Pakistan Steel Privatization

THE sale of 75 per cent of Pakistan Steel for Rs 21.68 billion to a consortium which includes one of Russia’s leading steel producers and a Saudi steel company can be expected to provide the shot in the arm the country’s largest industrial unit needs to become a thriving enterprise. The Russian company which forms part of the consortium is located in a region once famed for having the bulk of the former USSR’s iron deposits, and for providing the steel for half of all Russian tanks used during World War II. It may well be that this kind of expertise in the manufacture of steel may be required to make PS a vibrant commercial enterprise. Hopefully, with the successful sale of PS and the recent transfer of PTCL to a private party, transactions like the sale of a bank for Rs 12.35 billion, after the government had injected Rs 30 billion into it to cover its non-performing loans, are a thing of the past.

As for PS, nationalization and the tendency on the part of successive governments to use employment in it as a way to reward political cronies led to massive over-staffing and made it prone to political interference, thereby rendering impossible any chance of an efficient cost-effective operation. Besides, in recent years its reputation was affected by several financial scandals and charges of corruption against the top management. Prior to its privatization, it was being headed by a retired general who had previously headed the army’s own armaments manufacturing facility at Wah, but as in other industrial sectors, the induction of a retired army general did not help matters in the case of PS.

Privatizing state-owned entities can increase competition and efficiency (provided a state-owned monopoly is not replaced by one in the private sector), present an opportunity for small investors (to buy shares on the stock market), and bring in much-needed investment or allow the government to use proceeds from the sale to retire debt and fight poverty. The last two are particularly important in Pakistan’s case since the government has expressly said that privatization proceeds will be used to retire the mounting debt and to finance anti-poverty schemes. Perhaps the government would like to disclose, for the benefit of the public, just how much of its debt has been paid up from proceeds from privatization and how much has been spent on poverty alleviation. This would be in consonance with its stated objective of greater transparency and fiscal probity in all its transactions. This also needs to be done because the amount is quite large: according to the Privatization Commission, since July 2005, beginning with the sale of 26 per cent of PTCL’s shares to a UAE company, and counting in the PS sale, transactions netting the government over Rs 200 billion have been completed. Notwithstanding the fact that in the PTCL case, it is to be paid over a five-year period, taxpayers should be told how exactly the proceeds are to be utilized and whether the money collected is being placed in the debt retirement fund or the federal consolidated fund (which is used to finance current expenditures). After all, the government wouldn’t want the people to think that valuable national assets are being sold at throwaway prices or that the proceeds from such a sale go to finance current expenditures, especially budgetary deficits. In addition, the government should have in place a regulatory framework that monitors the private sector in the industry affected by privatization.

From relief to reconstruction

WITH the merging of the Federal Relief Commission into the Earthquake Reconstruction and Rehabilitation Authority, the focus will now shift from relief and care to reconstruction and rehabilitation. According to the chief of Erra, major relief work has been completed. This means that all relief and reconstruction phases will be supervised by a civilian head which at one time was a major demand of parliamentarians. There is no doubt that the armed forces worked tirelessly to reach those victims most in need and the international community was galvanized into providing aid, but six months after the earthquake, there are still hundreds of thousands of people whose fate remains uncertain. It is their future that Erra must continue to focus on as it cannot afford to neglect the nearly 300,000 people living in tent villages. While the outgoing chief presented a picture of calm in quake-hit areas, various news reports suggest otherwise. Many complain of not receiving any or adequate compensation. Conditions in many tent villages remain filthy, and there are many who are reluctant to return to their devastated villages as they do not know how to rebuild their lives. These are genuine concerns which need to be addressed and people assured that the government is there to support them and not force them out as many people fear. To facilitate the rehabilitation process, authorities should pay heed to international agencies’ concerns regarding the much needed aid in the form of medicines and other essential items. There is still need for helicopters to continue their work, but the numbers have been gradually reduced. Adequate funds will be needed to operate helicopters which are required till September to fly in medicines and food.

As international agencies begin to wind down their operations it is imperative that the good work they put in is continued by local organizations as their services will still be needed, especially in the absence of adequate health-care facilities. A major concern of Erra’s transparency, which was once admired by General Musharraf, should also be addressed so that there is a sense of accountability.

Vani strikes again

THE abhorrent tribal custom of vani or sawara, whereby girls are forcibly given in marriage to settle a blood feud between two parties, has reared its head again in Mianwali district. The victims are Kulsoom Bibi and Nusrat Bibi, two sisters who, at ages six and eight, were wedded off to two brothers whose father the girls’ father had murdered. However, when the girls came of age, they refused to be bartered away to atone for their father’s sin. On their appeal, a civil court annulled the forced marriages, but the ‘grooms’ as well as the two tribes refused to accept the decision. The girls contend that they have both attained college education while the men they were wedded to are illiterate. The village pesh imam is reportedly pressuring the girls to accept the vani tradition in the name of religion and go with their ‘husbands’, while a rights group is trying to protect the girls. All this, despite the passage of a law that declared this tribal custom a crime, just goes to show that the problem is so deep-rooted in society that laws alone will not root out such practices.

But, then, a parallel justice system under the Qisas and Diyat law is also in place, whereby it is legal for the family of a slain person to accept blood money or some such compensation from the murderer. This makes murder not a crime punishable by the state but a blood feud between two parties, the aggrieved and the murderer, to be negotiated and settled. While the government must do more to remove the existing lacunae in the justice system, it is also the responsibility of the intelligentsia and the opinion-makers to step forward to sensitise the public mind. This is necessary if weird tribal customs are to be curbed and the way paved for their total eradication from society.

Changing dynamics of South Asia

THE recent whirlwind trip of President George W. Bush to South Asia was a sort of political tsunami after which the region has not been the same. To define the paradigm shift in the emerging relationships between the US and India compared with those existing between the US and Pakistan, the word ‘de-hyphenated’ has acquired extensive use in post-visit reviews and comments. Several assessments have dwelt on different aspects of the visit.

Despite extensive reviews both in India and Pakistan as well as abroad, it is still unclear as to how the changing dynamics of South Asia will affect the political, economic and security scenarios in the region in the years ahead.

There is general consensus that the most significant outcome of the March 2006 visit was the culmination of the Indo-US nuclear deal on which the discussions started in July, 2005 and the signing took place during President Bush’s visit to the subcontinent. There are various dimensions of the deal but in my judgment one insightful perspective enveloping the deal is provided in the recently issued US government’s document entitled, ‘National Security Strategy of the United States of America’.

According to several reviews of that document, it is clear that the United States is unlikely to pursue unilateralism and will be moving towards the strengthening of bilateral or regional alliances with some attention given to effective multilateral efforts. This thinking follows the basic principle of international relations, namely, there is no permanent friend or permanent adversary, and the only thing that is permanent is the country’s self-interest.

Given India’s largest functional democracy and its status as a spectacular economic power of our time, it is quite natural for the United States to want to forge a strong alliance and mutually attractive deals with India. However, this American desire is not new. America would have developed friendly relations and economic links with India right after partition in 1948 but Prime Minister Nehru opted for friendship with Soviet Union. The first opportunity to oblige India came when the Sino-India war broke out in 1962 and the US offered military and economic aid to India despite Pakistan’s protests. When the Soviet Union collapsed and ideological changes swept the world, America started an intensive effort to forge relations with India. At the same time, India also realized that developing close relations with the United States was in its self-interest.

We must also recall that the collapse of the Soviet Union spurred the opening up of the Indian economy when Dr Manmohan Singh was the finance minister. Even at that time Indian leaders knew that a liberalized Indian economy would be a magnet for US business interests and their close cooperation with the US would help them overcome possible impediments to the economic sector especially with aspect to the supply of energy that is the lifeline of a fast growing economy. The mutual interests of India and the US coincided very firmly.

Let us now look at the nuclear deal itself. In India, it has been hailed as an unprecedented, historic deal. In Pakistan it is termed as an unfair deal that would lead to destabilization and an arms race thereby jeopardizing security paradigms. It is quite clear that the deal is not an event but a process that would change South Asian dynamics in the foreseeable future.

The following remarks in the joint statement at the conclusion of talks between the US president and the Indian prime Minister will guide the process related to the nuclear deal. “For energy security and clear environment, (the two sides) welcomed the successful completion of discussions in India’s separation plans and look forward to the full implementation of the commitment in the July 18, 2005 Joint Statement on nuclear cooperation. This historic accomplishment will permit our countries to move forward towards our common objective of full civil nuclear cooperation between India and the United States and between India and the International Community as a whole”.

Under this agreement, India will open up 14 of its 22 nuclear reactors to IAEA inspection but will not allow IAEA access to the remaining eight reactors dedicated to the production of nuclear weapons. In return, the US will provide nuclear technology and fuel to India. The same deal was not offered to Pakistan. Some reviewers have called these arrangements unfair and lopsided.

Pakistan government is understandably uneasy and trying its best to convince the US authorities to revisit the nuclear deal not only because Pakistan is a non-Nato ally but also because: 1) its energy needs are as pressing as those of India and its non-renewable energy sources are limited; 2) preferential treatment to India would trigger an expensive race for civil nuclear technology acquisition and jeopardize socio-economic development, thereby threatening the country’s capacity to fight poverty and terrorism; 3) the deal undermines the NPT because India is a non-NPT country; 4) other countries like Australia, Russia and France have already become interested in selling nuclear reactors to India; 5) the deal does not conform to the US Atomic Energy Act and the Nuclear Suppliers’ Group guidelines, and 6) since the enrichment uranium inputs are fungible, India could divert its own fuel resources to nuclear weapons, thereby accentuating tensions and possibly derailing the peace process with Pakistan.

The US authorities have defended the nuclear deal with India on the grounds that: 1) the two countries have different needs and the Indian goal of nuclear power generation in total energy supply by 2030 would be about 20 per cent while Pakistan’s is only five per cent; 2) the US would not allow the NPT to unravel; 3) the deal would bring 65 per cent of India’s nuclear facilities under international safeguards up from 19 per cent at present; and 4) the US was doing many things with Pakistan that it was not doing with India. For example, Pakistan’s taking over command of the Multinational Interdiction Force (MIF), duty-free entry of products from industrial zones in the quake-hit areas in the US.

Prior to the effective enforcement of the deal, the US Congress will have to make the necessary amendments to its previously authorized act and the NSG must also be approached to bless the deal. However, IAEA chief Mohamed ElBaradei has already welcomed the deal saying it would boost non-proliferation efforts (without saying, how) and would satisfy India’s growing needs for energy including technology and fuel. The US administration has sent its officials to Vienna to mobilize support for the Indo-US nuclear deal and has launched a forceful campaign at home to convince the US Congress of the desirability and merits of the case, urging it to approve it.

“India can be trusted”, is the major theme in the campaign. But critics and sceptics wonder if India can be trusted. They argue that India was one of the first beneficiaries of the “Atom for Peace” programme launched in 1953 offering access to civil use of nuclear technology in exchange for a pledge that the technology will not be applied for weapon purposes but that India did not keep its promise and exploded a nuclear device in 1974.

In the landmark Indo-US nuclear deal, reactions of two important countries — China and Russia — count very much. China has made it clear that the deal should follow the rules of the non-proliferation regime. Russia has been aligned with India for decades. It would not want to leave India in the US camp. Of late, Russia is getting closer to China even though the two were once moving in their own circles and spheres of influence. What would come out of these shifting alliances is still an open question.

Given the passionate “wooing” of India by the major powers of the day, Pakistan needs to revisit its survival strategy. Per force, it would have to rely heavily on indigenous resources not only for nuclear civil technology but also for harnessing alternative sources of energy. More importantly Pakistan needs to put its own house in order and achieve a well-galvanized federation with smaller provinces becoming active players in the nation’s advancement. It needs to build its economy on a sound basis with low inflation and high jobs growth and benefits accruing to all segments of the society, not just the upper 20 per cent. Besides crucial problems have to be addressed. These include poor quality education, inadequate human resource development, high levels of poverty, a high population growth rate, poor governance and judicial system, serious environmental concerns, an aging infrastructure, a looming water crisis, etc.

It must live in peace with its neighbours using thoughtful public diplomacy and nudging the peace process forward. The daunting tasks ahead would require extraordinary efforts and resources. If we fail to rise up to the challenges, then the commanding heights in the league of nations will remain beyond our reach.

The writer is a former adviser to the World Bank.