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| March 07, 2008 | Friday | Safar 28, 1429 |
Healthcare blues
Time for introspection
Concept of Islamic finance
OTHER VOICES - Pushto Press
THE Quran and the Sunnah are the principal sources of Islamic law. Islamic finance signifies financial services, mechanisms, practices, transactions, and instruments that comply with provisions given in these fundamental Islamic texts.
THERE are so many exemptions in Pakistan’s tax regime that it has come to be regarded as a grossly inequitable system. The farm and the services sectors are under-taxed. These have kept the tax to GDP ratio perpetually under than 10 per cent mark despite the fact that in the last eight years tax collection has gone up from Rs346bn in 1999-2000 to Rs835bn in 2006-07. According to one rule of thumb estimate effective taxation of agriculture income and imposition of capital gains tax on short term stock trading and real estate investment can raise at least an estimated Rs200bn which, it is believed, would take care of much of the budget deficit.
Both the agriculture and the services sectors are under-taxed though they together account for nearly 80 per cent of the GDP. The provinces collect less than Rs1bn from tax on farm incomes while agriculture has a share of about 20-21 per cent in national income. The big landowners and the privileged in the capital market and the real estate business have made it impossible for any government, even the military-led ones, to bring them under the tax net. The arguments used to defend tax exemptions and incentives are many and some of them appear to be even weighty enough. But no one has so far contested the validity of the argument that if income of salaried persons (who stand to lose their job for any number of reasons) could be taxed then why a farm owner should be given exemption just because he may lose the next crop for want of rain or because of a pest attack.
The issue of taxing agricultural incomes has been debated for so long and reiterated so many times in this country that it has now started sounding like a seasonal cliché — a formality that has to be articulated from time to time but not acted upon. The same is being said again by the official economic managers and the IMF advisers. What is their purpose? If those managing the economy were all that sincere about the proposal why did they not do something about federalising this tax collection in the last eight years when they had the backing of a military regime. The IMF’s intent is even more suspect. So far it has not been able to persuade the rich countries to stop giving massive subsidies to their farm sector which is used as the clincher argument against levying tax on income from agriculture in developing countries. All said and done, the incoming government would be well advised to look into this issue and work out a tax regimen on agricultural incomes that is equitable, economically feasible and fair.
THE kind of hazard posed by the waste produced by hospitals, clinics, dentistries, pathological laboratories and pharmacies is too well-known to warrant any detailed discussion. The need to dispose of this waste professionally and scientifically is also well established and beyond even a shadow of doubt. What boggles the mind is the blanket sense of callous indifference that pervades hospital administrations in both public and private sectors across the country. In the presence of infected medical equipment, used cotton swabs, bandages and syringes, and even severed body parts that remain dumped together with routine garbage around most hospitals, healthcare facilities have themselves become infection-producing sites. With the country generating close to 300,000 tons of hospital waste every year — and much of it getting disposed of casually — the magnitude of the problem may well be assessed by even the layperson. But hospital owners and managers, who are mostly qualified health practitioners, remain unconcerned for some strange reasons. A recent report carried by this newspaper suggested that there are about 3,500 healthcare facilities of all shades and denominations generating medical waste in solid or liquid forms in Karachi, but less than 150 of them happen to avail of government facilities to treat this waste through incinerators. This is a shameful four per cent of the total. In condemning the individual administrations, however, one must not forget the equally alarming fact that the government machinery supposed to pick up the waste from hospital premises works rather erratically despite recovering the levy regularly. It is a mess that all parties to the conflict are producing collectively at the cost of the common man in whose name they are all minting money.
One of the factors cited by the news report for the prevailing scenario is the absence of healthcare registration and regulation mechanisms in the overall healthcare delivery paraphernalia. As things stand today, anyone can open, say, a hospital or a clinic, without having to seek approval from any regulatory body. In other words, there are no listed minimum requirements in terms of even equipment, manpower and expertise, what to speak of a waste disposal mechanism. The need to have one such body in place cannot be overemphasised. In doing so, however, the government must ensure transparency at all levels. Otherwise, the body will turn out to be just an additional tier of corruption, the cost of which will ultimately be sucked out of the patients’ pockets.
THE reprinting of offensive caricatures of the Prophet (PBUH) by Danish and other western newspapers has, quite understandably, led the OIC to register its protest against ‘the repetition…of these deliberate offensive acts’. It is sad that newspapers in Denmark chose to ignore the events following the initial publication of the cartoons in 2005. Thousands of Muslims had protested worldwide. Last month, in a display of solidarity with one of the errant cartoonists against whom a death plot was uncovered, the newspapers decided to reprint the offensive illustrations. To make matters worse, a Dutch politician is soon to release a controversial documentary on the Quran. Such acts generate more tension between Muslims and the West. If there is no attempt to stop those who are provoking religious sentiments, even those considered as moderate Muslims may come to sympathise with the extremists and their bloody agenda. It is the healing touch that is needed, not an exacerbation of friction.
However, it is also time for introspection among Muslims to explore the reasons behind the militancy which is causing the West to react in this manner. The OIC may be the best place to begin such an exercise. For instance, it will have to ask itself why only a handful of its 57 members come under the UN’s ‘high human development’ category, the majority being classified under ‘medium human development’. Among its member states are the world’s six least developed countries — this despite Muslim countries having 70 per cent of global energy resources. But poverty and inequity alone have not generated frustration within Muslim states. Inadequate education has also contributed to this. Out of 43 countries for which statistics were available, more than half are spending less than the recommended four per cent of GDP on education. Moreover, political liberties are lacking as indicated in a recent Freedom House report where the number of OIC countries tagged as ‘not free’ is 26, while those with partial liberties number 25. Only six are characterised as ‘free’. This combination of negative factors, fuelled by clerics’ spreading a radical strain of Islam, is leading to frustration which is increasingly taking on a militant form. Corrective action can only come about if the OIC countries make efforts to introduce genuine reforms at home.
Thus, Islamic finance not only includes banking, but also capital formation, capital markets and all types of financial intermediation.
While some of these norms are shared by Islamic and western financial systems, certain norms are exclusive to Islam. In fact, some Islamic financial restrictions are severe enough to render certain western financial practices and transactions absolutely void. This assertion of religious law in commercial sphere reaffirms the claim that Islam is an all encompassing system, not just a set of prayers, acts of worship, and declarations regarding God’s existence and omnipotence.
Coming back to the topic, derived from the Quran and the Sunnah, some of the main features of Islamic finance, in brief, are:
(1) Riba is prohibited in the strongest terms. Riba literally means “an excess”, and most of the present-day Islamic scholars agree that it includes both usury and interest. The prohibition of riba is generally considered to be the most important of all Islamic financial principles.
(2) Gharar, which signifies ambiguity, uncertainty, or lack of specificity in the terms of a financial contract, is forbidden.
(3) As riba is prohibited, suppliers of capital become investors instead of creditors.
(4) Investment can only be made in permitted commodities and activities. For instance, one cannot deal in the import and export of alcohol. Similarly, it is not allowed to invest in a casino.
(5) Market prices must be determined by the forces of demand and supply. In other words, Islam envisages a free market.
(6) Information must be easily and equally accessible to all investors.
Based on the above-mentioned principles, there is a variety of Islamic financial instruments and transactions in vogue. Some of them are briefly explained below:
(1) Musharaka: It is a business structure in which the investor not only makes a financial contribution to the enterprise, but may also participate in managing the venture. Profits are shared between the parties according to a pre-determined ratio and losses are borne by them in proportion to their capital contributions. In terms of classification, this is an equity-based transaction.
(2) Mudaraba: In this arrangement, the investor provides the requisite financial resources, but does not participate in managing the enterprise. It is a form of partnership in which one party provides the funds while the other provides expertise and management. Profits are divided among the parties according to a mutually agreed ratio. Financial losses are borne by the investor alone. This is also an equity-based transaction.
(3) Murabaha: In this transaction, the finance provider, instead of advancing a loan to the party wishing to purchase goods or equipment, purchases those items and sells them to that party at cost plus a declared profit.
(4) Tawarruq: In it the finance provider buys an asset and immediately sells it to the client on a deferred payment basis. The client then sells the same to a third party for immediate delivery and payment. Consequently, the client receives a cash amount and has a deferred payment obligation for the marked-up price to the finance provider. The asset is typically a metal like copper or platinum.
(5) Ijarah: It is the leasing or hiring of a physical asset, and it is one of the fastest growing activities of Islamic financial institutions.
(6) Takaful: It is a form of insurance. It is an arrangement by a group of people to shield each other from loss or damage through the setting up of a defined pool of resources. Any member of the group who suffers such a loss is compensated in the form of monetary help from the common fund. In other words, it is a mutual self-help scheme between those who wish to support each other in difficult times.
(7) Sukuk: Also called “Islamic bond”, it signifies, speaking more accurately, an Islamic investment certificate. It is an asset-based investment as the investor owns an undivided interest in an underlying tangible asset that is proportionate to investment. The sukuk certificate is a proof of this ownership interest.
The certificate holder is not only entitled to all the benefits that it entails including a share in the revenues generated by that asset, but is also entitled to share in the proceeds of the realisation of the sukuk asset. Sukuk structures employ techniques that are well developed in conventional markets for structured finance, and have become a significant mechanism for raising finance in the international markets by institutions, corporations, and sovereign and state entities.
It must be mentioned that some of the prevalent transactions and instruments are not considered to be in conformity with Islamic law by all Muslim scholars. Those opposing these practices do so by pointing out the hidden or concealed elements of riba and gharar in them. For example, actual administrative fee is one thing and interest in the name of administrative fee is another. However, to most of the scholars, venture capital finance is closest to the actual Islamic finance. Thus, musharaka and mudaraba structures are favoured by the majority.
In fact, every financial institution dealing in Islamic finance has a committee of Muslim scholars, called “shariah committee”, that determines whether a product or practice complies with Islamic law. As there is no set of binding uniform rules, shariah committees, at times, give conflicting rulings. There can also be a difference between two countries or regions. For instance, in Malaysia, Islamic financial restrictions are interpreted more liberally than in the Gulf.
Another shortcoming confronting Islamic finance is the shortage of qualified professionals. There are not many people who are equally skilled in conventional finance and Islamic law. A person well acquainted with conventional finance can easily understand any Islamic financial product; however, one cannot develop or market such a product without knowing the rules and logic unique to Islam.
To summarise, lack of uniformity in laws and procedures, and deficiency of skilled professionals are among the main hurdles faced by Islamic finance. However, the industry is growing – the Arab oil money being one of the main driving forces. This is evident not only from the number of banks and institutions established specifically for practising shariah compliant finance, but also from the increasing number of western or conventional financial institutions engaging in Islamic finance operations.
Who will be Pakistan’s new PM?
Hewad, Peshawar
The PPPP won majority seats in the centre and a clear majority in Sindh, and performed better in NWFP and Balochistan in the Feb 18 elections. The party has to form its government in the centre and coalition governments in the provinces. All eyes are set on the leadership of the party…regarding the nominee for the premiership of the country.
The decision was expected soon after the election results were announced but was delayed for reasons best known to PPP’s leaders.
The common people of Pakistan hope to see Makhdoon Amin Fahim for many reasons. Firstly, he was in charge of the party when the late Ms Bhutto was in exile and her spouse, Asif Ali Zardari, was in prison.
Secondly, his style of politics is acceptable to the people at large, including the people of smaller provinces.
At this point, the top job must go to a person who can bring about reconciliation in the fractured environment of the country. Amin Fahim fulfils this criterion more than any body else in the PPPP cadres and seems acceptable to the people of all four provinces.
A different choice may frustrate the public, which will not bode well for reconciliatory politics in Pakistan.
The decision to nominate the next PM must be taken with the future of the country in mind. Any decision that overlooks such a pre-requisite will mar future political dispensation and reconciliation in the country. — (March 2)
Suicide attacks resume after elections
Khabroona, Peshawar
Three security officials were killed and 20 were injured in a suicide attack on a levies post in Bajaur yesterday. This was a day after the suicide attack on a funeral procession in Mingora, which killed 50 people and 100 were seriously injured.
It was hoped that the present year would be more peaceful than last year, and hence the date for the general elections was announced. The first month of the present year saw three suicide attacks which killed 44 security officials and some civilians, but the month of February began with a series of suicide attacks. The one at the ANP election meeting in Charsadda left 25 dead. Two days later, another attack in North Waziristan killed eight people. Another strike in Parachinar had 47 casualties…. A brief respite was experienced only during the elections.
Although the people of Pakistan decided to vote against Gen Musharraf’s party, the victorious parties, despite their show of strength, have yet to be invited to form their government in Islamabad and other provinces. Gen Musharraf was advised by many to resign but he continued to stay as the ruler in Islamabad. Several observers believe that the only way to deal with terrorism is to leave the matter to the elected representatives of the people. Gen Musharraf and his party failed on so many fronts, especially in establishing lasting peace and security across the country. We, therefore, urge the president to invite the winning parties to form their government. A democratic government is badly needed to deal with the issue of terrorism. — (March 2)
— Selected and translated by Khadim Husain