| 18 February 2004 | Wednesday | 26 Zilhaj 1424 |
D-8 summit
America's tacit admission
The decision by the Pakistan government to opt for swapping its recently launched $500-million five-year fixed rate Eurobond issue to a floating rate is a bold one.
Federal Finance Minister Shaukat Aziz told a press conference in Islamabad on Monday that the process of swapping Eurobond pricing from a fixed to a floating rate has begun and that, hopefully in about a fortnight's time, bids from international finance houses and banks would be received.
The minister said the fixed rate of 6.75 per cent for five-year maturity that Pakistan has got for its Eurobond offer was far better than expected but that the government would look at other options to improve on this.
The proposal to change to a floating rate is one such move through which Pakistan will look at the possibility of bringing down the pricing by a minimum of two per cent.
If it is able to do this, it will result in net savings to the national exchequer. The resulting re-profiling of our external debt will help debt servicing outflows on the one hand and boost the country's financial standing on the other.
Low US interest rates appear to be one of the factors behind Monday's announcement. Pakistan intends to capitalize on this by taking the view that US interest rates will not rise significantly in the foreseeable future.
Comments earlier this week by US Federal Reserve Chairman Alan Greenspan, who doused speculation about an imminent increase in American interest rates, could have gone some way to reinforce this belief. But US interest rates are at rock bottom, and analysts predict that sooner or later these are going to rise.
If this does happen, one would want to see what exit strategy Pakistan has in place for the eventuality. It cannot be over emphasized that the February 2004 Eurobond issue is significant for a number of reasons.
It marks the country's first foray into the international bond market since sanctions were imposed on Islamabad following nuclear tests in May 1998. Pakistan last sold a $300 million global bond in 1997.
This move has been taken against the backdrop of an overall improvement in Pakistan's credit standing and economic performance. The response to the offering is reported to have been very positive and helped promote international investor confidence in the country. However, to continue to attract this kind of investor response, the government needs to sustain performance not only on the economic but also on the political front.
The yield on Pakistan's bond compares closely with Turkey's dollar bond due in 2009. The Turkish bond was launched in November last year with a much higher coupon of 11.75 per cent, and currently yields 6.51 per cent.
It offers a 3.5 per cent pickup over treasuries, compared with 3.7 per cent for Pakistan's bond. While Pakistan's economic fundamentals compare favourably with Turkey, analysts say that the yield differential between the two can be attributed to political risk factors.
The Pakistan government now has to work towards easing some of the concerns in this regard which foreign investors have raised over the past year. If this is not done, all the good work on the economic front in the past few years will not yield the benefits that one could expect.
D-8 summit
One must welcome Prime Minister Zafrullah Khan Jamali's statement that the fourth D-8 summit conference beginning in Teheran today would focus on economic cooperation among member-states.
Established in 1997, D-8 groups eight Muslim countries and has the potential to contribute to the member-states' economic development. However, since its formation, the D-8 has little to show by way of concrete achievements.
Pakistan is also a member of the Economic Cooperation Organization, but the ECO, too, has turned out to be little better than a debating forum.
D-8 and ECO make us recall the fate of the Regional Cooperation for Development which was a smaller forum consisting of Pakistan, Iran and Turkey. However, during the 15 years of its existence, it achieved nothing, even though there was no dearth of solemn commitments and schemes on paper.
D-8 consists of Muslim countries from such diverse geographical regions as South-East Asia, the Middle East and west Africa, and they are not without natural resources, economic infrastructure and scientific manpower.
Their combined population comes to 800 million. Some of them have oil wealth; others have agricultural resources and pools of skilled manpower. What is more, their people are keen to see their Muslim countries come closer for the good of all. However, what seems to be lacking is political will on the part of the leaderships. Somehow, the sentiments expressed and resolutions passed at 8-D summits do not see the light of day.
At the 2001 Cairo summit, the D-8 members decided to fight the adverse effects of globalization and secure loans on better terms. This was the right thing to do because many of its members - Pakistan and Nigeria, for instance - are groaning under huge foreign debts.
They also pledged to harmonize banking procedures, double their trade within five years, and set up - at Bangladesh's behest - a joint shipping framework. Yet, nothing tangible has been achieved so far.
Given the potential they have, the D-8 countries should perhaps set up a mechanism whereby member governments should review the progress made on approved projects before planning for news ones.
America's tacit admission
The US government's decision to annually review the cases of Taliban and Al Qaeda suspects detained at Guantanamo Bay is something that should have come a long time ago.
Releasing a prisoner after holding him without trial for over two years would be considered legally and morally reprehensible in any civilized country, but who will hold Washington accountable for this most blatant breach of international law? The decision vindicates all those who stand for due process of law - even for those suspected of committing acts of war against a country.
Most of the 650 suspects have been in detention for over two years and during much of that time they were not allowed access to lawyers or given the opportunity to defend themselves.
To sustain its double standards, the Pentagon resorted to a disingenuous use of semantics. It invented a new legal term, 'enemy combatant,' and refused to call the detainees prisoners of war since doing that would compel it to uphold the Geneva Conventions.
The report that some Pakistanis at Camp X-ray could be released because they pose no threat to the US or are of no intelligence value is tacit admission of the fact that some of the detainees were either ordinary soldiers or were just caught in the war zone.
America's post-9/11 paranoiac mindset ensured that they be whisked away to far-away Cuba and kept in cages. Defence Secretary Donald Rumsfeld's remarks that his government would keep these people prisoner "as long as necessary" because they were not car thieves or bank robbers "but terrorists detained for acts of war" is designed to hide the Pentagon's embarrassment at having detained so many people for nothing.
The US is now willing to review the cases of the 650 suspects, because Washington seems to have finally come around to admitting that some of those at Guantanamo were innocent all along.