the investment point of view, but we are forced to pay through our nose or else risk our jobs.

The terms and conditions inter alia say: All employees of the police department are entitled to apply in the scheme, applications would be submitted on prescribed forms available from the office of the deputy superintendent of police (Headquarters) on payment of Rs100, the price per marla has been fixed at Rs30,000, 20 per cent of the price of plot would be required to be deposited at the time of submission of application whose receipt would be handed over there and then. In case of unavailability of plot, the said amount would be returned at once, cash payment would not be accepted, payments would be accepted through bank drafts and pay orders payable in the name of the “Faisalabad Police Welfare Society,” in the office of DSP Headquarters.

After allotment of plot, the remaining amount would be deposited in five equal three-monthly instalments. In case of number of applications exceeding the number of plots, the land would be allotted through ballot under the supervision of the DPO Faisalabd. In case of failure to deposit the instalment within the stipulated period, the allotment of plots would be cancelled. In case of the number of plots exceeding the number of applications from Faisalabad police employees of adjoining districts, like Jhang and Toba Tek Singh, etc. would be invited to apply. The scheme has been launched purely with the object of welfare of police employees, the profit and loss would accrue to the police welfare fund, the DPO, Faisalabad, would be authorized to reject any application without assigning any reason.

Information gathered from the revenue department confirmed that the land where the housing scheme for police was being developed was in the name of various private people while Abdul Majeed Puri had the power of attorney. It was claimed that the housing scheme would have roads, gas, electricity, telephone, market and shopping centre. However, ground realities are different.

The DPO is forcing his subordinates to purchase plots at a value at least four times higher than the actual price. Who will proceed against the police officers and question the legitimacy of the source of depositing money for plots? Is it possible for SHOs and other subordinates to remain posted in Faisalabad district when the police laws and the government instructions clearly bar any police official above the rank of ASI to serve in his home district? In such a backdrop, the police functionaries are being forced to buy plots which they cannot purchase by remaining within lawful means.

The police are notorious for extorting money from innocent people. But when the senior police officers create such a situation, then how could it be expected that ordinary policemen would discharge their duties diligently, honestly and without influence. All these flowery words have been written in Article 25 of the Police Order, 2001, in an oath declaration of police functionaries, a retired police officer remarked.

A team of the police officers, headed by the deputy superintendent of police (Headquarters) has been constituted for procuring the amounts from all police stations and the task of selling the plots at every cost has been assigned to the SHOs. A set of forms has been distributed to all the SHOs of the district, while an inspector, Mian Khalid, has been given the task to remain mobile at police station level for collection of pay orders on a priority.

DPO Zafar Abbas told this correspondent that the housing scheme was a step toward providing own houses to police employees in the housing colony located near the city. He claimed that neither any law nor any regulation barred the formation of police welfare society and provision of basic facilities to them. It was a right step for the well being and welfare of the police, and those who termed it a scam were in fact anti-police circles who did not believe in the prosperity and welfare of the police. He further claimed that no hanky-panky and financial bungling would be allowed in the welfare oriented projects. He said the time had come when the police bosses should protect their subordinates and provide them with facilities by initiating such projects.

The development inspector of police said 205 plots had been developed in the colony, including 123 of 3.5 marlas, 72 of 5 marlas and 10 plots of 10 marlas. Up to 52 commercial shops of one with 16 plots of different dimensions were also being developed. He told that on the request of police officials the grace period for making payment of the plots had been extended from one and-a-half year to two and-a-half years.

He conceded that the housing scheme lacked the basic infrastructure, but added that tenders had been called for the provision of basic facilities. As soon as advance payments were received, the same would be utilized for development. He said forms were being distributed at police station level and would be collected within a fortnight with 20 per cent advance. However, neither was there any stamp receipts on amounts being collected nor any income tax deduction was being made.

Commenting on this housing scheme, a senior citizen said ultimately the people would suffer, as the police functionaries had no extra resources to generate money for making payment of the plots.

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Planning Commission to monitor progress of projects


The following is the edited text of Dawn Dialogue with Federal Finance Minister Shaukat Aziz:

Question: Every government has been talking about higher PSDP allocations and budgetary focus on new areas like housing, agriculture, SMEs, etc. All these sectors have been here all along. There have been PSDPs before but no implementation. The funds are seldom utilized to the full.

Answer: Yes. Implementation is a big problem. Now we have decided to convene meetings of the National Economic Council twice a year. I am proposing to the prime minister that the NEC should continue for two days, one day for monitoring and the second for reallocation. On the first day, status reports based on physical checking by the planning commission should be reviewed and on the second day reallocations should be made so that if one ministry is unable to take up the project, the money could be transferred to another. Then there would be quarterly meetings of executive committee of the National Economic Council, starting with September so as to re-gear the line ministries.

Q: How is it possible to do physical checking of projects by the planning commission?

A: They have the capacity. Every senior officer will be responsible for 10-20 projects for physical checking. The problems would be reviewed on a quarterly basis and put on the website so that everybody, including the media could verify them on the spot, in the light of these reports, because this is very crucial. It will be a great help to the government.

Q: What about fund releases?

A: We have decided that 45 per cent of releases could be drawn in July by the ministries for human development. For non- human development, 40 per cent allocations could be drawn but this would be on the basis of reconciliation of previous accounts. The investment ratio has already improved.

Q: The defence budget last year was increased from Rs146 billion to Rs160 billion due to additional cost of deployment and redeployment of troops. But why has it been kept at Rs160 billion this year when troops have been withdrawn and you are talking of peace initiatives?

A: The deployment and redeployment meant an additional cost last year. The basic thing is that the military establishment is very prudent. The Rs160 billion is the minimum possible we have for defence. But if there is need, this can be increased. There is always flexibility in the budget, but you have to appreciate that as a percentage of GDP, the defence expenditure is coming down. We have brought it down even below 3.6 per cent from four per cent. But when there is a question of national sovereignty, we can render any kind of sacrifice for the dignity and security of the country.

Q: Some quarters suggest the PML-Q was deliberately letting the crisis on the LFO continue to avoid tabling the fiscal responsibility law and anti-laundering law before the LFO crisis to center in order to avail parliament as demanded by the donors.

A: Then they are giving too much credit to the PML-Q government. You see, the opposition parties would support us on the fiscal law because that would help the country to achieve sovereignty. We want parliament and the people to know that there should be a limit to borrowing, but a simple majority could increase or decrease that limit.

Q: You said the reduction in duty on luxury cars was a quid pro quo for the market access we were allowed by the EU. Would you like to elaborate?

A: Yes, last year I met EU trade commissioner Pascal Lamy who said their cars were at a disadvantageous position and then he took up the issue with Humayun (commerce minister). But what is wrong with that? How many luxury cars would come, 200-250? Some of these would be European and some cruiser etc., but we would get some revenue.

Q: Punjab has reduced tax on agriculture land holdings. Would not the IMF be unhappy with that?

A: Leave it to us. Punjab has only changed the floor rates. Revenue will remain the same. They (IMF) are concerned with the overall national fiscal deficit only. We have to look at the expense and income of each and every province and see that our consolidated deficit is within our target. Punjab’s total revenue is within the target, only the floor has changed. So long as total revenue is there, leave it to us how we tackle the donors.

Q: You have envisaged a paltry Rs10 billion proceeds from the privatisation programme. Don’t you expect the privatization process to proceed with any degree of speed?

A: No. We expect a lot. The amount is quite a lot. This also includes Rs4 billion income from stock exchange listings of big units like PTCL, PIAC, SSGC and NBP. Pakistan State Oil and Habib Bank Limited will be on the block for sale. If these two are privatized, then we are really happy. The numbers are, however, very conservative but very realistic.

Q: Don’t you think it was the right time to offload more public sector shares as the KSE has become very dynamic and is being regarded currently as one of the best performing bourses of the world instead of just two per cent and 3 per cent shares.

A: Yes, but because the stock exchange listings would be on the basis of green shoe option like we have done earlier with National Bank and some other transactions. We offered five per cent shares and sold 10 per cent in both the cases so that if the response is good from the public, we don’t return the amount but offer more shares.

Q: Don’t you think the donors would object to salary increases?

A: No. They are not concerned with microeconomic management. They are concerned with the overall deficit. But, obviously, it is not that you do this and that and in the end the overall deficit becomes unreasonable. So we had the fiscal space and will be able to deal with them (the increases).

Q: What about the salaries of autonomous organizations and provincial government servants?

A: Obviously, they would also follow. But as I said in the post-budget briefing, they have their own boards and procedures. They would seek approval from their line ministries. Wapda and KESC have their different, higher salary structure. Provincial governments would also increase the salaries of their civil servants. How can they say, No.

Q: How would you react if we said it was a routine budget?

A: You may say whatever you like. But philosophically we were much more stronger this time than ever before. It had an idea. The rationale was that there should be no fiscal problem. There should be no current account problem. We should not derail the reform process. We established our credibility with donors and we have taken them on board. So this is a growth and investment oriented budget, not just a revenue balancing one. And we were confident that we have achieved 4.6 per cent fiscal deficit target and we can achieve four per cent next year.

Q: How was this fiscal deficit target achieved?

A: Because there were no spendings. Now we have to put allocations for timely spendings, then otherwise what good is it if there is no physical progress?

Q: What about the revenue strategy?

A: We believe there should be growth and then stabilization would follow. You cannot have growth unless you have some basic foundations. Now we have to bring an improvement. The whole government strategy of income and revenue is growth. So the whole revenue exercise was to plug the loopholes, broaden the net to increase revenue. Bringing the sales tax rate from 15 to 20 per cent does not impact the taxpayer, because if he is paying 20 per cent he will get back five per cent as rebate. Now, we have further improved the duty and tax remission for export (DTRE). Our aim was to increase private sector investment. We have given a lot of incentives and given a signal to come out of the past and move forward. So it was government policy to create an environment for domestic investment. They look at whether access to credit is available, whether there is corruption or not and if they feel comfortable, then they come forward. And there has been a lot of investment in the textile sector. People can now open L/Cs at seven per cent interest. So it is all psychological. You see there has been no upsurge in countries where they had macroeconomic stability and consistency of policies.

Look at Malaysia. We presented our whole plan to Mohathir Sahib and he had a lot of good comments on that. When people invest in Malaysia, why not in Pakistan? Because they were not sure whether they would be able to take out their dividends and there are many other factors as well, but you have to give confidence to your own domestic investment.

Q: You have increased tax on oilseeds. What about that?

A: No. We replaced 10 per cent duty with 20 per cent sales tax on imported oilseeds to encourage local farmer. So the purpose is to bring the edible oil industry into documentation.

Q: But the local investor has been here all along. Why did he not perform before?

A: The production of local edible oil has already gone up. If there is 15-20 per cent sales tax, it is to encourage them further to increase output. It is not relevant what happened in the past. But now they have to. Our local oil production has increased a lot and the new measure would help both the farmer community and the edible oil industry to increase their production so that they take over the money we are providing to farmers abroad.

Q: You have again allocated Rs53 billion for Wapda and KESC to subsidize these public sector entities. You are talking about reducing the input cost but under the financial improvement plans (FIP) agreed with the IMF, you have promised 6.6 per cent tariff increase next year. What is this?

A: No. This is not true. The power tariff in the medium to long term would come down with additional reliance on gas, availability of water, coming on line of the Ghazi Barotha project and some other hydel projects, the IPPs bulge would also come down from next year, followed by power production from Thar coal. Currently, the production cost also increases because of high furnace oil prices which also increase the IPPs’ production cost. Earlier, the FIP for Wapda was only for one year. The IMF wanted it should be for five years. Now, Wapda has also agreed to reduce line losses by one per cent per annum.

Q: It is said that quality of Thar coal is not good and diplomatic reports also suggest the Chinese company engaged in the project did not have a single success story at home.

A: No. The fact is that Thar coal is not transportable. Electricity can be produced at the mine-mouth and transmitted through wires. We have done due diligence and asked the company to carry out a feasibility study. Coal production is not rocket science and we know how these diplomatic reports are prepared.

Q: Why have power utilities been unable to reduce line losses? Do you suggest 25 per cent line losses would be overcome in 25 years.

A: Wapda has agreed to reduce five per cent losses in the next five years, and, then, 10-15 percent losses are common in the power market around the world. To overcome Wapda pilferage, the administration is doing its job and we have allocated Rs53 billion. The KESC has recently obtained a loan from the ADB to improve the system.

Q: Why is there no progress on power sector privatization?

A: Now, you have to admit that these are all old companies. Their assets were not known. It was a daunting task to separate their assets and accounts. But now they hold their assets and a lot of interest has been generated about the privatization of Faisalabad Electric Supply Company. People in Wapda are now moving. We have even invited EOIs for the Fesco sale, and local people say they would purchase it themselves. The privatization commission is now ready to put it on the block.

Q: The Wapda Act says that no one can hold the office of Chairman for more than five years. The incumbent is completing his five-year tenure in November while he has been given an extension till 2005. How can you do this without amending the act?

A: They are now moving and working for the improvement of the utility. I have not read the Wapda Act but the competent authority can always extend the contract or reappoint a person on contract basis.

Q: Which sectors are the focus of next year’s budget?

A: After growth, stabilization and investment, what next? I think three sectors, agriculture, housing and construction and manufacturing. These three will be our objectives. In agriculture, we have reduced the cost of production because tariff rates have been reduced, the cost of credit has come down, and now we have also asked banks to come in this sector because they have a lot of liquidity.

In the budget, we have made allocations to ensure reliable water because that is the key. Now non-banking financial institutions (NBFIs) can also provide credit to the agriculture sector. Leasing companies have been involved to lease bulldozers and tractors. Earlier, they were in the automobile sector; now they are coming in agriculture so that our farmers can produce for the world market.

Since we don’t know when big dams are to be built, we have increased allocations for lining of canals and water courses, construction of medium-size reservoirs and repair of barrages and the irrigation system both in Punjab and Sindh because farmers can do everything if there is timely availability of water.

But the point is that our farmer has to move into the 21st century. Our farmer has to produce for the world market and for that he has to increase output and value addition. Look at crops, dairy, meat, fishery, and major crops like rice and wheat, preserved fruits, vegetables, there is no sales tax. We have zero rated the tax on import of machinery for packing, cleaning, grading, storage, branding of these products. So the farmer has to focus on value addition. This will increase their price and expand the market. You can install a plant in six months for grading. This will increase the premium. India is packing our rice in Dubai and selling it in many countries. Why can’t our people install a plant here and increase their premium.

You can import palm oil machine from India. There is no restriction, no sales tax, and credit availability is there. So this is now the priority sector.

Now on the housing and construction sector, civil servants can obtain loans from the HBFC according to their income and repayment capacity for 20-year mortgages to build and own their own houses and the government will guarantee repayment and make deductions from their monthly salaries and they can also pay off from the retirement benefits. Central excise duty on cement has been reduced by 25 per cent, central excise duty on wires and electricity cables has been abolished which used to be 10 per cent in the past. This will reduce the cost. The common man can also avail of the tax rebate on mark up up to Rs 500,000 or 40 per cent of the income or whichever is less if he wishes to construct his house through loans from banks and NBFIs.

Our banks did not know about this kind of banking before. We have developed them in this regard during the last one year. They were involved in corporate banking only and were unaware of agriculture credit, SMEs and house building. The gestation period has also been enhanced to 20 years. So our housing and construction sector is heading towards a real boom.

We are also asking the provincial governments to involve the private sector to develop land and sell plots. You may think there would be scandals, but we would not influence (any transactions). This will create movement, create jobs, and promote 30-35 allied industries.

We introduced a formula last year for large-scale manufacturing and medium-enterprises, and now we have expanded it further. Cost of capital has been reduced. We have reduced duty on 259 industrial items, all raw material. The revenue impact is Rs 10 billion, but whole industries are running there. Wherever there are high tariffs, these are paper tariffs. Smuggling is flourishing. This has to be documented. Why not reduce the duty and tariffs and marginalize the smugglers?

In large scale manufacturing, there were a lot of problems relating to refund and sales tax audit. Now we have law that there would be an audit once in a year. The tax-payer will be given seven days to respond to the audit. The audit officer will have to either accept the response or give reasons and then he will be required to issue a certificate stating that audit for such and such period has been conducted. Earlier, every new officer used to conduct audit afresh to harass the taxpayers. Wastages have been quantified. Everything has been codified and quantified by the Export Promotion Bureau. The whole refund has been institutionalized through DTRE. This was their (exporters) longstanding demand.

Now, I would like to come to job creation. Job creation and poverty alleviation are two basic objectives of the government strategy for the next couple of years. This cannot be achieved through ‘chit culture’. We have to expand the sectors, both the public and the private. So in the public sector, implementation and the vigour of the PSDP is very critical to the whole budget to expand the market. This will open opportunities for steel, cement, and labourers, masons, foremen and so on and so forth will get employment. PSDP will provide massive job opportunities. Building of water courses, roads, water reservoirs, repair of irrigation system — these are all labour-intensive sectors. Then, the National Highway Authority is following a massive road programme ... no motorways but linkages. Then there is the Wapda power sector and the railways.

Q: Don’t you think the tax target is too high given past performance?

A: No. We believe this is very realistic. This year collection would be more than Rs 450 billion, adding GDP growth at five and a half per cent, inflation at 3.5 per cent and then 2-3 per cent increase through reforms and plugging the loopholes.

The Dawn interview panel included M. Ziauddin, Khaleeq Kiani, Ihtasham ul Haq and Mubarak Zeb.

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The budget and I


By I. A. Rehman

‘I’ HERE means an ordinary citizen of Pakistan, one who used to be described as the ‘common man’ or ‘man in the street’ or who became the ‘common person’ after scribes in the English language agreed to make a small concession to feminists. Quite remarkable that these expressions have been progressively squeezed out of the public discourse. The common man never really mattered but he often figured in the rhetoric of rulers. Now he is rarely recognized.

This common man started reading the annual budget, of course through newspaper headlines only, many decades ago. In the bad old days, the main budget headline concerned the person at the lowest tier of the social structure. If the price of salt or kerosene oil was reduced or raised by a paisa or a fraction of it, if the railway fare or the cost of the postcard was reduced or increased, that was considered as the most important feature of the budget. And the budget was good if electricity was made affordable for the poor. The privileged among the common men hailed budgetary statements if payscales of state employees or dearness allowances (one can’t remember when the manna of dearness allowance started falling before anaemic clerks) were raised or the taxable income level upped.

The centre-place allowed to the common man in budget speeches had an impact on the subcontinent’s march to freedom. Mr Liaquat Ali Khan was finance minister in the Interim Government of India and he dared to offer some minor concessions to the poor in his budget proposals. The rival party, the Indian National Congress, was appalled and scared. It convinced itself that Mr Liaquat Ali’s party, the Muslim League, posed a threat not only to the integrity of the motherland but also, and more ominously, to the interest of Indian capital that was enjoying a world war windfall. At least that is what the League told the faithful, the most loyal of them being writers of stories, presented as history. Obviously the common man’s concerns were good for party politics in pre-partition days. After independence, the rule had to change, and the common man could easily be cast aside.

That world in which budget-makers sought to make their mark in history through display of concern for me is dead. What I pay for salt or sugar is no longer Mr Shaukat Aziz’s concern. Nor is he bothered if the electricity authority raises its tariff every few weeks or so and can brazen-facedly transfer the amount it cannot recover from a variety of defaulters to the fools who pay their bills regularly. Postal and telephone charges are not the budget-craftsmen’s headache, nor is the supply of dirty and germ- laden water in the tap which I am obliged to substitute with costlier and perhaps equally unsafe water that comes in plastic bottles.

There is no use telling me that things have changed, that the script that obliged the state to guarantee my life, liberty and well-being has been scrapped. I am more concerned with the condition I find myself in than with the causes of my downfall. For me the critical fact is that I am no longer at the centre of things. My pleasure or satisfaction is not required to win kudos from distant patrons. For me the reality is that 40 or 80 years ago I had one genie to shout at if my basic needs were not met. I could go to the house of elected people to reprimand the postal service, or the railways, or the managers of power houses, or distributors of water. Now I have to raise my lament before a brigade of genies, none of them answerable to my representatives, even if they cared to listen to me. And I find myself standing alone before a whole pack of hungry wolves in the arena.

Since I am no longer visible to the finance minister, his budget has nothing for me.

The figures the finance minister rattles off in his budget speech do not address my concerns. He says the overall size of the budget has gone higher than ever. That only means that he and his colleagues around the roulette table have more money to play with, more money to spend on activities they favour and which his predecessors could manage with less. However, the overall size of the budget is exactly equal to what the state expended in the outgoing year. Thus the resources the state expects to have in the new fiscal show no increase over the preceding year. So much for economic revival, but that does not concern me.

I am told that per capita income has gone up. Now, if this has happened despite a fall in my income, the reason must be a hefty increase in the income of the privileged, and the tidings leave me cold.

I am also told that the inflation rate has been reduced to three per cent or so, but I am worried about the shrinking of my purchasing power. I cannot buy the same quantities of mutton or mangoes or peanuts that I could five years ago.

The budget has been described as business friendly. Quite right. Friendly to the business concern the state has become and which has laws to enforce its demands, and friendly to the businesses outside the law, and both unfriendly to the common man or the common person.

A feeling is growing that instead of making my days happier, the annual budget exercise has become a means to overawe me. A rigmarole of figures and high-sounding claims is presented before me to strengthen my bonds of loyalty to the custodians of wealth produced by common people like myself. There is an allocation for defence without any indication as to who is to be defended and against whom. So much for agriculture, but how much of it for the landless tenant or the bonded haris? So much for education, but how much for the imprisoned girls in Dera Ismail Khan or for the Karis-in-waiting in Jacobabad? So much for industry, but how much for the collective bargaining agent dethroned under IRO 2002?

The budget now looks more and more as simply an instrument of coercive governance, fashioned by servants of the state to ensure the prosperity of fellow state servants in their positions. I do recognize my stake in the state, but what about the state’s stake in my well-being? Are we moving towards the ideal of a great state of small people, a rich state of poor subjects?

I suspect there is a design in eschewing any mention of the common man in the budget. Since there is nothing in the budget papers to attract me in relation to my personal battle with hunger and want and joblessness, I will be the least inclined to ascertain how the money the state collects in my name is going to be spent. By the same token, I will bother less and less about how the state is managed. That is how things are planned. The common man has been effectively marginalized. Three cheers for this success, for liberating the state of its people.

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