PAKISTAN seems to have entered into a new phase of economic activity where the privatisation deals have become the in-thing. The sweetest of them all was that of the PTCL sell-off. After the deal was done, the terms were sweetened to keep the buyer from walking away. The KESC deal also carries a lot of sweeteners. The candy-coated steel mills deal has been annulled by the Supreme Court.
The sweet import deals of the Black Cab, Tractors, Renault, Daimler Chrysler and Railway coaches are on the front pages of most newspapers. Favourites are also being allowed to make big killings by hoarding essentials like sugar and not so essentials like cement. Half a dozen of stock- brokers have been allowed to make money at the cost of small savers.
The oil marketers as long as they were allowed to fix prices had turned the whole exercise into a lucrative cartel. The real estate deals that the defence housing authorities have been able to obtain in the prime areas have no parallels. The list is very long and the details of all these deals are being discussed in the media minutely on daily basis but without in any way causing the decision- makers even a little bit of embarrassment.
Of course, there is this argument that you do need to sweeten such deals to attract foreign or even local investment because the physical and social infrastructure is in the dumps and the law and order is as bad as it can be. The market manipulators are being excused in the name of free market. But then, all this reflects economic and financial indiscipline. A free-for-all. And there is anecdotal evidence to show that such an indiscipline is deliberately promoted to benefit the favourites—a charge often levelled against previous governments.
Lack of transparency is seemingly once again creating the impression that commissions and kickbacks are back with a vengeance. And in the name of foreign investment and free market, a small coterie of cronies is amassing unearned incomes by the millions.
When you break the very laws by which you have been swearing all these years—-the laws of transparency, the laws of austerity, the laws of propriety and many more basic laws of economics, the signal which is going down from the top is, everything goes. So breaking the law or bending a rule here and there is not considered all that bad when it is a matter of siphoning public money or increasing unearned incomes. That is perhaps is the reason why despite some numbers being highly uplifting, one sees many more not-so-uplifting statistics.
On the face of it, the economy is doing very well. In the last five years the GDP has doubled from a mere $60 billion to $120 billion. Exports have soared to nearly $17 billion from less than $9 billion.
Imports have jumped to $24 billion from about $13 billion. Foreign exchange reserves have maintained a steady level of $12-13 billion from being around a billion or so. And to top it all, the government claims that it has brought poverty down statistically by about 10 per cent.
But then why is it that despite the doubling of the GDP and per capita income, the number of income tax payers not gone beyond 1.2 million in all these five years? Why is the economy still largely undocumented? And why despite all the so-called reforms in the CBR, tax evasion is still so rampant?
Ask any businessman, he will have long tales of how he gets away with blue murder by bribing the tax collector. The real estate transaction is still so unwieldy that you cannot buy and sell without greasing scores of palms. And why are the small savers continuing to lose money on the stock exchange despite so many reforms that are supposed to have been introduced in the market to regulate it?
Why has the income inequality increased so much in the last five years? Why has the trade balance gone up to around $10 billion from a mere $1.4 billion in the year 2000? Why has the foreign exchange reserves gone down to the less than six month’s import bill from being equivalent of more than 11 months’ import bill in 2003?
And why has the fiscal deficit gone up to 4.2 per cent despite the existence of the Fiscal Responsibility Law? Indeed, 2005-6 is the first year since 1997, when the primary budget deficit is negative, which means that the revenues are falling seriously short of the needs of the government. And despite all the tall claims of poverty reduction why is the health expenditure still hovering around 0.5 per cent of the GDP and education at about 2.1 per cent of the GDP?
Instead of finding answers to these questions, the official economic managers seem to have decided to subsidise their way out of the soaring shortages in food items and import their way into make-believe prosperity by using the rising incomes from remittances and privatization to finance the expanding current account deficit.
Both these incomes are unearned incomes. Also, since all privatisation to foreign investors has remained confined to only those units which have no export bias, it is more than likely that over time the foreign exchange reserves would come under great pressure when the fun time is over and the foreign owners of these privatised units start repatriating their profits.
A significant part of the soaring import bill is attributed to increase in the demand for oil for running the increasing number of motor cars and two wheelers on our roads. Similarly, the already stagnating supplies of electricity are coming under increasing demand pressure from expanding sales of goods like air conditioners and other such electric appliances causing frequent and long drawn load shedding and continual darkening of our large industrial cities.
The decade of 1990s was the decade of paucity. The leakages from this shrunken cake were also too small. The current decade seems to be the decade of plenty. And the way the economy is being managed, it seems, as if, tomorrow would never come. So the amount being siphoned off also seems to be plentiful.
The parliament is too weak to make the government accountable. The celebrated NAB seems to have been assigned just one job—hound the politicians in the opposition who can be a potential threat to the regime.
