Democratic consensus needed on NFC

President Gen Pervez Musharraf has suggested a new resource distribution formula between the federation and the provinces and among the provinces for the next five years.

Answering questions at his Thursday's interaction with media, the president said he wanted a 50:50 shares for the provinces and the federation and rejected Sindh government position of making revenue generation as one of the three or four criteria for resource distribution. However, he hinted at "accommodating maximum demands of the provinces" in the future formula of the National Finance Commission (NFC). The NFC constituted in 2001 has failed to give a consensus award with the federal government refusing to offer more than 48 per cent of the federal tax pool to the provinces.

The other reason for failure of the NFC was Punjab's insistence on retaining population as the only basis of resource distribution and a complete rejection of multiple criteria demanded by other provinces.

A random interaction with some politicians belonging to the ruling coalition and bureaucrats in the secretariat on Friday evoked a rather lukewarm response. No-one was ready to offer "on the record" any comment on the president's proposed formula for the future NFC award.

The NFC, in accordance with the spirit of the provisions of the 1973 Constitution, should work independently, without any interference from any quarter. But it is a fact that none of the NFCs from 1973 till 1997 were independent.

"Times have now changed," remarked an official who pointed out that Abdul Karim Lodhi, a retired bureaucrat who was Sindh's private representative on the NFC "resigned in protest because the NFC was not working independently."

A World Bank report has pointed out that the NFC formula so far have never been 'consensual' as required by the constitution. But it was mainly because of the "federation prevailing over the NFC". The 1997 NFC award which virtually crippled Sindh and Balochistan financially is a classic example.

By the same token, even if the new NFC formula stipulates 50 per cent provincial share in the tax pool and the southern provinces of Sindh and Balochistan manage to get some concession, it will be taken as an 'authoritarian' rather than a democratic consensus.

President Musharraf's proposed outlines for the future NFC formula, according to the official, has in fact put in awkward position the finance ministers of Sindh and Balochistan and the private nominees of the two provinces on the NFC.

The NFC failed to come out with a consensus award in 2002 even when it had been decided that an annual Rs 20 billion subvention fund would be instituted to provide additional funds to Sindh, Balochistan and the NWFP.

It was decided to distribute funds among the provinces on the basis of population and to consider multiple criteria for the next award. The NFC collapsed owing to sharp differences over how 2.5 per cent of the GST should be distributed - on the basis of population or on the basis of collection.

After the 2002 elections the NFC negotiations again could not proceed because Islamabad offered only 48 per cent of the tax pool. There was no consensus on a formula for distribution of about Rs 32 billion collected as 2.5 per cent of the GST.

Since then there has been a deadlock which resulted in the protest resignation of Mr Lodhi in December 2004. In his resignation letter Mr Lodhi called the NFC 'hand-maiden' of the federal government.

Recent reports suggest that the Sindh government has suggested to Islamabad the names of Mr Salik Nazir, a former chief secretary, and Mr Nazar Sheikh, a former finance secretary, as the province's private representative after Mr R.A. Akhund reportedly expressed his inability to take up the assignment.

Another former finance secretary, Mr A.W. Kazi, is also said to have been approached but he too expressed his inability. The federal government is expected to endorse one of the two names and notify it when the NFC meeting is called.

Lunch date with a duke

I went for lunch with the Duke of York this week. Well, to be precise, me and a hundred others. Prince Andrew, the second son of England's Queen Elizabeth, was in Sharjah in his role as the "UK's Ambassador for International Business". His job is to travel the globe meeting the high and mighty (not sure how I got there) and generally promoting British trade.

It never ceases to amaze me that there are still parts of the world which roll out the red carpet for British royalty, and the Gulf countries are amongst them. A whiff of the aristocracy and doors open and so it is that the Duke drops in occasionally, meets the rulers and does a bit of lobbying for British companies.

So, somehow, I found myself in the company of British business people and Sharjah government officials as the prince wandered around shaking hands and having a few words here and there. I am sure that most people wanted to ask him about the inside stories of the wedding fiasco of his elder brother Charles, but they were all too polite for that.

As I said, this event was taking place in Sharjah which is the neighbouring emirate to Dubai. Sharjah is 20 minutes down the road - or a couple of hours if you travel at the wrong time and get caught in the endless traffic queues.

Sharjah is a dormitory town to Dubai. Lots of people live there because of cheaper accommodation and are happy to suffer the commuting hassles. The prince's message - and here, you will be relieved to know, I eventually come to the point of this meandering - is that most business people concentrate on Dubai and tend to forget that the United Arab Emirates consists of seven emirates.

For those of you who have only a hazy idea of the UAE, allow me to explain a few basics (Gulf NRPs and their relatives may skip the next few lines). Apart from Dubai, the UAE is made up of Abu Dhabi (which is the federal capital) and the Northern Emirates, which are Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah.

Dubai, of course, hogs the world spotlight and has no shame in making sure it stays there through amazing developments and endless self-promoting publicity stunts. This week, for instance, it has been staging the Dubai Open Tennis Championships.

A couple of the star players were persuaded - I have no doubt with oodles of cash - to go to the top of the spectacular Burj Al Arab hotel where a tennis court had been laid out (even more cash) on the helipad. There they hit a ball back and forth over the net.

Nothing too strenuous you understand - running backwards too far to reach an overhead shot would have meant tripping over the edge and plunging a few hundred metres into the Gulf waters below.

It was a totally contrived and meaningless encounter but it served (as they say in tennis) the purpose. Pictures and film of the event were transmitted throughout the world and once again the brand of Dubai was everywhere.

Even Abu Dhabi has existed in Dubai's publicity shadow. Abu Dhabi has more than 70 per cent of the UAE's land area and enough oil at present output to keep pumping for another 150 years.

It is probably because of its wealth that, with few exceptions, the entrepreneurial spirit has never really taken off in Abu Dhabi, but I get the sense that things are changing. Following the death, during Ramazan, of Shaikh Zayed, the ruler of Abu Dhabi who had been president of the UAE since its formation in 1971, there have been many changes in government circles.

New ministers have taken office, some of whom seem intent on clearing out the stifling bureaucracy, which has hampered progress. At the same time, there is evidence that many senior figures don't like to see Dubai setting the pace all the time and feel Abu Dhabi should be grabbing a few headlines of its own. And remember, Abu Dhabi, unlike Dubai, has loads of money - there's no limit to what could be achieved. Yes, if I were looking to do business, I would be keeping an eye on Abu Dhabi.

But what of the Northern Emirates? Sharjah has had a property boom thanks to its proximity to Dubai, but it also has a thriving economy of its own making. It has gas fields, which, although modest, provide a useful income, and is home to more than half of the UAE's manufacturing sector, from small workshops to sizeable industries. Its hotels are full, although, again, probably a lot of the trade is Dubai over spill.

Further along the coast is Ajman, the tiniest of the emirates which is enjoying a mini-building boom thanks to (yes, you've guessed it), over spill from Sharjah. And then we come to Umm Al Quwain. Not a great deal has happened here in recent years, so it's not an obvious place to go and make your fortune.

Ras Al Khaimah, the northernmost of the Emirates, is a different story. The Ruler, Shaikh Saqr, came to power in 1948, which probably makes him the world's longest reigning leader.

He is now in his late 80s, but just under a couple of years ago decided to replace his eldest son, who had been crown prince for more than 30 years, with his fourth son, Shaikh Saud.

There were riots and tanks on the streets, but everything calmed down and since then Shaikh Saud has been on a mission to wake up this sleepy emirate. Rarely a day goes by without an announcement about another project, be it tourism, industry or commerce. RAK is still small, but it is definitely aiming to go places and from a business viewpoint is definitely worth watching.

Finally, over the east coast, there is Fujairah, the only emirate lying on the shores of the Indian Ocean with a backdrop of mountains. It has great tourism potential and this week there was an announcement of plans for 30 hotels which, if they go ahead, will transform this friendly place.

And that completes my lightning tour of the United Arab Emirates. Dubai is still the place to be, but it is correct to say that there's a lot going on elsewhere, and in many cases without so much competition. Oh, by the way, I never did actually have lunch with the prince. He had been invited to eat with the Ruler of Sharjah and apparently thought that was a better offer.