| 22 June 2004 | Tuesday | 03 Jamadi-ul-Awwal 1425 |
Changing horses in midstream
First things first
Elbow room is what matters
Does the budget for the financial year beginning July 1, 2004, signal an economic beginning for Pakistan? Will it take the country on to a high plateau of growth on which it can move for many years - perhaps even decades - to come? Will it lend support to the few sectors in which Pakistan has comparative advantage and have these sectors become the engines that will pull the economy toward new heights?
Will the budget bring relief to the poor and begin to reduce significantly the large pool of poverty Pakistan has collected over the last several years? Will it begin to integrate the Pakistani economy with the global economic system from which it has remained at some distance? Or, to put it differently, will the proposals in the budget allow Pakistan to take advantage of the process of globalization that has been reshaping the world economy for more than a decade? Finally, does the budget set the stage for structural change in the economy so that Pakistan can take full advantage of improved economic relations with India?
"Perhaps" is the answer to all these questions. From my perspective, however, the most important accomplishment of the budget is to indicate continuity in economic policy; to give a clear signal to the markets that for as long as this government is in power it will continue to build on its successes and correct its mistakes.
The absence of such an approach has bedevilled the Pakistani economy ever since the end of the period of Ayub Khan, in fact since 1965 when Pakistan fought a brief war with India.
Now, some 40 years later, economic players in the country can see continuity in policies rather than brace themselves for quick-fire changes that happened every time a new set of leaders took office in Islamabad. Markets hate uncertainty and uncertainty, is what the series of Pakistani leaders provided to them over the last 40 years.
If there is a theme that runs though the 2004-05 budget, it is to bring growth back to Pakistan on a sustainable basis and to have the poorer segments of the population benefit from economic expansion.
A sub-theme is to enhance the performance of the sectors that can lead the economy towards robust performance. Are there some missed opportunities in the budget proposals? The answer is yes and I will identify a couple of them later in this article.
Finance Minister Shaukat Aziz has every reason to be pleased with all that the economy achieved in the year 2003-2004. The estimated growth in GDP was said to be 6.4 per cent, considerably higher than the earlier projections.
Although the budget speech did not present estimates for increase in income per head of the population, the estimated growth rate implies that average income for the Pakistani citizens increased by an impressive four per cent.
This is the first time in decades that Pakistan has breached the four per cent mark in per capita income increase. This should signal the arrival of the period in which the incidence of poverty should begin to decline.
Whether that would actually happen depends not only on the pace of growth in the economy's output. An important determinant of such an outcome is what development thinkers and practitioners call the quality of growth.
Economic growth is of good quality when a significant amount of incremental income is delivered into the hands of the poor and the lower middle classes. Growth reduces poverty only when the distribution of income in the country is relatively equitable. This, unfortunately, is not the case in Pakistan.
For several years now, income equality has been increasing. This means that the "trickle down effect" would not work with as much efficiency as would be the case if the distribution of income was fairly even.
What can we say about the proposals in the budget with respect to this aspect of the country's economic situation? Will the proposals presented in the budget improve the distribution of income? I will attempt to answer these questions in a later column.
Let me for the moment go back to the estimated rate of growth and how this was achieved in the recently concluded financial year. Unlike 2002-03, when the economy expanded by 5.4 per cent, agriculture this year was not the driving force.
Last year, the sector performed exceptionally well in part because of good weather but in part also because of the recovery from three years of poor performance. That performance was largely the consequence of an extended period of drought the likes of which Pakistan had not seen for many years.
This year, output of agriculture increased by a paltry 2.6 per cent, not much more than the increase in population. The poor performance of agriculture was attributed to weather by the finance minister. But that can only be partly true.
Some of the reason for this is the rapid and ongoing deterioration of the country's irrigation system. For Pakistan, dependent as it is on irrigation, weather should be less of a factor in such sharp swings in total output than was the case in the last two years.
To get agriculture to produce without too much volatility, it must become immune to changes in weather. That should be the case for Pakistan which has the largest contiguous irrigated area in the world.
In fact, much of Pakistan's agricultural output should come from the lands that have access to irrigation and not from those that are dependent on rainfall. That the barani areas still play an important part in the sector's total output is an indication that the irrigation system, as it is, is not performing to its full potential.
The restoration of the system and making improvements where they are needed should be one of the most important priorities in the government's plan. This will require a well thought out strategic plan of the type put together in the early 1960s which led to the Indus Water Replacement Works.
That was the last time the government looked at the irrigation sector in a systematic and strategic way. The budget could have focused on this aspect of growth as well.
The finance minister drew considerable satisfaction from the fact that manufacturing rebounded significantly in 2003-04; its output increased by a whopping 17.1 per cent compared to last year.
This is encouraging; what is less encouraging is that most of the increases came from the industries producing consumer goods rather than providing inputs for investment. Thus the output of air conditioners increased by 189 per cent, that of refrigerators by 69 per cent, of cars and jeeps by 64 per cent, motorcycles by 71 per cent.
These statistics suggest that consumption rather than investment was the main push behind economic growth. The sharp increase in the value of imports, to $15 billion compared to exports of $12.5 billion may also be an indication that much of the goods manufactured for consumption had a very high import content.
That is certainly the case for items such as air conditioners, refrigerators, cars and motorcycles. The finance minister's choice of the growth sectors includes all the areas from which sustainable increases in output can be generated.
He is also correct in emphasizing that the development of these sectors cannot be done by the government alone and that much of the investment will have to come from the private sector. Nonetheless, the government will need to create the environment which promotes the interest of private investors in getting involved in these sectors.
I have already commented on the need for putting together a comprehensive programme aimed at rehabilitating and improving irrigation. Similar initiatives will be required for the other sectors designated as the engines of growth.
At least one of them is dependent on knowledge accumulation which in turn will depend upon the establishment of institutions that can provide skills and training to Pakistan's large and young population.
For some time now I have been emphasizing that policymakers in Islamabad should not treat Pakistan's large population as a burden but as an economic asset which can provide high economic and social returns to the economy.
The budget appears to recognize this and puts emphasis on creating a workable partnership between the public and private sectors that would help with knowledge accumulation.
What the budget does not do - or perhaps leaves it to some other parts of the administration such as the commission on higher education headed by Dr. Atta ur Rahman - is to identify the precise areas where Pakistan would become an important contributor of skills to the global economy.
This would require a concerted effort aimed at the development of the country's human resource. Once again, I would urge the government to come up with a well-defined strategy and plan for institutional development to make Pakistan use the window of opportunity made available by what I have in some earlier articles called "demographic asymmetry."
Rather than spend time and effort on contemplating how to inflict harm on the West in general and America in particular, the Pakistani youth should be motivated to acquire skills and training that would turn them into good global citizens.
This is the right time for the planners and strategic thinkers in Islamabad to take a good look at the skill shortages the world now faces and come up with a plan on how Pakistan could meet these.
There are a number of areas where Pakistan already has a comparative advantage - an educational system that is producing a large number of physicians and health workers, a rapidly expanding sector of business education that can provide the world with the skills it needs but does not have in sufficiently large numbers, a developing entertainment industry and a growing telecommunications service industry.
There are other areas as well where similar skill development capacity exists. What can be done to develop all of these? The finance minister talked about the need to reach out to the large Pakistani diasporas, to get help to accelerate economic development at home.
One area where the expatriate community could help is to establish institutions of higher and advanced learning in partnership with the educational entrepreneurs at home and with the government.
The members of the diasporas - in particular those living in the United States - have the skills and the resources to undertake this kind of effort. Some of this is being done already but in an ad hoc manner.
What is required is a well thought out plan to provide incentives to the members of the diasporas for collaborating with the government and local entrepreneurs to set up a series of institutions that could help to develop Pakistan's young population into a real economic asset.
One thing the budget does not do as much as it should have is to empower the newly established local governments to undertake serious, community based development. Instead, it expands the programme managed by the members of the various legislative assemblies.
Simply put, that is a mistake. The job of the legislators is to legislate and oversee the working of the executive branch of the government. It is not to directly participate in the economic development of the constituencies to which they belong and which have elected them.
That is the task of the local government institutions. It is not a good strategy, economically or politically, to confuse these two functions. This is the one aspect of the budget with which I have a real problem.
Changing horses in midstream
One fine morning, about a fortnight ago, the nation learned that Sindh has a new chief minister. For the historian, it marked the twentieth time a chief minister had taken the oath, since colonial officers in tan helmets had given the nod and the province was separated from Bombay in 1935.
For the cynic, however, it represented the continuation of the feudal satrapy and the replacement of one landlord with another. Foreigners, accustomed to witnessing countryside demonstrations and protests which often led to widespread violence, as occurred against Marcos and Suharto, before a head of state or province is forced to step down, were naturally a little intrigued by what could best be described as a rare rejection syndrome, especially when the Sindh assembly had not expressed any lack of trust in the leadership of Sardar Ali Mohammed Maher.
They found it incomprehensible that the same people who a day earlier continued to repose their faith and trust in Maher, suddenly threw in their lot behind Arbab Ghulam Rahim.
There was no discussion in the cafeteria, no debate, no arguments for or against, no closed session admonishments with party whips. It was what has come to be known in political circles as a drawing room decision, taken possibly between the coffee and the cigars.
The media has thrown up lots of reasons for the replacement. High up on the imaginary charge-sheet was Maher's regular selection of dinner guests, who apparently still owe allegiance to the self exiled 'Daughter of the East', and have not yet defected to the other side.
His differences with the governor, though hotly denied at regular intervals, must have contributed to the denouement. But somewhere at the end of the litany of complaints, it was suggested with a touch of impish humour, that the removal might have had something to do with the politically motivated crime wave that had been unleashed in Karachi.
Anyway, Maher is now a back bencher and better off than he has ever been before. But critics are still asking the question why he had been appointed in the first place.
One wishes the new chief minister the best of British luck, for he certainly needs it. But it is doubtful that Arbab Rahim will be able to cut any ice and to exert a distinctive voice.
The problems of the province are too complex and too obtuse, and are complicated by the intrusion of issues that have their origin elsewhere in the country, but seek their resolution in the provincial capital of Sindh.
As Arbab Rahim sits behind the carefully clipped vegetation of the chief minister's house, he will be constantly faced by insuppressible reminders of ethnic and sectarian strife.
Soon after taking over the stewardship of the province he spouted the usual cliches that come so easily to the lips of feudals about looking after the interests of the serfs whose destiny they control.
He also made the usual gestures that newly appointed chief ministers make, like issuing strict directives to government servants to enforce and maintain punctuality.
While a change has been made in Sindh, rumours have been circulating that the president is unhappy with the prime minister and his government, and that the man in battle fatigues, who continues to steer the ship of state on an unchartered ocean, has now started encircling names from a list of 50 probable candidates, inscribed on Chaudhry Shujaat Hussain's clipboard.
The president has reason to be disenchanted with Jamali's government. But unfortunately, it is for the wrong reasons. In spite of all the hype and publicity given to Shaukat Aziz's impressive figures of economic achievements, which are supposed to add immeasurably to life's rich pageant, there has been no progress in the real sense of the term.
Foreign exchange reserves of billions of dollars which look most impressive on paper, have not stopped the desperate housewife in Karachi's buffer zone from killing her two daughters and herself because her husband has been unemployed for two years.
No laws have been enacted for the protection of women. The controversial Hudood Ordinances, gifted to the nation by Zia-ul-Haq, the high priest of obscurantism and political repression, still keeps over 300 women in the jails in Karachi and Larkana, for alleged crimes they have no knowledge of committing.
Jirgas continue to be held in defiance of the ruling of the high court which bans such unconstitutional kangaroo courts. Women are still killed in the name of honour, while rural policemen who collectively perpetuate the retrogressive feudal system turn a blind eye to the atrocities being committed.
In the presentation of the budget it was pointed out that poverty had been reduced, and an actual percentage had been quoted. It has always been a mystery to this writer how government economists can come up with this sort of dribble when the population is still rising at an alarming rate and M2, money in circulation, is still over 125 per cent of the GNP.
But the point is, would substituting Zafarullah Khan Jamali with another rightwing troubadour from the same or another retrogressive stable, really make any difference? Jamali decided soon after inhaling the heady air of the Margalla Hills, that he would play safe and not do the Junejo on Pervez Musharraf, and that the best way to hang on to his shaky seat was to ensure that nobody in his government rocked the boat.
And so he publicly refers to the president as his boss, and in parleys where important issues are discussed, the president co-chairs the meetings, destroying whatever belief there might have been that Jamali enjoys the role of primus inter pares.
It does remind one of that delightful quotation of Lord Beaverbrook when commenting on the performance of Asquith... " uninformed indolence and general indifference."
The common perception is that the whole political menagerie has been shaped and fashioned by a soldier who, while his honesty, integrity and sincerity of purpose have never been questioned, needed a system to perpetuate and prolong his rule and to protect his flanks.
To ensure this, the Constitution had to be given a severe mauling, with retrogressive elements in both the MMA and the government supporting changes that have given the army a permanent place in the political future of the country.
People like Jamali and Maher, and the nazims who cut down rows of trees, because they believe they poison the environment, and quietly sell the timber in Haji camp, are the product, rather than the cause or symptom of an iniquitous system, and are dispensable.
But unless the president overhauls the political system at the grass roots level and at the next election replaces feudal elements with their quaint mediaeval ideas of right and wrong, with people who not only believe in socialist values, progress and justice, but are in a position to do something for their fellow workers, the country will continue to slide downhill, in spite of what George Bush and Colin Powell might say about Pakistan winning the war on terrorism.
First things first
There is a pre-build-up to the budget, the budget itself, and a post-analysis. That's the way it's always been. The budget always brings back memories when I was a working journalist. Those were relatively simpler days and we had a pretty good idea how we would handle the budget.
We were certain that the budget would be described as "the common man's budget." There would be a barrage of statements from members of the business community and other public figures who would hail the budget with slight reservations on some specifics. The common man whose budget it was said nothing.
There was no television in those days and I cannot remember if the budget speech was carried by radio but we waited for the teleprinter to start clattering. The "hailers" would sometimes arrive before the budget speech was completed.
These were the days of Muhammad Ali Bogra. He had been our ambassador in Washington and had arrived, gift-wrapped, to become prime minister. Not many of us at the coffee-house had even heard of him. But he endeared himself to us by his folksy optimism, everything was "hunky-dory."
Sometimes he would get his folksiness tangled up. Intending to say that Pakistan had turned the corner about one particular budget, he said instead that Pakistan was "round the bend."
The disadvantages of growing old greatly outweighs the wisdom that is supposed to come with advancing years but sometimes one is cheered up by remembering some happy times even on something as serious us the budget.
This is not a column about the budget but more generally about this and that though I would not include power-failures among the sundries. There obviously are some technical constraints that seem impossible to overcome.
But power-failures are not new and seem to get worse with every passing day. What we have is an immovable object pitted against an overwhelming force. The demand seems to be increasing while the supply is unable to keep up.
The demand cannot be reduced and the supply cannot be increased for reasons not known to mere mortals. Mr. Micawber had it right. When expenditure exceeds income, the result is misery.
But what might happen if this misery was to be shared alike? Men and women of power and wealth have been able to instal generators and the impact of power-failures is hardly felt.
I have this gut-instinct that the situation would greatly improve if these people of power were denied the use of generators and were made to endure what the ordinary people have to in this simmering heat, if they too were given their share of hell. There is nothing like personal experience to goad one into finding solutions.
Somewhere in the late 1950s a very senior bureaucrat, he belonged to the elite ICS cadre, told me that Karachi's infrastructure was so fragile that it would collapse by 1970.
This was well before the influx of hundreds of thousands of people which would lead to a population explosion. I pointed out to him, as politely as possible that he was a cog in the governing wheel and there seemed to be no point in telling me as I was among the countless governed.
He was half-right and Karachi's infrastructure has been sustained (as opposed to maintained) by patch-work repairs. It has been on a life-support system. The reasons for systematic and relentless power outages are not state secrets.
Everyone knows that the 'system' is not only obsolete but on its last legs. It needs to be replaced. I remember being in Manila once when Marcos was at the height of his power. It was an open secret that the political system was a kleptocracy and even the side-walks were owned by his family.
Yet he seemed popular. I asked a local to explain his popularity. He told me that before he had come to power, Manila was one of the most dangerous cities in the world and also that it was notorious for its most erratic power-failures.
Marcos addressed both problems head-on. There would be zero-tolerance as far as crime was concerned and he simply set a deadline for the electricity system to be made functional and do whatever was necessary to get it working smoothly. He would accept no excuses. The streets were made safe and there were no power failures.
I am not a technical man and, therefore, am in no position to offer any solutions. I have no idea why there are power-failures as a matter of routine. What I do know is that they cause untold hardships to millions of people. Yet there seems to be no let-up.
Is it a matter of money, that a complete overhaul of KESC would entail some heavy investment? If so, we should find the money. And the money can easily be found by cutting out wasteful expenditure.
The city loses billions of rupees through power-failures. If the hardship of the people is not a good enough reason, then the financial loss should be. We have all had a go at trying to define what good governance should be.
We all end up at dizzy heights. Good governance is a connection between the people and the administration, good governance is when an administration is receptive to public opinion.
Newspapers are filled with stories, most of them harrowing, about the sufferings of the people who are enduring sleepless nights because of power failures. The administration cannot claim to be unaware. I refuse to believe that there are no solutions.
The same applies to the transport system. Why can't Karachi get a transport system that is reliable and comfortable? We can have an airline that is. Is running a bus system more complex? From the outset, we appear to have got our priority-system upside down and somehow we lack the will to correct it.
Even the poorest household is run on a system of first things first and it starts with basic needs. There is no reason why an administration cannot adopt the same principles.
Elbow room is what matters
Everyone should be in power. How else would we recognize politicians? You can never really recognize them when they are in opposition, sprawled across the moral high ground.
It is only when they are in high office that you discover what they really intend to do. Opposition is the nesting spot of good intentions. Power is where, bit by bit, like a jigsaw puzzle coming into place, the real picture begins to emerge.
Rahul Gandhi, for instance, never suggested before the general elections that the first thing he would want, if in power, would be the dismissal of the Mulayam Singh Yadav government in Uttar Pradesh.
The break between the Congress and the Samajwadi Party did not come after the results; Congress leaders have been bitterly critical of Mulayam Singh for years. There is nothing wrong with that.
They have every right to attack, and attempt to displace, the party that has usurped their space in the largest state since 1989. Fifteen years is a long time on the margins.
The Congress also knows that it will never be able to make that substantial leap forward in the Lok Sabha until it can resurrect in Uttar Pradesh and Bihar. It was V.P. Singh, directly, and the BJP, indirectly, who enabled Mulayam Singh to capture UP and Laloo Prasad Yadav take Bihar.
Both the Yadavs have used power brilliantly to protect their electoral base, which mainly consists of an alliance between the backward and the Muslims. The Yadavs are with them because both are Yadavs and look after their own.
Other backward castes joined them because of the implementation of the Mandal Commission report. The Muslims, who are emotive, reinforced Mulayam after he protected the Babri Masjid as chief minister from "kar sevaks" during one of the many peaks of the Ram Mandir movement: they still recall his vow that not a bird would be able to fly over the mosque as long as he was chief minister.
Laloo got the Muslim vote when he arrested Lal Krishna Advani during the latter's rathyatra. The Congress, conversely, lost the Backwards because of its wobble on Mandal; and the Muslims because it presided over the construction of the foundation of the proposed temple to Lord Ram and the destruction of the mosque in 1992.
As the last elections have proved, neither vote has returned to the Congress. In that vast catchment area of the Ganga and Jamuna, in the three states from the Himalayas in Uttar Pradesh to the Bay of Bengal via Bihar, the Congress has got less than 20 seats in this parliament.
It is perfectly logical therefore for Rahul Gandhi to confront Mulayam Singh Yadav. Presumably he can take on only one Yadav at a time; Laloo's turn will come later. (How much later we cannot say, but opportunities in politics often appear with dramatic suddenness.)
But democratic political conflict is one thing. Demanding the dismissal of an elected government, and that too within a time limit of a month, is quite another. The reason offered is not too impressive.
There is no evidence that "law and order" in Uttar Pradesh is any worse than it is in Bihar. But "law and order" was the favourite excuse of the Congress when it was powerful enough to dismiss chief ministers it did not like.
One sign of the growing maturity of Indian democracy is that Union governments no longer impose president's rule in states when it suits them politically to do so. Any suggestion of this kind revives the nightmares of the 1960s and 1970s. That is one nightmare that should keep the Left awake.
The Left, which effectively controls the majority that the present government commands, will check the Congress. But Rahul Gandhi did not do himself a favour by raising the spectre.
A little forethought would have suggested that, even by the laws of pragmatism, it is always bad practice to raise a dubious demand that cannot be implemented. You get the blame without getting the benefit.
Moreover, Mulayam Singh and his lieutenant Amar Singh, have improved their mandate in Uttar Pradesh. It has been a long while since anyone has won 37 seats in the state.
The BJP was routed in UP, but it was not the Congress which defeated its nemesis. The Samajwadi Party even picked up safe Congress seats like Sultanpur, next door to Amethi, and represented by Gandhi family loyalist Satish Sharma.
The Congress of course has every right to withdraw support from the Mulayam Singh government in Lucknow, and if that can start a process by which the government collapses, so be it. But arbitrary dismissal would be undemocratic.
Is this the first taste of the Congress' return to power? Every prime minister leaves the stamp of his personal convictions and attitudes on the culture of his government.
Jawaharlal Nehru was the finest of them all. If Mahatma Gandhi led the generation that gave us our freedom, Nehru was the undisputed hero of the generation which proved that democracy was a non-negotiable foundation on which modern India would build its future.
Nehru lived in an age when "Third World" leaders across the world exploited the first excuse they found to become dictators. The world would not have been surprised if Nehru had used his stature and credibility to do the same. The thought never occurred to him.
As early as in the 1930s he mocked himself for any "Caesarean" temptations. Neither success, which was his fortune through the 1950s, nor failure, which was his destiny after the war in 1962, made him waver from an unshakeable commitment to democratic behaviour.
His cabinet was one of equals, even when others were not equal to him. His chief ministers were colleagues, not servants. No one was "his man"; they were all partymen who had arrived where they had because of their individual stature. There was no insecurity in the Congress at that time.
The pattern began to change in the muddied politics after the thin Congress victory in 1967 at the centre, and the wholesale defeat of the Congress in the states the same year.
The stupidity of the non-Congress parties helped and to an extent legitimized intervention by Delhi in state affairs. Mrs Gandhi's brilliant success in the 1971 general elections changed equations within the ruling Congress; the leader was now not the first of equals, but a supreme entity whose judgment was never questioned, and who was fed what she wanted to hear.
This led to the tragedy of the emergency, and it is to Indira Gandhi's credit that she understood that she had made a mistake and restored democracy to the country. However, the culture of power within the Congress had been affected fundamentally; and while the Congress functioned as a family, it did not function as a democratic family. This was true even after the tragic assassination of Rajiv Gandhi removed the family from the apex.
P.V. Narasimha Rao was as authoritarian as Indira Gandhi had ever been, with this difference that while Indira Gandhi knew how to win elections, Rao did not. Which model is Sonia Gandhi going to adopt: that of Jawaharlal Nehru, or of Indira Gandhi and Narasimha Rao? One can safely assert, without fear of contradiction, that if Dr Manmohan Singh had been the only leader of the Congress government, he would have emulated Nehru.
The fact is that Manmohan Singh is only a prime minister while Sonia Gandhi is in power, and it is the model that she follows that will define the culture of the party. She has been leader of the Congress for six years, and in power for less than six weeks.
This is not enough time to define a pattern. But early signs suggest that her model is Indira Gandhi rather than Nehru.People are either "with us" or "against us", with little leeway provided for alternative space.
Once again, this is the privilege of the Congress and its leadership. If that is the way they want to run the party and government, they have every right to do so. The snag is that such an attitude works if, like Indira Gandhi, you can win a simple majority by yourself.
It does not work in alliance politics, where elbow room has to be clearly defined. Elbows seem to have but a single edge. In politics they can be double-edged. When you want to elbow an enemy in the face, you have to be careful that you do not hit an ally in the ribs.
Opposition is life in a free field, and everyone can run at arm's length from one another. Governance is taking positions in controlled space. You are recognized not by the smile on your face, but by the nudge in your elbow.
The writer is editor-in-chief, Asian Age, New Delhi.