THE two-day Pakistan Development Forum in Islamabad last week was marked for unfolding of Pakistan’s ambitious development plans for the near future amidst cautionary notes sounded by the European Union delegates against rising poverty and increasing inflation in the country.

The World Bank officials think that Pakistan is on the right track and should sustain the high economic growth it has been able to achieve and hold down inflation instead of considering double-digit inflation in the circumstances as normal or inevitable.

The theme of the conference, which used to meet in Paris before finalizing the Pakistan budget was “sustaining growth and improving the quality of life” both of which are challenges to the government, said the visiting World Bank vice-president for South Asia Praful Patel.

Prime Minister Shaukat Aziz wants the 7.5-8 per cent growth to be sustained for over two decades — 20 to 25 years. John Wall, World Bank Resident Representative in Pakistan, said the high growth should be maintained for 10 to 15 years for poverty to be eliminated, while Bank’s vice president says the high growth be sustained for five to six years and then its momentum could be carried on.

But the Dutch ambassador to Pakistan, speaking on behalf of the 25-member European Union, said that poverty was on the rise and urged the government to come up with a well thought out plan of action for improvement in key areas. The donors want their aid to produce positive results, particularly when the EU has quadrupled its aid from 15 to 60 million euros.

On the donors part they have assured full support to Pakistan in key areas, beginning with poverty reduction, social sector development and infrastructure development. But they want their aid used well, and in time, and achieve their promised targets. In this regard Praful Patel holds 2007 as the key year and not for political reasons.

The donors have promised full support to enable Pakistan achieve the UN Millennium Development Goals of which the most significant is reducing world poverty by a half by 2015. And Pakistan has declared it will make a success of the millennium goals. Praful Patel has said the World Bank will raise its aid by over 50 per cent to 1.5 billion dollars a year for the next three years. That is a rise from an average annual bank aid of 900 million dollars, and a half of that will be without interest or on highly concessional terms. The three year package is a new feature of World Bank aid against the annual allocation so far, and is very helpful to the aid recipients.

He described the power infrastructure in Pakistan as “terrible” and voiced his satisfaction over the coming privatization of the KESC. He said the heavy line losses in the power sector were due to managerial inefficiency. He said the bank would provide risk guarantees to foreign investors for making investment in the power sector.

The Japanese yen aid to Pakistan has been resumed following the visit of the Japanese Prime Minister Junichiro Koizumi to Islamabad. Japanese yen aid used to be the largest — around 500 million dollars a year — when it was suspended in 1998 following Pakistan’s nuclear explosions. But following the economic problems of Japan, external aid commitments have been reduced considerably. And it is now, to begin with, to give a yen loan equivalent of 164 million dollars for the Lower Chenab Canal and 3.83 billion yen more for the load-despatch system upgradation of the canal.

The prime minister waxed eloquent on the future prospects of Pakistan and said he wanted to make Pakistan a multiple corridor for energy, trade, tourism and transportation. He said that the future growth strategy of Pakistan rested on five pillars. They are water security, energy, infrastructure development, human capital development, and second generation reforms. None of the pillars are new but the need for the projects is being stressed with greater vehemence. These goals are unavoidable.

Pakistani officials presented development projects to be implemented in the near future costing 42 billion dollars. Of that 33 billion dollars is meant for the water sector until 2015 and 12 billion dollars are needed until 2010.

Mr. Patel says “The biggest challenge Pakistan has, in my view, is to maintain stability between today and 2007. Politics aside, if you had eight per cent growth, we believe that five to six years of six to seven per cent growth will put the economy in the irreversible path of high growth.”

Shaukat Aziz spoke of not only poverty reduction but also social exclusion. That is an advanced stage of poverty reduction in Pakistan in which not only the poor are socially excluded but also many illiterates unless they are successful traders. Women suffer from various exclusions and the poor women from infinite indignities.

Patel says that nothing can be said about the increase in poverty until the national poverty survey results come in two to three months. That may show less poverty in the rural areas and more poverty in the urban areas, he surmises.

The World Bank wants the government to decide on the major dams so that it could provide the necessary assistance. The decision on either Kalabagh dam or Bhasha dam is being delayed a great deal. The Technical Committee on water resources headed by Mr A.N.G. Abbasi has not been able to take a decision by April 30, its last deadline and wants more time.

Meanwhile, the government is coming up with a food security plan at a cost of Rs four billion out of which the Asian Development Bank’s contribution will be Rs eight billion. It is a good move, but what matters is how well the stored foodgrains are protected instead of exposing them to severe losses.

Meanwhile, a like-minded or liberal group among the donors attending the PDF has expressed serious concern over the unequal distribution of land in Pakistan, non-implementation of the national minimum wage policy, and non-promotion of rights-based labour market which are essential to reduce poverty and unemployment.

The group comprising Canada, the Netherlands, Norway and Switzerland who are substantial aid givers, has in a common statement raised several other issues regarding Pakistan’s initiatives targeting poverty and unemployment. They include issues of women’s empowerment, exploitative condition of the working poor, leakage of Zakat funds to non-poor sections, and the need for comprehensive monitoring and evaluation mechanisms for accurate date on poverty reduction.

The statement says that poverty is not a matter of insufficient growth but of distribution of income. For example, it says, distribution of land in Pakistan is extremely unequal. Equal access to land, water and public services is essential to reduce poverty. Property and inheritance laws need to be enforced in order to ensure equal access to women to productive resources. This group argues that high economic growth alone is not enough to reduce poverty. There has been several countries with high economic growth along with high incidence of poverty.

To accelerate the economic growth a larger role is being provided to the private sector and many projects are to be promoted through public-private cooperation. But what kind of a private sector are we having? Look at the sugar prices which hit Rs. 28 for a kilo rising from Rs. 22. The Economic Coordination Committee had a special session devoted to sugar prices. The prime minister who attended the meeting was surprised that sugar prices have been soaring when two millions tonnes of sugar is available in the market. In addition, 360,000 tonnes of sugar is available with the Trading Corporation of Pakistan. And the government has permitted the private sector to import refined sugar and some of that has landed and begun entering the market. And yet the sugar price was too high because of the pernicious cartel system of price fixing. The Monopoly Control Authority has now been asked to enquire into the matter.

Earlier, the cement manufactures were functioning like a cartel and fixing higher prices in spite of the concessions given by the government to make cement less expensive. Now the government is reported to have reduced the import duty on cement plants with a capacity of 300 tonnes per day.

Earlier it was Atta, the hoarders and price pushers were after. A lady member of the Senate last week told its members that in parts of Balochistan a ‘roti’ was being sold at Rs. six per piece, while another lady Senator said that in some parts of the same province it was available at Rs. seven a piece. The government should not believe the bland reports furnished by its officials not to upset the top rulers.

When the government submits plans for 42 billion dollars for development, the donors would expect political stability and economic consensus. By stability they don’t mean the same rulers should continue but there should be a system based on the will of the people, freely and openly expressed. If, instead we have a parliament which is often postponed for want of quorum, and which is more marked for its noisy walkouts than legislation passed, we cannot have an effective government that makes a success of its development projects with large foreign funding. The people should also be made to feel that economic planning and projects prepared are for their good, particularly the well being of the poor and what is promised will be delivered.

Now interest rates are going up fast. The average lending for house building and consumer loans is 13 to 15 per cent. The export refinance rate has been raised by the State Bank of Pakistan to 6.5 per cent and the banks will lend at the rate of eight per cent. Within a short time the rate has risen from three per cent to eight per cent.

Simultaneously Shaukat Aziz wants a four-fold increase in exports within five years — Rs. 70 billion instead of the current revised target of 14 billion dollars from the original target of 136 billion dollars. Will not higher rate of interest for export refinance deter increase in exports many fold? Shaukat Aziz dos not think so. He presumes that higher economic growth will promote larger exports.

Earlier, the governor of the State Bank of Pakistan Dr. Ishrat Husain wanted a slow rise in interest rates in keeping with world trends. But now since inflation has crossed the double digit he seeks to raise the interest rates quicker and make money far more costly. He expects people will borrow less and spend less and hold down prices. But the interest rate mechanism has seldom worked to reduce inflation in Pakistan. There is too much surplus funds outside the banking system that defeats the SBP. And this country is accustomed to high interest rates. So the official tool is blunted.

THOSE of us who work on the gloomy side of the prediction industry about Iraq, the prospects for Middle East peace, and the sanity of the Bush administration, have been given plenty to think about lately. On the one hand, on Monday the 87th British soldier was killed in Iraq, while suicide bombs and armed clashes have accounted for more than 40 Iraqi deaths since last week.

On the other, the Bush administration is in triumphalist mode. A friend who visited the White House recently described the president’s buoyant account of his Iraqi crusade, which highlighted the fact that a national government has been formed. Some progress is claimed towards normalization in Shia and Kurdish regions. Syrian withdrawal gives Lebanon a chance of making something of democracy. Washington asserts that it is involving itself more than ever in the Middle East peace process.

None of these claims should be dismissed out of hand. The greatest danger for those of us who dislike George Bush is that our instincts may tip over into a desire to see his foreign policy objectives fail. No reasonable person can oppose the president’s commitment to Islamic democracy. Most western Bushophobes are motivated not by dissent about objectives, but by a belief that the Washington neocons’ methods are crass, and more likely to escalate a confrontation between the west and Islam than to defuse it.

Such scepticism, however, should not prevent us from stepping back to reassess the progress of the Bush project, and satisfy ourselves that mere prejudice is not blinding us to the possibility that western liberals are wrong; that the Republicans’ grand strategy is getting somewhere.

It may sound perverse to suggest that we should not measure progress in Iraq solely, or even chiefly, by counting corpses. Yet most insurgent activity is the work of Sunnis, chronically alienated by dispossession from power, or jihadists committed simply to frustrate any project sponsored by the US.

The key question, surely, is how far the Shia and Kurd majority is moving towards the creation of a working society. Evidence on this is mixed. Journalists are able to travel so little outside the Baghdad enclave that the world depends for information chiefly on western military and diplomatic sources.

My own contacts say that the situation is improving, but remains precarious. They suggest that criminal anarchy is gradually being stemmed. The recruitment and training of Iraqi security forces is going a little better.

It is hard to derive much comfort from statistics that show a diminution in clashes between insurgents and security forces. These principally reflect a lower-profile strategy by the coalition, designed to reduce confrontation and casualties.

The most powerful reason for remaining cautious about Iraq must be doubt — shared by many US officers — about whether the country is sustainable as a unitary state. It is hard to believe that the Sunnis will quickly reconcile themselves to Shia supremacy, or that the Shias now leading the government will forswear payback for decades of subjection. The Kurds will do their own thing in their own region. Only fear of American wrath and Turkish intervention can dissuade them from breakaway.

It seems wrong for either neocon true believers or liberal sceptics to rush to judgment. We of the latter persuasion must keep reciting the mantra: “We want Iraq to come right, even if this vindicates George Bush.”

Those who say that Iraqis are incapable of making a democracy work may well be proved right. But until we see what happens on the ground over the months ahead, we should not write off the possibility that the Iraqi people will forge some sort of accommodation. A premature coalition withdrawal promises catastrophe for them, not us.

The same caution seems appropriate in assessing the current dialogue between the US, the Israelis and the Palestinians. I suggested before the Iraq war that Saddam’s fall might make the Israelis less tractable. For all the Muslim world’s protestations of support for the Palestinians, most Arabs have little liking for their oppressed brethren, and no desire to go to the wall for them.

Today, deprived of Iraqi support and with Syria also in retreat, the Palestinians are chiefly dependent for their own future upon international goodwill; a doubtful commodity. Israelis have always believed that their own security is best served by ensuring that the Palestinians are as weak as possible. Washington seems to acquiesce in this view.

Many of us, by contrast, believe that the best chance of peace lies in creating a settlement that offers a Palestinian state the chance of political, economic and social viability. Today the new Palestinian leadership is talking, because there is nothing else it can do. The litmus test is whether Israel accepts an ultimate commitment to withdraw from the West Bank. If this remains unlikely, it seems naive to suggest that peace prospects are improving, merely because violence is temporarily eclipsed.

Washington’s current optimism seems founded upon the fact that Palestinian militants command less Arab support than three years ago, because of the huge American military pressure. In short, the fundamentals still look pretty awful. Any peace founded merely upon Palestinian subjection, rather than upon territorial justice, seems unlikely to stick.

Here, indeed, is the nub of the issue about American foreign policy. The Bush vision is founded upon the exercise of military power. It is hard to regard Condoleezza Rice’s “charm offensive” or the state department’s protestations that in the second Bush term diplomacy will blossom, as more than cosmetic. The president himself has declared that, while he welcomes more allies, they must accept that the game will be played on Washington’s terms.

We must respect American power, and also acknowledge that the world sometimes has much need of it. As Sir Michael Howard, wisest of British strategic thinkers, often remarks: “If America does not do things, nobody else will.” We should acknowledge the limitations of the UN. The pitiful performance of many international peacekeeping contingents, not least in Afghanistan, highlights the feebleness of what passes for European security policy.

Yet it still seems reasonable to question the optimism currently prevailing among Washington’s neocons, because this remains founded upon a woefully simplistic vision. It is true that, in some chronic, unstable regions, some bad governments — those of the Taliban and Saddam Hussein — have been removed by the Americans. But the fragile advantages gained will be lost, unless Washington can match its boldness in the deployment of military power with a new sensitivity to alien cultures, matched by far more subtle political skills.

—Dawn/Guardian Service

THE British comedy troupe “Beyond The Fringe” had a skit years ago about a group of doomsayers who huddled together on a mountaintop to await the end of the world. They sang a final dirge and waited ... and waited. Finally one of them broke the silence: “Same time tomorrow, lads. We must get a winner one day.”

Economists must feel a bit like the perpetual doomsayers in the British comedy skit. They have been warning about global financial imbalances for months and in some cases for years. They have described serious risks for the United States if it doesn’t reduce its budget and trade deficits. And the worriers aren’t flakes: They include such famous names as Fed Chairman Alan Greenspan, former Fed chairman Paul Volcker and investor Warren Buffett.

But somehow the perpetual-motion machine of the US economy has kept defying predictions. And gradually people may begin to think the economic laws of gravity really have been suspended. The situation reminds me of the Internet bubble of the late 1990s.

Economists had been warning that the bubble was unsustainable — that people wouldn’t keep paying absurd prices for companies just because they had an Internet “business plan” — and yet the Nasdaq kept rising. Ordinary folks began to wonder if the economists were all wet, and they rushed to buy their piece of the Internet dream. Whereupon the bubble burst.

Among politicians in Washington, the disregard for economic warnings is now almost universal. There’s a political cost to facing reality — namely, unpopular spending cuts and tax increases — so most legislators continue to ignore it. Greenspan tried to sound a wake-up alarm last week, telling Congress: “The federal budget deficit is on an unsustainable path, in which large deficits result in rising interest rates and ever-growing interest payments that augment deficits in future years.” But his comments roused little response.

Unlike the hapless doomsayers on the mountaintop, economists who are warning about a financial day of reckoning will in fact get a grim winner one day. The U.S. economy will slow, the dollar will fall, consumption in the United States will decline — until the twin deficits begin to shrink and the global economy is rebalanced.

That process of correction may already have begun while the politicians were off in Neverland: The Commerce Department reported yesterday that during the first three months of 2005, the U.S. economy grew at its slowest pace in two years, 3.1 percent, because of lower consumer and business spending, higher oil prices and the widening trade gap.

A sober forecast of what may lie ahead can be found in the annual World Economic Outlook published this month by the International Monetary Fund. Using a new model of the global economy, IMF economists simulated what would happen if China, Japan, South Korea and other Asian nations that have been financing the US trade deficit joined the rest of the world in selling dollars.

The model forecasts a steep fall in the dollar of 15 percent or more; an increase of nearly 1 percentage point in US interest rates; and a fall in American economic output of 1.5 to 2 percentage points. And those changes are on top of the US slowdown that would take place normally to rebalance the trade deficit, IMF chief economist Raghuram Rajan explains.

Translating the IMF simulations into consensus numbers about the real economy, what can we expect? If the Asians decide to sell some of their dollars, the U.S. currency is likely to decline by at least as much as it has over the past two years, down to $1.60 against the euro, or worse; the U.S. economy would slow toward zero growth or even a mild recession. And that’s assuming that financial markets remain orderly.

The Bush administration’s main response to the economic squeeze — in addition to the president’s racing around the country promoting an unpopular plan for private Social Security accounts — has been to push the Chinese to revalue their currency upward. That would make Chinese exports to America more expensive and might thereby reduce the US trade deficit.

But as New York University economist Nouriel Roubini has noted, a 20 percent appreciation of the Chinese currency against the dollar would cost the Chinese a $100 billion loss on their dollar hoard, equal to about 7 percent of China’s gross domestic product. Roubini and economist Brad Setser describe the situation as a “balance of financial terror.” It’s hardly the ideal environment for an orderly global rebalancing.

Economics is in part a confidence game: That’s why bubbles last so long, and why they finally explode. The best tonic for the global economy, argues the IMF’s Rajan in a recent speech, is a commitment by political leaders to sensible policies that will slowly but surely reduce the imbalances. Unfortunately, that’s precisely the sort of responsible political leadership that has been missing in the United States.—Dawn/ Washington Post Service

“WE have to have a war. I’ve already paid a month’s rent on the battlefield.” The quotation is from Marx, but not the Marx you think. Airline reading has its merits. The books I picked up for my latest long-haul flight were a biography of the world’s most famous orator, Cicero; a biography of the world’s second-most famous conqueror Tamerlane (more correctly, Taimur); and a biography of the world’s most famous comedian, Stefan Kanfer’s Groucho: The Life and Times of Julius Henry Marx. The first two books were inestimable. The third was irresistible. Guess which I began first?

Groucho Marx is not yet forgotten. He can be found in the back shelves of the modern generation’s favourite intellectual haunt, the DVD library. Julius, using the screen-stage name of Groucho (picked up from a cartoon-spoof on Sherlock Holmes called Sherlocko, the Monk), along with three brothers Chico, Harpo and Gummo, lifted popular comedy from vaudeville and placed it among the classics without losing the ravenous insanity of slapstick. The knockabout was not physical. It was intelligent gymnastics that never made the mistake of becoming intellectual.

No victim was out of range. In a sense, if you had not been insulted by this Marxist gang you hadn’t arrived. Their theatre and movies, Animal Crackers, At the Circus, Cocoanuts (sic), Night at the Opera, Duck Soup, Copacabana, I’ll Say She Is — in which Groucho is Napoleon without sacrificing his handlebrush moustache or round spectacles — could not be scripted for no one could reinvent their natural, instinctive madcap insight.

Their movies are an inexhaustible riot. No one was safe, least of all high society or the pretentious. Groucho got away with murder, or at least character assassination, because he was never afraid to assassinate himself. In a famous exchange his brother Chico once said, “I’d like-a to say goom-bye to your wife.” Groucho replied, “Who wouldn’t?”

He once rejected an offer to join a Hollywood club with this charming reply: “I don’t want to join any organization that would have me as a member.” When an anti-Semitic swimming club would not take in his daughter, he wrote to them: “She’s only half-Jewish. How about it if she only goes up to the waist?”

He had a devil in his eye and an angel in his brain. His insults are legendary. “I never forget a face, but in your case I’ll make an exception.” A woman on his talk show claimed proudly that she had ten children because she loved her husband. Replied Groucho, “I love my cigar, but I take it out of my mouth once in a while.”

Groucho Marx should have been around to cover the British general election of 2005, for I haven’t seen a better analysis of why Tony Blair went to war in Iraq in the company of his best mate George Bush: “We have to have a war. I’ve already paid a month’s rent on the battlefield.”

The moment Blair and Bush sent their troops to the frontlines along the borders of Iraq, long before the United Nation’s wars on the invasion and occupation of Saddam Hussein’s Iraq were over, they simply had to have a war. The rent was costing them too much, in both money and credibility. Every ploy after that was only an excuse (which got thinner as the days passed) to justify what they had already decided had to be done.

Blair called a general election this year rather than in 2006 because the opinion polls were consistent in their view that Labour’s victory was certain. With election taking place today, the opinion polls still do so, although they are less strident about their future-mongering.

There are so many hums and haws (if the vote is below 59 per cent Labour is in trouble, if there is a minor negative swing against the government in a hundred marginals, watch out Tony Blair, etc etc) that one wonders why anyone bothers about psephological stretch exercises based on samples of 2,000-odd voters.

The second reason that Blair went to the polls early was surely because he was convinced that time, and Bush’s re-election, had put the Iraq war on the electoral back burner: there might be steady heat but it was too low-level to burn up votes. And yet, like the ghost in Macbeth, the Iraq war refuses to leave the Labour banquet. Come to think of it, Blair has become an excellent instance of hubris.

The one thing that a majority of British voters are agreed upon, irrespective of their party affiliations, is that Blair lied to the country in order to drag Britain into this war. This is the one charge that evokes response even when it comes from the dour Conservative leader, Michael Howard.

All politics, it used to be said, is local. That remains true. Television, curiously, had made all local politics international. We sit in India and watch a bus rolling through London’s East End proclaiming to Bangladeshi-origin Muslims that the moment has come to avenge a war they did not support.

Cameras bring alive a debate in which the three leaders, Blair, Howard and Charles Kennedy of the Liberal Democrats spar over Iraq. In which Blair is accused by a citizen of going to war to please his best-mate Bush, and Howard asks people to raise their hands if they think Blair is telling the truth on Iraq and very few hands rise.

It was noted, famously, of Howard that he had something of the night about him. The eyes of Tony Blair during that debate and through this election campaign suggest that he has something of the graveyard about him. Blair could still be prime minister of Britain on May 6 but desolation will never entirely disappear from those eyes.

Blair seems to have lost even if Labour wins, for victory will come because of Labour’s record on the economy and not on Blair’s record on the war. Power has already passed from Blair to his chancellor of exchequer and heir-presumptive Gordon Brown.

Brown’s eyes have acquired the quiet sparkle of confidence as a much-cherished dream comes within striking distance.

A pro-Labour newspaper, the Guardian, probably settled the succession issue in Labour recently with its revelation that the attorney-general, Lord Goldsmith, had clearly advised Blair that the UN Security Council was the final arbiter, and not the British government, on whether Saddam Hussein was complying with UN resolutions or not.

This in turn would determine the legality of the war that Blair was determined to wage. Blair got away with an ingenious fudge: the attorney-general would deem it satisfactory if Blair could be sure of Saddam’s guilt.

Anger over Iraq has been at the core of this campaign. The Conservatives are not beneficiaries of this anger because of their familiar problem: they speak with a forked tongue. They believe the war was good but Blair was bad, which is why no one believes them.

The Liberal Democrats are the only party which has been consistent in its opposition to the war and now wants British troops withdrawn. But the Lib-Dems are stuck in that strange swamp called unelectability. Madhu Limaye, the socialist ideologue now, sadly, not with us, used to tell me that a political party needs to cross the 23 per cent support line in order to emerge from this swamp and then stride ahead towards the crucial 30s in public support. The Lib-Dems are still stuck on the wrong side of 23 per cent.

While the politics of war demands its wages, no one is paying a heavier price for this war than the Iraqi people. There have been a few welcome steps in Baghdad, but the carnage continues on the streets. The simple fact of relentless death makes nonsense of good intentions.

Where else to end but at the beginning? On May 6, 1972, the 81-year-old Groucho made his final faltering and moving appearance in New York, at the Carnegie Hall. With havoc of Vietnam preying on his conscience and consciousness, he recalled an old Irving Berlin song in which the devil sings thus to his son:

‘You stay down here where you belong the folks above you, they don’t know right from wrong. To please their kings they’ve all gone out to war, But not one of them knows what they’re fighting for.’

‘Way up above they say that I’m a devil and I’m bad; But the kings up there are bigger devils than your dad; They’re breaking the hearts of mothers, Making butchers out of brothers; You’ll find more hell up there than there is down below!’

The writer is editor-in-chief of Asian Age New Delhi.