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| January 25, 2007 | Thursday | Muharram 05, 1428 |
Delayed yet again
More basic issues
Lowering inflation is high priority
THE choice for the government now is between higher economic growth and reduced inflation. The government has preferred the former and the growth rate for the current financial year has been reaffirmed as seven per cent. And inflation will not be 6.5 per cent, as indicated earlier, but 7.5 per cent and most probably 8.5 per cent as the prices of essential goods continue to soar and refuse to climb down.
MR Hamid Karzai seems to be getting a little wiser. On Sunday, there was less of a bite in his anti-Pakistan outbursts, and he appears to have realised that there were problems with his own government. Speaking in parliament, the Afghan president refrained from blaming Pakistan — as he is wont to — for the insurgency in his country and instead criticised “certain Pakistani circles” for protecting terrorists. More important, he admitted, perhaps for the first time, that drugs and corruption in his government contributed to the violence in his country. His speech coincided with the release in Washington of an official report which provides a fairly good indication of how the Bush administration views Islamabad’s role in the war on terror and the problems involved. In its annual report to Congress, the Homeland Security Department, headed by Mr John Negroponte, acknowledges Pakistan “as a frontline partner” in the war on terror and emphasises that eliminating “Taliban safe havens” in the tribal area is essential for an end to the insurgency in Afghanistan. Parts of the report, however, seem to acknowledge some realities that Islamabad is faced with and point out that operations against the religious militants have been “costly” for Pakistan’s security forces. While it does admit that Pakistan remains “a major source of Islamic extremism”, the HSD report points out that, in handling al-Qaeda and Taliban, Islamabad has to be mindful of “the potential” for a large-scale rebellion in the tribal area and a possible Islamist backlash because there is “widespread opposition” among Islamic parties to American military action in Iraq and Afghanistan.
Foreigners who are quick to dole out the “do more” advice to Pakistan often fail to realise the link — for all Muslim peoples — that exists between America’s war on terror and its policies towards Palestine, Iraq and Afghanistan. There is near-unanimity in Pakistan on the question of terrorism, and no sane mind approves of the acts of terror like the attacks on the World Trade Centre or the bombing of trains in Madrid or London. But the problem acquires a new perspective when even those genuinely interested in eliminating terrorism find the American military action — the way it has been in Iraq and Afghanistan, coupled with reports about torture of civilians in Abu Ghraib, Guantanamo and Bagram — hard to justify.
As history shows, successive governments in Pakistan have managed the tribal areas through a policy that has been a mix of carrot and stick. The British realised the futility of relying solely on force and finally ensured peace by reaching an understanding with the tribal leaders. This policy recognised the tribesmen’s right to live according to their time-honoured customs and traditions in return for maintaining peace. The deal last year is essentially a continuation of that policy. Foreign militants and their sympathisers cannot be eliminated by force alone. The Sept 5 deal has more or less worked, though the Mirali attack earlier this week came as a rude shock and calls for investigations to fix responsibility and flush out the guilty elements. Being on the spot, Pakistan knows better how to handle tribesmen than foreigners having little understanding of the complexities of the situation. From this point of view, the Negroponte report seems to show an understanding of Pakistan’s problems. One wishes Mr Karzai too learnt to restrain himself and paid more attention to the corruption and incompetence in his own government.
NOTHING, it seems, can move the federal cabinet to approve of a draft version of the Human Organs and Tissues Transplant Bill so that it can be tabled in parliament and eventually enacted into law. By delaying the matter yet again, the cabinet has failed to heed the Supreme Court’s recent advice on urgent transplant legislation. Moreover, it has also closed its eyes to the suffering of thousands of renal patients in the country who could benefit from cadaveric or live voluntary organ donation. The only group who stand to benefit from the endless delay are those unscrupulous doctors, hospital staff and middlemen who are making a killing from the sale of kidneys to mostly foreign patients. The latter, because of strict laws in their own countries, generally have to wait a long time before an organ is available for transplantation. Consequently, they turn to illegal means of procuring a kidney — and in many cases this includes a visit to Pakistan where the absence of legislation has led certain hospitals, mostly in Lahore and Rawalpindi, to offer costly “packaged” services to patients.
The worst sufferers are those who sell their kidney — usually for a pittance. With a majority of them poverty-stricken or deep in debt, they see this as the only way out of their financial predicament. What they do not realise is that, in the absence of proper post-operative and follow-up care — which most would not be able to afford over a prolonged period — the resulting health complications could mean less productivity at work and restart the cycle of debt and poverty. This makes it all the more necessary to enact comprehensive legislation that would ban the sale and purchase of organs and penalise those who flout the law. With lawmakers dillydallying with the draft bill, the organ mafia — for it is nothing less — is getting stronger by the day. Cases are now coming to light where people have been kidnapped and their kidneys forcibly extracted or where doctors have stealthily removed a patient’s kidney while operating on him for another ailment. The cabinet’s deferral of the bill is wholly incomprehensible; especially when it knows that unless speedy legislation is made, the damage done will be irreparable.
THE JUI leader, Maulana Fazlur Rahman, believes that prayer leaders and religious scholars have a role to play in mobilising the ummah to cope with the new political and economic challenges facing it. The JUI chief was speaking in the context of, what he believes, are the dangers Islamic laws and culture are facing on account of the pro-West policies of the governments. His concerns are difficult to understand in view of the fact that society is plagued by graver problems than the ones mentioned above and, more importantly, they are in direct violation of the shariah. If one looks around, one can see that crimes against women are rampant, illiteracy is high, women’s rights, even those recognised by Islam, are blatantly violated, corruption is common and there is no respect for basic human dignity.
Should not the ulema be focusing on these issues which are more pertinent to the Islamic way of life of a large number of people? Our society would be transformed and definitely move closer to Islam if the religious leaders were to preach effectively about the dignity of man and woman, the value of honesty and integrity, the need to adopt a caring attitude towards children and the weaker segments of society, the importance of cleanliness which is considered to be next to godliness in Islam, the significance of work ethics and the merit of community living based on peace and justice. The MMA has not been able to attend to these issues even in its home province, the NWFP, where it is in office. Last year 415 women — the highest number in recent years — were murdered in the Frontier generally in honour crimes. The religious leaders who preach to captive audiences could make an impact if they turned their attention to the more basic social and human issues.
If the world oil prices come down and stay at reasonable levels, much below $50 a barrel, and the benefit of that is passed on to the people the inflation can come down. But between the world oil prices and the domestic prices stand tax-collecting machinery, the high profit seeking oil companies, refineries and distributors with their usually devious ways.
The reduction of four rupees in petrol price and one rupee in diesel oil price has been described by various sections of people and trade and industry as being much inadequate. Too little has been conceded after such a long period of high prices. And the severest condemnation has come from the Public Accounts Committee of the National Assembly which has questioned the logic of exporting petrol to Afghanistan at Rs 26-27 a litre and selling the same at home at Rs 53.70 a litre. It wants the large profits of the refineries and the oil companies to be reduced and the consumers given a fair deal.
The PAC wants the 1994 profit sharing formula to be revised as it was negotiated at a time when the world prices of oil were relatively low compared to peak prices of recent times when they touched $79 a barrel. The government should now agree to come up with a new formula. Even after the recent reductions, the government will earn Rs 22.73 from a litre of petrol, Rs 30.80 from HOBC, Rs 4.60 on Kerosene oil and Rs 4.25 from light diesel oil. The secretary to the ministry of petroleum who attended the PAC meeting has agreed to take the issue to the cabinet which alone can revise the profit sharing formula negotiated in 1994. The new rate of Rs 53.70 per litre of petrol is still very high if judged by the low wages in the country. Various organizations and transporters want a reduction of Rs 12 per litre.
What is of concern is that the benefit of the price reduction is not being passed on to the people by the transporters. The car owners feel better for the price reduction but the commuters are no gainers as the benefit is not being passed on to them. Maybe if the price reduction was much larger, there might be some small reduction in passenger fares.
This is how the system works. When a tax is raised it is immediately passed on to the people, even the raise in the prices of the old stocks, but when a tax is lowered either the benefit is not passed on to consumers or too little is passed on. So, the consumers are always the loser and there exists no protection against such abuses.
Pursuing higher economic growth at the cost of several other factors has some advantages for the government. It has for example resulted in an improvement in revenue collection during the first half of the current financial year by 27 per cent instead of the targeted 17 per cent, says prime minister Shaukat Aziz.
In the first half of the last financial year the revenue collection was Rs 323 billion. But the collection in the first half of the current financial year ending December was Rs 410 billion which delights the government. Abdullah Yusuf, chairman of the Central Board of Revenue is confident that even if the oil import bill goes down, the total targeted tax revenue of Rs 835 billion would be collected. In view of the vastly improved tax collection particularly of direct taxes there is some hope of a substantial reduction in oil prices if they don’t rise in the international oil market.
The oil pricing policy is usually based on the principle that when the world oil prices go up the prices at home will be held down. And when the world oil prices come down the government would make up for its earlier loss by not lowering them. Here, the policy has been to maintain far higher domestic prices compared to the world prices. And the large income from taxing oil is not described as a tax but as a development surcharge which the government uses like any other revenue. In addition, the taxes on oil include the sales tax and excise duty and the share of the refineries, oil marketing companies and the distributors. We need a new profit sharing formula that promotes the interest of the consumers and the commuters instead of only those of the vested interests.
The State Bank of Pakistan’s second half year monetary policy says the bank will continue its tight monetary policy although it may not have great impact on inflation; it wants the supply chain to be improved and developed to meet the needs of the consumers, particularly for essential goods whose prices have been rising. A recent report said prices of 17 essential items had risen high although the latest sensitive price index shows a single digit rise in the index of 8.5 per cent in the year but food inflation according to another report rose last year by 12.7 per cent.
The extent of poverty reduction achieved so far is a matter of argument between the government and the World Bank. The Bank says that poverty in Pakistan went down during 2003-05 by 5.2 per cent and is 29.2 per cent. But the government claims that during last five years poverty went down by 10.6 per cent.
Does this difference has its origin in the concept or definition of poverty or in the methods of data collection? The government does not accept the universal concept that anyone living below a dollar a day is very poor, instead it goes by the consumption of calories to determine who is poor and who is not and as a result it comes up with a low poverty figure. The government should accept the universal concept of poverty instead of determining that only by the number of calories consumed by a poor man.
Meanwhile, the LPG prices have been raised by six per cent and the OGRA has urged the government to reduce gas prices following the cut in oil prices. The government should not come up with the usual argument that the price of gas in Pakistan is low as compared to oil and should hence be raised as an incentive for the companies looking for oil and gas.
The World Bank has spoken of cartels and monopolies in Pakistan that distorts the working of the economy and discourages the investors and calls for the promotion of competition. The old monopolies commission has now become competition promoting commission and it is for the rechristened commission to play its role well. Its performance now should not be as inadequate as when it was a monopolies commission because of opposition from vested interests. We need competition at all levels. We can’t have a free enterprise without real competition.
India is going for promoting competition in the retail trade as well and bringing the top retailer of the world Wal-Mart to the Indian market. We should not lag far behind and improve the supply chain by strengthening the retail market.
The State Bank governor Dr. Shamshad Akhtar has admitted that a preference for high economic growth at the cost of fighting inflation can be a self-defeating strategy at the end if enough corrective measures are not taken. She has acknowledged that inflation in Pakistan is higher compared to countries like India and China with whose products our exports are competing Our trade partners too have a low rate of inflation while the cost of doing business in Pakistan is high.
We have already a record balance of trade deficit as well as a balance of payments deficit which cannot be sustained for long despite the large home remittances and foreign investment which in the first half of the financial year rose by 68.82 per cent compared to the first half of the last financial year.
In addition Pakistan has a long history of high inflation and what we have today is the outcome of the accumulated inflation of decades since the oil shock of 1973. Hence the government and the State Bank have to give serious thought to reducing inflation to around five per cent by strengthening the supply side and making available most of the essential goods in adequate measure.
P.S: The government and the State Bank do not seem to know what to do with the coins and small denomination currency notes. The size and shape of the coins are to be changed again. I hope they will not get smaller and smaller to reflect their diminishing purchasing power. After doing away with the rupee 1, 2 and 5 currency notes, Rs 5 notes are to make a comeback again in a different form. Meanwhile, the high denomination notes have been becoming smaller, reflecting their shrinking purchasing power although that is not meant by the issuers.
Maybe the government wants us all to become credit card holders which involves a lot of hassle. Let the government and the State Bank take their own time and come up with the right currency notes and coins instead of making a mess of the coins and petite currency notes. And let, what it comes up with, stay for some time instead of changing them too quick and confuse the common man.