Who needs the NFC?
By Dr Pervez Tahir
THE constitution of a National Finance Commission (NFC) has been among the early decisions taken by the democratic regime. The only two consensual awards emerged during democratic regimes in the past, one under Mr Bhutto and the other during the first tenure of Nawaz Sharif. That might happen yet again. So, at least, all well-meaning souls wish. But will it, with positions and even postures set in stone?
Each province now has its well-known position, with a Kalabagh-like regime-neutral provincial consensus. Territorially the largest province, Balochistan wants territory to be the basis of distribution. The NWFP is the poorest; it insists on poverty and backwardness as the criteria for horizontal distribution. Sindh believes it collects the most taxes and would like it to be the basis. Punjab is the most populated and has had the muscle to keep population as the sole criterion in the apportionment of resources. If the presidential election is any guide, this time round the power has tilted in the other direction.
One shudders to think how this new matrix will play up in the deliberations of the recently constituted NFC, the conciliatory gestures of Mian Shahbaz Sharif towards the smaller provinces notwithstanding.
Resource distribution had haunted the unitary federation inherited in 1947 from its very inception and was finally its undoing in the smog of 1971. Reading the proceedings of the Pakistan Economic Association in the 1950s and the 1960s, one comes across a recurrent view of the Bengali economists about the unfair centre-province resource distribution. At play had been the logic of power.
East Pakistan was the condemned, over-breeding province; so population could not be the criterion of resource distribution. ‘National interest’ demanded parity. Once that unfortunate province was seen off by the forces that be, population was unashamedly enforced as the sole criterion of federal-provincial apportionment.
The Panel of Economists set up by the Planning Commission in 1969-70 on the Fourth Plan came out with two separate reports, a Bengali report and another by Punjab- and Karachi-based economists representing West Pakistan. The plan never took off. The Panel of Economists recently set up by the Planning Commission to prepare the next five-year plan is drawn almost entirely from what President Zardari described in his recent Washington Post article as “an elite oligarchy, located exclusively in a region stretching between Lahore and Rawalpindi-Islamabad” and Karachi, with an IFI nexus as the most common denominator.
Nominal representation of economists from Pakhtunkhwa and Balochistan and none from rural Sindh, the Seraiki belt of our amiable prime minister, Fata, AJK, and Northern Areas gives little hope for inclusive development or the ‘Pakistan Khappey’ project.
Arrogance like this has sown the seeds of a deep mistrust in the federating units. Resources are generated in provinces, not Islamabad Capital Territory. Should the provinces trust the federal government with the major chunk of their resources? The last NFC was subverted by the Musharraf government by shifting the focus from the vertical distribution on which there was a consensus to horizontal distribution between the provinces.
All provinces were agreed that the federal share be reduced to 50 per cent from the hefty 62.5 per cent fixed by the NFC 1997 on the advice of the current chairman of the Panel of Economists. Instead of acting on this united stand, the Musharraf-Aziz government challenged the provinces to come out with a new formula for distribution among them. The inevitable result was a deadlock, giving Musharraf the chance to impose an interim award to protect the federal share.
The success of the new NFC hinges on two actions by the federal government and an act of entente by the Punjab. The former has to implement this year, not over the years, the provincial consensus that already exists on a 50:50 vertical distribution with no deduction of collection charges, and the latter has to accept population as just one of the criteria. If the unlikely happens, and the NFC moves on rather than witnesses walkouts and boycotts in the very first session, then a possible consensus formula may be à la the Senate elections: equal weightage to population, territory, poverty and revenue collection.
Roughly, the resulting weighted average will give Punjab 36.42 per cent compared to 57.36 per cent at present, Sindh will improve to 29.34 per cent against the existing 23.71 per cent, the NWFP’s gain will be 15.19 per cent compared to 13.82 per cent at present and Balochistan will claim 19.05 per cent against the existing share of 5.11 per cent. The fact of Balochistan being the only significant gainer, and the estimates of tax collection and poverty, will raise the temperature of the discussion at the NFC. What is acceptable for the Senate may not be acceptable for resource distribution.
If inter-provincial disharmony is what NFCs promote, who needs them? My reading of the positions taken by the smaller provinces is that the issue is not more resources but control over their resources. That understood the response has to be to allow each tier of government a major elastic tax of its own. The federal government can live perfectly well within its constitutional limits on taxes on incomes including agricultural incomes, and customs. Sales tax should return to the provinces. Local government qualifies for the third tier; it must be allowed all property-related taxation. Further, provinces should have full control over their natural resources.In case of need, any tier should be able to approach the Council of Common Interests (CCI) and negotiate assistance from other tiers. In the interest of efficiency, the Federal Board of Revenue may continue to collect all taxes but it should be placed under the CCI and be funded by fixed collection charges.
The writer teaches at the GC University, Lahore.


Mbeki in trouble
By Chris McGreal
PRESIDENT Thabo Mbeki’s political future hung in the balance on Friday as South Africa’s ruling party debated whether to force him from office and a leading former judge said he should be put on trial for allegedly misusing his power to try to imprison the man likely to succeed him, Jacob Zuma.
The African National Congress national executive began a three-day meeting at which Mbeki’s future will be decided after a high court judge accused the president and senior justice officials of being part of an illegal conspiracy to charge Zuma, the ANC’s president, with corruption for political ends.
Mbeki’s critics were lobbying hard for his removal, although earlier in the week Zuma was more cautious. South Africa’s influential council of churches warned that ousting Mbeki could create chaos.
Before the meeting, Mbeki launched a robust defence of his actions saying in a statement that the “insults” hurled at him were not based on facts. He denied any involvement in the decision to prosecute Zuma and said “no evidence has been provided by those making the claim”.
But the president received another blow before the meeting began when one of the country’s most respected former judges, Willem Heath, called for the president, his former justice minister, Penuell Maduna, and the former chief prosecutor, Bulelani Ngcuka, to be charged with crimes for pursuing a political prosecution. His call followed a ruling last week by a high court judge, Chris Nicholson, against the prosecution of Zuma, which he said was the result of “baleful political influence”.
Heath told a Johannesburg newspaper, the Mail and Guardian, that South Africans needed protection from the “systematic abuse, detailed in the judgment, of organs of state by the president and his purported henchmen.
“If the behaviour found by Nicholson is not addressed, the application of the principle of the separation of powers will remain at the whim of those who have seemingly been using it most effectively for personal gain.”
Some senior party officials said they would not support ousting Mbeki because of the damage it would do to the party.
Mbhazima Shilowa, the premier of Gauteng province, with Johannesburg and Pretoria at its heart, said that a no-confidence vote would divide the ANC. “I think members of the executive will not vote for that motion,” he said. “I personally don’t think the judgment provides any basis to say the president must go.” But some ANC factions, including the party’s youth league, Communists and trade unionists have lobbied hard to oust Mbeki.
The council of churches said that removing Mbeki could plunge the country into a crisis. “In our view, the recalling or impeachment of the president will lead to the collapse of the current executive and would plunge the country into an unnecessary crisis.”
— The Guardian, London

