| 02 August 2004 | Monday | 15 Jamadi-us-Saani 1425 |
Devolution is not working
Was Iran linked to Al Qaeda?
Need for new DFI model
Since the invasion of Iraq in April 2003 and now in July-August 2004, it is neither in the interests of the people of Pakistan nor that of Iraq for us to send our troops there as long as US and British troops remain in that country.
Regardless of the banner under which our troops are proposed to be sent and regardless of the terms and conditions under which they will be required to operate, Pakistan should desist from sending either civilian personnel or armed forces to Iraq at this time.
On the face of it, the preceding assertions may appear to be insensitive to the critical needs of a fellow Muslim country, particularly if the present government of Iraq formally requests Pakistan to send our troops.
But it is sometimes necessary to be, so to speak, cruel in order to be kind. While respecting the sincerity that may inspire such a possible request the fact remains that the present government of Iraq is one that has been installed in office by an invasive coalition and does not represent the freely expressed will of the Iraqi people, thus reducing, if not removing altogether, the validity of a possible formal request.
The opinion expressed here has nothing to do with the barbaric, reprehensible slaughter of two innocent Pakistani citizens held hostage by a group of thugs posing as champions of Iraq and Islam.
The killers have attempted to disgrace the sacred name of a great faith that enjoins compassion and kindness and abhors murder. Several months before this latest blot on contemporary Muslim history, and on several occasions on electronic media, this writer has expressed exactly the same view: no troops under any circumstances for Iraq.
Why should one take such a position, particularly when Pakistan is one of the most active and substantial contributors of troops to the peacekeeping contingents of the United Nations around the world? The arguments in favour of abstinence are several.
First, Iraq in 2003-04 is an even more complex and multi-dimensional case than the average and typical situation in which the UN sends in a multinational force to keep the peace.
In countries such as Sierra Leone, Namibia, Haiti, Cambodia, Somalia, East Timor, Bosnia, Kosovo, and other cases, the principal reasons for conflict have been connected with internal implosions within states or conflicts with immediate neighbours.
In the case of Iraq, notwithstanding some other examples in history where hegemonistic and expansionist powers have struck militarily at targets geographically distant from themselves, we have an incidence without precedence in the recent history of the past two or three decades where a single superior power about 8,000 miles distant from the focal point of attack has bulldozed a coalition to lead an invasion in the name of preemption.
Rarely have the factors of religion, economics, politics, history, and military force become so enmeshed with each other and rarely has military action provoked such a powerful protest across the globe, transcending racial, religious, geographical and political divisions, as well as affinities. Iraq is by no means "just another" or "yet another" typical conflict point that requires conventional intervention by the United Nations.
The failure to find a single weapon of mass destruction and also the failure to show a convincing connection between Saddam's government and Al Qaeda remove two of the most fundamental justifications given for creating the mess in Iraq in the first place. And they also expose the belated attempt to use the UN to cover up the naked truth.
These failures alone make the Iraqi case unique. That the Saddam regime was a brutal and repressive entity is undeniable. But, given the fact that states, including the US and UK, are committed to respecting the principle of non-intervention and to requiring specifically worded resolutions by the UN Security Council authorizing military action against a fellow state, and that these fundamental principles were disregarded, knocks the bottom out of the excuses for the invasion and occupation of Iraq.
Second, the continued presence of over 100,000 American troops in Iraq after the so-called "transfer of power" prevents any other contingent of troops in Iraq to achieve credibility as a separate and autonomous force operating under a command independent of the influence of the US government and the US military.
To even speculate that it is possible for the two entities to operate simultaneously on Iraqi soil with the more powerful and the more well-resourced entity - the US forces - being willing to allow the other entity to operate freely is to entertain a sheer fantasy.
In the unlikely event that this does occur, it shall certainly not be seen to be so, either by the eye-witnesses who are the people of Iraq nor by the people of Pakistan nor the people of the world at large. As long as US and British forces remain in Iraq, troops from any other country will be seen as an extension of the present occupation forces.
Sending Pakistani troops while the occupation forces remain in Iraq will be in direct conflict with the views of most Pakistanis. Even if demonstrations and processions in Pakistan against the invasion and occupation have attracted only thousands or hundreds in comparison with the hundreds of thousands in some other countries, the opinion of the vast majority of citizens is predominantly against any form of endorsement of the invasion as also against any alliance with the invaders during their continuing presence in Iraq. Pakistani troops attempting to enforce order at this time will seriously damage our standing in the eyes of the Iraqi people.
With reference to Afghanistan, we are already seen by most people in the Muslim world as having gone far too deep into a relationship with the US which is widely seen as being hostile to the Muslim world. The despatch of Pakistani troops will only worsen the image of Pakistan amongst fellow Muslims across the world.
From the viewpoint of the Iraqi people, the presence of a few thousand Pakistani troops alongside large contingents of troops from other countries acting to protect Iraqis from themselves will be seen as interference in the internal affairs of Iraq.
Far from proving to be a positive and healing factor, the Pakistani presence in this context may deepen the perception of real or imagined Pakistani partnership with anti-Iraqi forces in the past.
Calling for the unilateral withdrawal of American and British troops from Iraq immediately raises the possibility of a dangerous power vacuum that will only lead to further chaos and mayhem.
This possibility requires careful reconsideration in the light of the extraordinary bloodshed and destruction going on under the very noses of the invasion forces.
Can conditions get far worse if the invasion forces leave than what conditions already are? Perhaps for some time they will. That will be a painful price to pay. Yet, in the immediate and medium term, it may be a price worth paying.
Once the occupying forces have left the country, the conditions may actually improve. The popular desire for peace and stability and the recognition by the leaderships of the different indigenous forces and parties of their own responsibility are likely to acquire a compelling force, gradually bringing a new stability and order to Iraq leading to free and fair elections with the assistance and support of the United Nations. It is in that phase alone that Pakistani troops could play a welcome and positive role in Iraq.
Within four weeks of the paper transfer of power, force has been frequently used by the US from the air and on the ground. For instance, in Fallujah on July 28, force was applied targeting places suspected of harbouring "terrorists". Dozens died.
Unknown elements continue to kill and injure hundreds of innocent Iraqis. This kind of action is bound to continue. While troops under a United Nations banner will have relatively limited areas of deployment - to protect UN personnel, offices and activities - it is the US forces that will enjoy access to all parts of Iraq making them the most visible and vital factor identifiable with the presence of "foreigners" in Iraq, rather than the United Nations being seen as the more potent presence.
As regards the proposal to the effect that discussions have been initiated for the possibility of a force comprising troops from friendly Muslim nations to be deployed, this may superficially be better than a United Nations force. But here, too, the same condition applies.
As long as US and British troops remain in Iraq, even a Muslim force will fail to gain credibility and respect as a genuinely independent force free from the covert influence of US and British troops and American policy.
The savage behaviour of a group of Iraqis with fellow Muslims from another country such as Pakistan as evident from the beheading of two Pakistani citizens on July 27, despite appeals by the president and prime minister of Pakistan, is a grim indicator of how little deference will be given to a Muslim force.
To suggest that Pakistani troops should not go to Iraq in the present context and under any conditions is not, by any means, to give in to threats from terrorists or to hostage-taking blackmail.
It is only to suggest that true courage at this time lies in withstanding pressure from whichever source it may come in order to reflect the views and the sentiments of the overwhelming majority of the people in Pakistan who see the original invasion of Iraq as unlawful.
Pakistan's participation in any international peacekeeping effort should only begin once a clear-cut, short, precise timeframe has been set for the exit of all US and British troops from Iraq.
The writer is honorary chairman of the International Institute for Peace and Conflict Resolution and a former minister.
Devolution is not working
It is now generally believed by both supporters and detractors alike that President Musharraf's devolution plan has not only not accomplished the goals it set out to achieve, but has, on the contrary, created so much confusion that it has adversely affected administration in the four provinces.
Its biggest drawback is that it is full of internal contradictions. These have, in fact, left the Local Government Ordinance of 2001 open to various, often conflicting interpretations which have made its implementation exceedingly difficult.
No clear cut boundary lines have been drawn on the playing field, which could delineate the relationship between the mayor known as the nazim and the bureaucratic head of a district who represents the centre, referred to in bureaucratic jargon as the DCO.
And even though the ordinance has officially designated the mayor as the chief executive of the district government, to be assisted by the DCO, the latter has on many an occasion ignored the former and struck out on his own.
How well one remembers that historic speech of August 14, 2000 when the people were led to believe that at last the nation had thrown up a person who was going to take them out of their misery and put the country right.
They watched in a mixture of awe and pleasurable anticipation as a buoyant president in a starched khaki uniform, addressed the nation on television, and gradually unveiled his Local Government Plan. It was his finest hour.
The intention behind the plan, which had been approved in a joint meeting of the National Security Council and the federal cabinet nine days earlier, was, according to him, an attempt to build genuine democratic institutions and 'empower the people at the grassroots level.'
Good, wholesome cliches. The only problem is, they are inflicted on the nation every time a reactionary military government takes over. But in spite of this, the people thought this time things were going to be different.
The main stated objectives of the plan were: political devolution, administrative decentralization and the redistribution of resources to local governments. The basic issue, in the words of the president, was to "empower the impoverished, and to make the people the master of their own destiny."
The speech contained a few more platitudes about wanting to introduce "the essence of democracy" and not sham democracy which promotes the interests of the privileged. Devolution was going to provide the panacea, the grail on the marsh that everybody had been waiting for, "and would change the fate of the country."
Unfortunately, none of this has happened. The rich are still getting richer, the people are still impoverished and in the process the sham democracy which has evolved has turned the military into a fountainhead of wisdom and enlightenment. Worse still, some of the nazims have been doubling as lumberjacks and systematically destroying the environment.
The Local Government Plan is not a new idea. Military dictators in Pakistan have used it to considerable advantage in the past, primarily as a weapon against traditional political adversaries and the well organized civil service, the last vestige of a colonial past.
It has a wonderful psychological appeal to members of the urban proletariat and to those members of the public who are more affluent but still outside the ambit of political party influence. It also conveys the impression that the man at the helm of affairs is trying to replace a system which is corrupt, which hasn't worked and is unworkable.
In essence, it institutes lower tiers of government as a substitute for democratization at the provincial and national levels. In one sense, however, President Musharraf's plan could be regarded as an advancement in administrative rectitude because it promised to vest vast political and administrative authority in the nazims by providing substantial federal and provincial grants to enable them to fulfil their objectives.
What is more, despite its lack of legitimacy, the plan has considerable support from international donors who believe the scheme is actually furthering the cause of democracy and keeping in check military adventurism.
As a consequence, the main effect of local government has been to undermine federalism by circumventing constitutional provisions for provincial, political, administrative and fiscal autonomy.
Though the plan demonstrates the democratic credentials of a regime to audiences abroad, and especially to the international media, an important fallout of the move is that it depoliticizes governance and develops and sets in place a new political elite to challenge and undermine the authority of elected members of the opposition.
If one takes a cold hard look at the plan, one must come to the inescapable conclusion that, instead of strengthening local control and accountability, it has undercut the established political parties and siphoned off power from the provinces while doing little to minimize corruption or establish clear accountability at a local level. Instead of enhancing democracy, the reforms ushered in by President Musharraf have, in fact, strengthened and consolidated military rule.
The plan initially promised substantial autonomy for elected local bodies. And despite the rhetoric from Islamabad about empowering the local officials to put things right, local governments have only nominal powers.
It is not clear if President Musharraf realizes the irony, but there is a huge contradiction in the dispensation of power. Devolution from the centre directly to the local levels, negates the very concept of decentralization, because Pakistan's principal federating units, its four provinces, have been completely bypassed.
Military dictators usually have a loathing for politicians who they believe are responsible for the mess this country finds itself in, and there is every possibility, that like Ayub Khan, President Musharraf's primary intention when he came to power, was to lay the foundations of a genuine local democracy.
But things haven't worked out quite the way they should have. It's not just the PPP and the MMA that have proved to be a nuisance, his own plan has generated considerable friction between various levels of government and low domestic acceptance is undermining its long-term prospects.
The general conception nevertheless remains that the main rationale for devolution was the legitimacy and survival of the regime, and that the local governments were installed to create a pliable political elite which could be manipulated to ensure that the military's grip in local politics is strengthened.
How else can one explain why district nazims used public funds and other state resources to stage pro-Musharraf rallies during the presidential referendum in April 2002 and to support the parliamentary candidates of the King's party in the 2002 national elections.
The local government experiment has been closely observed by public sector organizations in Europe and Asia. But the most incisive and comprehensive report on the subject is the one prepared by the International Crisis Group and released on March 22.
There is evidence of deep investigative research and scholarship. The volume is bristling with analyses and ideas which if adopted might be able to put the derailed wagon back on the rails.
ICG in its executive summary has made a number of recommendations to the government of Pakistan and to the international financial institutions and key donor governments which, if implemented, would certainly make the plan meaningful and workable.
If nothing else it might ensure government elections are held on a party basis, with direct polls for district officials, and that the centre refrains from imposing political discipline on local officials and misusing them for political ends such as partisan electioneering. It would, at least, be a beginning.
Was Iran linked to Al Qaeda?
Did Iran help Al Qaeda stage the Sept 11 attacks on the United States? Perhaps, suggested the US 9/11 commission which claimed Iran allowed eight Al Qaeda future aeroplane hijackers to pass through Iran from Afghanistan between seven and 11 months before the attacks on America.
Unnamed senior Bush administration officials also claim Iran proposed collaborating with Al Qaeda in 2000, but was rejected by Osama bin Laden. "Maybe we attacked the wrong country," one of the dimmer lights in Congress ruefully observed.
There has been no evidence produced that Iran knew of the 9/11 attacks or assisted them. In fact, the Bush administration has still never produced the White Paper promised by Colin Powell in late 2001 proving Osama bin Laden and Al Qaeda were behind 9/11.
Why would Iran, knowing it was in Bush's gunsights, join in a monstrous terrorist attack that, if linked to Tehran, could have brought US nuclear retaliation?
This writer has long predicted the Bush administration would orchestrate a pre-election crisis over Iran designed to whip up patriotic fervour in the US and distract public and media attention from the Iraq fiasco. The growing clamour over Iran's nuclear intentions, with rumblings about future US-Israeli air strikes against Iran's reactors, are part of this manufactured crisis.
Remember, these latest fevered claims about Iran come from the same "reliable intelligence sources" and neo-conservative hawks that insisted Iraq had a vast arsenal of weapons of mass destruction that threatened the US, and intimate links to Al Qaeda.
The Iran-Afghan border is a 1,000 kilometre border of wild, broken terrain that is extremely difficult to police. Large numbers of smugglers cross this border on countless hidden trails, bringing hashish into Iran.
The US, with fleets of planes, helicopters and sensors, cannot stop a flood of undocumented Mexicans crossing its own southwestern borders. Why should the poorly equipped Iranians do any better?
Didn't these same 9/11 hijackers also enter the US unchallenged? Of course. They simply slipped unnoticed into Iran and the US. No one knew their intentions. This is the most likely explanation.
Iran does not have a unified government. This nation of 72.5 million is afflicted by feuding factions that have produced a state of political chaos. Iran has certainly been involved in acts of terrorism, notably against Jews in Argentina.
Militants from the intelligence service or Pasdaran (Revolutionary Guards), might have let Al Qaeda mujahideen to slip across the border without Tehran's knowledge.
Far more important, there are two key facts media and government are not telling you. First, Iran and Al Qaeda were bitter enemies. In Afghanistan, Al Qaeda ardently backed the Pushtun-dominated, Sunni Taliban movement, which disliked Shias as heretics and killed large numbers of them.
Shia Iran (and Russia) armed and supported the Taliban's greatest foe, Ahmad Shah Massoud and his Northern Alliance, composed of Dari (a Persian dialect)-speaking Tajiks, Afghan communists, and Shia. Massoud was a long-time collaborator with Soviet/Russian intelligence.
After the Taliban killed a group of Iranian intelligence agents, Iran almost invaded Afghanistan to overthrow the Taliban. Just before 9/11, Al Qaeda assassinated Massoud. Iran quietly aided the US invasion of Afghanistan that overthrew the Taliban, and jailed scores of Al Qaeda members, including one of bin Laden's sons.
Active Iranian cooperation with Al Qaeda seems illogical. Of course, my enemy's enemy is my friend, and collaboration was theoretically possible, but Iran derived no benefit whatever from the 9/11 attacks. Quite the contrary.
Second, the Bush administration and former Clinton officials are trading accusations that the other was responsible for failing to take action against Al Qaeda and ally Taliban prior to 9/11. But what no one admits is that both administrations sent millions in aid to the Taliban until four months before 9/11.
Why? Because CIA was considering using one Taliban and one Al Qaeda as weapons against Iran and, possibly, China, where there was Muslim discontent. This nasty, embarrassing intrigue remains buried.
That's the major reason no action was taken against Taliban and one Al Qaeda before 9/11. No one in Washington dares admit to playing footsie with the devil. Iran is now Washington's latest whipping boy. Those who deceived the US into invading Iraq are at it again with Iran. So caution is advised. -Copyright
Need for new DFI model
A critical question today that has two distinct, sharply contrasting, responses is the need or otherwise, in the changed context of a liberalized, deregulated and more market-oriented financial sector, of the availability of long-term project finance through specialized institutions.
To some even a cursory reference to specialized financial institutions invokes images of the much pilloried and failed Development Finance Institutions (DFIs) of yester years, which provided project funding at concessional interest rates to manufacturing entities that were, by and large, heavily protected from competition.
We are rightly reminded of the patronage extended to politically connected investors through public sector institutions like IDBP, NDFC and, to a lesser extent, PICIC, that, combined with managerial incompetence, weak institutional capacity to assess project risk, bureaucratic and political interference in the functioning of these organizations, corruption and poor governance, contributed to the huge portfolios of non-performing loans, leading eventually to their bankruptcy and closure. The financial sector reforms and greater liberalization of the economy has rendered the old DFI model redundant and obsolete.
They argue that the after the financial sector reforms development of the debt market (with the creation of a market for long-term government debt instruments that would provide the benchmark/reference rate for pricing debt to the private sector - depending on the credit rating of the company wanting to raise funds from the market) would take care of the investment needs of the industrial sector.
In support of their argument they refer to the encouraging response of the market to the debt instruments, in the form of Term Finance Certificates (TFCs), of several private sector entities operating in different sectors and sub-sectors of the economy.
They maintain that there are no easy answers to the apparent reluctance of the existing institutions to fund investment needs of entrepreneurs. They claim that the banks cannot be blamed for being lazy and more risk averse despite a huge stock of liquidity, even though this complaint is to some extent supported by the fact that most banks have much larger portfolios of government securities than required under the State Bank's prudential regulations.
Since overall investment activity is also low key, the entire blame for low funding of investment cannot be laid at the doors of the financial institutions.
However, the opponents of this approach argue that whereas the financial sector reforms were launched in 1991 with pious hopes, the progress on the project finance front has been disappointing, in terms of achievements after 13 years of the reform effort.
Until recently, there has been little new long-term investment, although, admittedly, an important reason for the private sector having been shy, at least since the late nineties, has been the intrusive role and hamhanded approach of the NAB.
They admit that commercial banks cannot be expected to finance risky projects particularly if there is a huge maturity and asset liability risk mismatch. To fund long-term investments would require an adequate quantum of funds of the right mix and maturity.
The issue of the asset liability risk mismatch pertains to the need for long-term funds for large projects whose revenues will start flowing over a longer period while the liabilities of financial institutions, in the shape of deposits, tend to have much shorter maturity periods.
Whereas the bulk of the arguments propounded to warn against a return to the dark era are based on solid theoretical premises, and backed up by adequate evidence, there is also the reality that the hoped for development of the financial systems, especially the one relating to the debt market and related instruments (in terms of debt market depth and instrument liquidity) has not proceeded at the pace hoped for.
This has meant that there is a continuing gap between the need for adequate long-term project finance and the availability of such funds, partly also owing to the lack of human skills within domestic financial institutions (in particular, within the commercial banks) to evaluate projects and associated cash flows.
The core competence required in the financial sector to evaluate project design, business and market risks, and project implementation is sorely missing. Moreover, the fact that, until recently, the prudential regulations also essentially revolved around adequacy of collateral against the funds advanced and did not allow banks and financial institutions to lend against project cash flows only compounded the difficulties of those looking for project finance.
Of course, there are capital markets for raising equity or debt finance. And such markets are better equipped to handle risks (both business and market) and pricing for a whole range of investors trying to raise funds - problems that the old DFIs were unable to grapple with.
But then how can firms access such markets for finance (even if the threshold at the entry level is raised for new players entering the market) if they do not have a minimum size and a track record of performance.
To be able to acquire that minimum size and establish a track record to be able to access capital market means that they must have prior access to finance - a classic dilemma.
Moreover, the standard answer in our case that venture capital will finance start-ups, critical to innovation of new ideas, and thereby development, fails to inform us why the handful of institutions initially established to play such a role have either closed shop or are in a moribund state.
The much extolled successful development experience of the South East Asian countries bears testimony to the role played by development finance institutions in nurturing the industrialization process.
Moreover, similar types of institutions are actively performing such functions in China. They have reasonably successfully financed start-ups and made available funds to some of the successful firms so that their growth is not constrained by lack of resources in these countries.
What lesson can we learn from this experience in creating and injecting some life into similar institutions at home so that they can contribute to industrial development.
In a developing economy like ours plagued by serious structural issues, the debt market can neither satisfy the needs of the large number of small and medium-sized enterprises nor does it have the kind of resources and liquidity (even after the large, almost recurring, inflows of funds from abroad after 9/11) to meet the requirements of large-sized projects requiring diversified portfolios of resources.
Nor can the debt market substitute for comprehensively designed project finance with project evaluations and guidance to entrepreneurs on how to choose from a list of financing packages.
The financial model implemented through DFIs of the past, being flawed, failed. But then, there is an unfulfilled need to promote competition through support for new enterprises.
If banks are reluctant and markets have not acquired the depth or liquidity required to fund such projects (examples of a few, stray, transactions notwithstanding) and given Pakistan's huge investment needs, should we just wait for financial markets to develop and become mature to eventually satisfy such demands?
Hence the plea for a new model to replace the old, obsolete, one that has the right balance of efficiency in managing the risk of the loan portfolios and support to SMEs to enable them to grow. This will require answers to questions on who will own such an institution and manage it, how it will be funded and how it will handle risks.
The writer is a former finance minister of Punjab.