A counter-offensive?

“UNPROVOKED and cowardly” is how a Pakistani security official has described the US air strike on Pakistani soldiers from across the Durand Line in the Mohmand area on Tuesday. The attack killed several Pakistani soldiers, and the security official termed it as an “act of aggression” that would not serve the common cause of fighting terror. In what indeed is the strongest criticism of the US-led allies in Afghanistan, the official said the attack “hit at the very basis of cooperation and the sacrifice” which Pakistani soldiers had been making in the war on terror. The air strike came after the militants launched an attack on a target inside Afghanistan. But the Pakistani soldiers were killed in what has been described as “a counter-offensive”. It is significant that this is the first major US air strike since the democratic government began negotiations with the Taliban to end the insurgency in Fata.

The incident must be sorted out to end the friction that has now become characteristic of the relationship between Pakistan and the US-Nato officials in Afghanistan. Islamabad must insist that those responsible for this ‘cowardly’ attack must be made accountable. The episode also serves to highlight the lack of coordination between security authorities on both sides. At a higher governmental level, it is the distrust between Islamabad and Kabul that is the root cause of the confusion among the officials on the spot. Not a day passes without some Nato official accusing Pakistani authorities, especially the ISI, of helping the militants. Islamabad’s plea that it has deployed 100,000 soldiers to combat the Taliban and has suffered over 1,000 military casualties goes unheard. An added problem is Pakistan’s domestic political situation, for the democratic government has still not settled down. There is a sense of uncertainty, the focus of political power appears to be weak, and foreign governments must be wondering who to talk to. This has disastrous consequences for the situation in Fata and the peace negotiations. One does not even know who is talking to the Swat militants and with what specific objective. A federal spokesman says the talks have been scuppered, while the provincial government denies this. Before we expect Kabul and others in Afghanistan to accept our point of view we must first set our house in order.

How the economy fared

THE economy may not be close to hitting the bottom. But it’s got every bare bone — burgeoning twin fiscal and current account deficits, declining national savings, tax revenue and private investment, underperforming real sector, spiralling inflation, etc — to trip over. As the Pakistan Economic Survey released on Tuesday shows, the task of sustaining growth even at the current revised level of 5.8 per cent is pretty challenging given the domestic constraints — lingering political turmoil, energy and infrastructure crunch and poor law and order conditions. Then there are external shocks as well such as spiking global oil, food and commodity prices that have to be countered. Yet the economy needs to grow rapidly, and, at the same time, tame the price inflation. This is no doubt a tough job to do. The job at hand looks even more daunting at a time when all efforts to put the genie of inflation back into the bottle have already fallen apart and the country is all set to miss almost each and every major growth target for the current year.

The economic growth moderating to 5.8 per cent, the lowest in five years and well below the 6.8 per cent achieved the previous year and the 7.2 per cent target for the outgoing year, may not seem to be a cause of much concern. Pakistan still remains one of the fastest-growing economies in Asia even at this rate. What is more alarming is the changing pattern of growth, mainly its deteriorating quality. Though economic growth in the past five years has mainly been driven by the services sector and private consumption, the contribution of the manufacturing and agriculture sectors and private investment to the GDP has dropped heftily. The real sector has put up a very dismal show and investment as percentage of the GDP declined, according to the Economic Survey for the outgoing fiscal 2007-08. Agriculture, which forms 21 per cent of the GDP and is the biggest employer of the labour force (43 per cent), has expanded by just 1.5 per cent due to the failure of major crops. Manufacturing, which makes up almost 19 per cent of the GDP and employs over 14 per cent of the workforce, has grown by just 5.4 per cent. Large-scale manufacturing couldn’t even keep pace with manufacturing growth and dropped to 4.8 per cent. On the other hand, the large services sector, which is 54 per cent of the GDP, grew by 8.2 per cent.

Most critically, investment, the key determinant of economic growth, slumped as percentage of the GDP to 21.6 per cent from a high of 22.9 per cent. Fixed investment also declined to 20 per cent from 21.3 per cent. Private investment, which makes up almost three-fourth of the total domestic fixed investment, rose by less than one per cent in real terms against the last three-year average of above 16 per cent in real terms. Foreign investment was down by 32.2 per cent to $3.6bn during July-April, foreign direct investment slumped by 16.7 per cent to $3.48bn and portfolio investment by 91 per cent to $99m. Almost 67 per cent of foreign investment went into the more profitable telecommunication, financial and oil and gas sectors rather than into the manufacturing or export-oriented sectors. Little wonder that the contribution of investment to GDP growth plunged substantially to almost 12 per cent from 45 per cent a year before.

The government has already “put aside the advice” from the International Monetary Fund and the World Bank to further moderate economic expansion for the next fiscal year to a maximum of 3.5 per cent and is likely to pursue higher growth targeted at 5.5 per cent. But it would be a huge challenge for the government to attract domestic and foreign investment, especially in the productive sectors, in the given framework of the tight monetary regime created to leash the high price inflation. Inflationary pressures are likely to persist over a period of two to three years owing to global energy and food price shocks, removal of subsidies on power and fuel, a weakening rupee, widening trade and current account gap and burgeoning government borrowing from the State Bank of Pakistan to cover its swelling fiscal deficit. National savings required to finance investment as percentage of the GDP have already come down to just below 14 per cent from 17.8 per cent a year ago due to skyrocketing inflation.

The increase in investment, essential for growth, is very much likely to stoke inflation, which is projected to cross 11 per cent at the end of this year against the target of 6.5 per cent. It is here the government will be required to strike a delicate balance between domestic demand and inflation — food prices have already gone up by 15 per cent — and encourage investment to remove supply side constraints. If the government succeeds in managing the economy prudently, enforcing stringent fiscal discipline, removing fiscal imbalances and creating a physical and social infrastructure for boosting industrial and agricultural output, it will be able to restore business confidence and trigger investment and growth. Also, it will be able to reduce poverty as investment in the real sector generates far more and better quality jobs. If it falters somewhere on the way, it will only fuel inflation at the cost of economic expansion, and leave hapless millions reeling under the escalating prices of food and energy.

Small farmers can feed the world

I SUGGEST you sit down before you read this. Robert Mugabe is right. At last week’s global food summit he was the only leader to speak of “the importance of land in agricultural production and food security”. Countries should follow Zimbabwe’s lead, he said, in democratising ownership.

Of course, he has done just the opposite. He has evicted his opponents and given land to his supporters. He has failed to support the new settlements with credit or expertise, with the result that farming in Zimbabwe has collapsed. The country was in desperate need of land reform when Mugabe became president. It remains in desperate need of land reform today.

But he is right in theory. Though the rich world’s governments won’t hear it, the issue of whether or not the world will be fed is partly a function of ownership. This reflects an unexpected discovery. It was first made in 1962 by the Nobel economist Amartya Sen, and has since been confirmed by dozens of studies. There is an inverse relationship between the size of farms and the amount of crops they produce per hectare. The smaller they are, the greater the yield.

In some cases, the difference is enormous. A recent study of farming in Turkey, for example, found that farms of less than one hectare are 20 times as productive as farms of more than 10 hectares. Sen’s observation has been tested in India, Pakistan, Nepal, Malaysia, Thailand, Java, the Philippines, Brazil, Colombia and Paraguay. It appears to hold almost everywhere.

The finding would be surprising in any industry, as we have come to associate efficiency with scale. In farming it seems particularly odd, because small producers are less likely to own machinery, less likely to have capital or access to credit, and less likely to know about the latest techniques.

There’s a good deal of controversy about why this relationship exists. Some researchers argued that it was the result of a statistical artefact: fertile soils support higher populations than barren lands, so farm size could be a result of productivity, rather than the other way around. But further studies have shown that the inverse relationship holds across an area of fertile land. Moreover, it works even in countries such as Brazil, where the biggest farmers have grabbed the best land.

The most plausible explanation is that small farmers use more labour per hectare than big farmers. Their workforce largely consists of members of their own families, which means that labour costs are lower than on large farms (they don’t have to spend money recruiting or supervising workers), while the quality of the work is higher. With more labour, farmers can cultivate their land more intensively: they spend more time terracing and building irrigation systems; they sow again immediately after the harvest; and they might grow several crops in the same field.

In the early days of the green revolution, this relationship seemed to go into reverse: the bigger farms, with access to credit, were able to invest in new varieties and boost their yields. But as the new varieties have spread to smaller farmers, the inverse relationship has reasserted itself. If governments are serious about feeding the world, they should be breaking up large landholdings, redistributing them to the poor and concentrating their research and their funding on supporting small farms.

There are plenty of other reasons for defending small farmers in poor countries. The economic miracles in South Korea, Taiwan and Japan arose from their land reform programmes. Peasant farmers used the cash they made to build small businesses. The same thing seems to have happened in China, though it was delayed for 40 years by collectivisation and the Great Leap Backwards: the economic benefits of the redistribution that began in 1949 were not felt until the early ’80s.

Growth based on small farms tends to be more equitable than growth built around capital-intensive industries. Though their land is used intensively, the total ecological impact of smallholdings is lower. When small farms are bought up by big ones, the displaced workers move into new land to try to scratch out a living. I once followed evicted peasants from the Brazilian state of Maranho 2,000 miles across the Amazon to the land of the Yanomami people, then watched them rip it apart.

But the prejudice against small farmers is unchallengeable. It gives rise to the oddest insult in the English language: when you call someone a peasant, you are accusing them of being self-reliant and productive. Peasants are detested by capitalists and communists alike. Both have sought to seize peasants’ land, and have a powerful vested interest in demeaning and demonising them.

In its profile of Turkey, the country whose small farmers are 20 times more productive than its large ones, the UN’s Food and Agriculture Organisation states that, as a result of small landholdings, “farm output ... remains low”. The OECD states: “Stopping land fragmentation ... and consolidating the highly fragmented land is indispensable for raising agricultural productivity.” Neither body provides any supporting evidence. A rootless, half-starved labouring class suits capital very well.

Like Mugabe, the donor countries and the big international bodies loudly demand that small farmers be supported, while quietly shafting them. Last week’s Rome food summit agreed “to help farmers, particularly small-scale producers, increase production and integrate with local, regional, and international markets”. But when, earlier this year, the International Assessment of Agricultural Knowledge proposed a means of doing just this, the US, Australia and Canada refused to endorse it as it offended big business, while the United Kingdom remains the only country that won’t reveal whether or not it supports the study.

Big business is killing small farming. By extending intellectual property rights over every aspect of production, and by developing plants that either won’t breed true or don’t reproduce at all, big business ensures that only those with access to capital can cultivate. As it captures both the wholesale and retail markets, it seeks to reduce its transaction costs by engaging only with major sellers. If you think that supermarkets are giving farmers in the UK a hard time, you should see what they are doing to growers in the poor world.

As developing countries sweep away street markets and hawkers’ stalls and replace them with superstores and glossy malls, the most productive farmers lose their customers and are forced to sell up. The rich nations support this process by demanding access for their companies. Their agricultural subsidies still help their own large farmers to compete unfairly with the small producers of the poor world.

This leads to an interesting conclusion. For many years, well-meaning liberals have supported the fair trade movement because of the benefits it delivers directly to the people it buys from. But the structure of the global food market is changing so rapidly that fair trade is now becoming one of the few means by which small farmers in poor nations might survive. A shift from small to large farms will cause a major decline in global production, just as food supplies become tight. Fair trade might now be necessary not only as a means of redistributing income, but also to feed the world.

—The Guardian, London

PPP: let Pakistan move forward

THE problem fundamental to the ailments of this country has been a judiciary servile to each succeeding government.

A free and independent judiciary is an absolute need of a country to provide justice to the people and for political stability and economic development.

A government functioning under an independent judiciary lasts longer, works correctly and efficiently, as it is aware of its duty of functioning under the law. It is therefore not vulnerable to adventurers. The fact that it functions under the watchful eyes of an independent judiciary gives a government unmatched protection which is better than even repealing Article 58-2(b). Without an independent judiciary it is not possible to stop a usurper taking over and re-imposing 58-2(b) or anything else he invents. He will bulldoze through everything including any ‘constitutional package’. As in the past, a compliant judiciary will ignore the lawful government and facilitate the adventurer.

Absence of an independent judiciary suits only a usurper, not an elected government unless the aim of its leaders is other than governance. A government functioning under an independent judiciary enjoys the confidence of the people and the world has confidence in such a country. Always remember, this ‘confidence factor’ is fundamental to the success of a government and the progress of the country.

When people have confidence they bond with their government. It is the participation of 160 million people that will help the country move forward and not a dictator or unscrupulous politicians working under a muzzled judiciary. When the confidence factor is there, people don’t send their money abroad but invest it in their own country. That is when the country really progresses.

A government functioning under an independent judiciary does not have to have road shows, spending millions of dollars on foreign trips to attract investors. You don’t have to teach the world geography by requesting people to invest here based on the claim that ‘Pakistan is the hub of Central Asia’, a pet phrase of Shaukat Aziz and Pervez Musharraf in the eight years when they presided over the economy. The world ignored the absence of the confidence factor.

International investors are smart. They have to risk their money; they know the world geography better. Pakistan may be the hub of Central Asia but the investor knows the judiciary is not independent, lawlessness is internally created; and there is no justice. When he is pitched against the state or a bigwig neither the investor’s money nor his rights are protected. He will not come and invest irrespective of what you say.

Why does the investment pour into other countries of the region like India, Singapore or Malaysia? Why have they shot up to success and glory and we remain stuck in backwardness? It is not just because they are democracies but more so because their judiciaries are independent.

It is the duty of the parliamentarians of the majority party to force their errant leaders to restore the Nov 2 judiciary; remove a blatant constitutional violation and now let the country move forward. At a meeting of the PPP MNAs with Mr Zardari on May 16, only one MNA — a woman — stood up to tell her leader that the judges’ restoration was long overdue.

Was it the fault of the independent judges that a dictator purportedly removed them? Briefly, they set aside the sale of Pakistan Steel Mill (PSM) by the Musharraf government for Rs21bn when PSM land alone was worth over Rs60bn. They took notice of human rights violations of the people. Action was taken in cases of gang rapes, child marriages, disappearance of people picked up by the agencies and the high-handedness of the authorities. The judges brought much relief to the people and required the administration to act according to the law.

And when Musharraf’s most immoral and illegal creation, the NRO, came up before the bench of the Chief Justice for judicial review, the court suspended any benefits intended to be derived from the ordinance. The final judgment was to be passed after hearing all the parties.

The independent judges were considered a threat to the dream of a second illegal term of the presidency by a man insensitive to the welfare of this country and indeed to the agony of his compatriots. He betrayed his mindset when he accused innocent rape victims of seeking publicity and money to get immigration to rich countries.

We have already wasted 60 years while other countries have moved on. Please stop wasting more time by introducing new ‘packages’. It is time to undo the illegalities of the dictator as advised by the top and independent legal minds of the country. A purely legal issue should not be politicised. Even with respect to political matters remember the well known saying: nothing is politically right, which is morally wrong and let Pakistan move forward.

The emergence of an independent judiciary from the year 2005 under the Honourable Iftikhar Muhammad Chaudhry was the result of an evolutionary process of 58 years of trials and tribulations of this unfortunate country. Tampering with it will mean that many more years will be needed for this institution to re-emerge as independent.

The writer is senior partner of the law firm, Amhurst Brown, in Islamabad.
ma@amhurstbrown.com

OTHER VOICES – Middle East Press

Survival at our expense

The politicians are talking about the survival of the country but are thinking about their own survival… they are recruiting the dead, the prisoners, Qassam rockets, the Palestinians, the Syrians and the Iranians to buy a little more time.

This is a critical moment, Ehud Olmert said at the AIPAC conference. It does not even matter what he… is referring to precisely, because his intention was obvious. The more critical the national moment may be, the more a decision on his personal fate will be delayed.

It is hard to remain indifferent to the cynical scenario that repeats itself. This political conduct is identical to that of the days following the publication of the Winograd Committee’s interim report, and the promises of Ehud Barak to act to change the situation. It is hard to remember a similar situation of such absolute disconnect between the public and its leadership. The public has lost its trust in the prime minister’s ability to take action.

Olmert needs to end his tenure as prime minister as soon as possible, irrespective of the date when he is charged.

The legal proceedings will go ahead at their own pace and the attorney general cannot be asked to do the work of the politicians…. Olmert has avoided explaining to the public the envelopes of money he received…. — (June 8)
Haaretz

US bullying Syria

The message from Damascus is clear: Syria has not indulged in any kind of nuclear activity. The International Atomic Energy Agency (IAEA)… can inspect any site anywhere in the country. The Al Kibar site, alleged to be the location of a nuclear reactor… can also be accessed by IAEA inspectors, who will be in Damascus on June 22, for… investigation. Syrian atomic energy agency head Ibrahim Othman has said that his country had displayed complete transparency in all related matters. But the United States, in its obsession to protect Israel and ensure that no country in the region equals it in military might, will certainly not believe him.

Proof that the IAEA is an American puppet is its silence over Israel’s nuclear facilities…. Many Arab countries, the Arab League and other members of the international community have on numerous occasions sought an investigation of the Dimona nuclear reactor. But the Americans have been silent and have never asked for an IAEA inspection.

The IAEA has also not taken any initiative on its own to verify the charges…. The result is that Israelis have steadily built a huge nuclear arsenal…. All this proves that Arab countries are being singled out for persecution. This persecution will continue until they kowtow to Israel and sign peace deals on the Jewish state’s terms. — (June 7)
Oman Tribune