THERE is considerable excitement in provincial capitals about the first meeting of the new National Finance Commission (NFC), which is due later this month.

All parties, Punjab and Sindh in particular, are reported to be preparing for a battle royal.

The only point on which all provinces agree is to get the provincial share of the divisible pool raised to 60 per cent of the total collection, according to one report. But if that is all the NFC is going to do, its performance will be no better than the 2006 award when Gen Musharraf, as the supreme arbiter, had resolved the deadlock in the commission by nominally raising the provincial share and mandating an annual one per cent increase. Under that formula the provinces will be entitled to 50 per cent of the resources in the divisible pool in 2010-11.

The size of the allocation to the provinces is important but much more significant is the principle of distributing funds among them. The present formula of fixing a province’s share in accordance with its population, except for the division of the small portion of the sales tax added to the provincial share, is favoured only by Punjab. Some time ago the Balochistan finance minister claimed that at the meeting of provincial finance ministers in June last, Punjab had agreed to consider other bases of resource-sharing.

Relief at this welcome news was short-lived. Latest reports indicate that Punjab will defend the population-basis formula as stoutly as ever and it has been doing elementary arithmetic sums to counter proposals for other formulas. This does not bode well for the future of the federation.

The NFC is one of three institutions, the other two being the Council of Common Interest and the National Economic Council, that have a pivotal role in guaranteeing peace, justice and understanding between the centre and the provinces and also among the provinces. Their failures and inadequacies weaken the federation, undermine good governance and adversely affect the rights of the people. Some unusual importance attaches to the NFC award because it offers direct relief to cash-strapped provinces.

Almost every year Balochistan and the Frontier plead their inability to prepare their budgets unless they receive from the centre grants-in-aid besides their share in the NFC award. No responsible federation can be complacent about this state of affairs.

Distribution of resources across the various parts of a state is a fairly common problem in the world. All federations face this problem and so do some unitary states that wish to address economic imbalances between regions or communities. Population is a common basis of determining regions’ shares but quite a few other formulas are also in vogue.

For example, India also started allocating states their share of the divisible pool on the basis of population, and it is still a main factor, but other bases are also being used. These include a state’s backwardness/poverty, resource absorption capacity, ability to generate its own resources, et al. Some economists take exception to the Indian Finance Commission’s obsession with precise calculation of the different states’ entitlements but it will be difficult to find fault with the principle of defining these entitlements. The point one wishes to make here is that the NFC need not be shy of learning from good practices abroad.

For reasons that are well known the NFC has become a source of contention in domestic politics. The less populous provinces believe its awards have been unfair, unjust and politically unsound. If their grievances can be removed by including, along with population, some other criteria such as area and state of underdevelopment in the resource-sharing formula, the NFC may become a healer of their wounds.

Some thought needs to be given to the composition and autonomy of the NFC. It has traditionally comprised the federal finance minister, the provincial finance ministers and four other nominees of the provincial governments. This means a commission of the establishment and for the establishment. If a party is in power at the centre and in two provinces, the establishment’s hold over the NFC will become more complete.

The present practice of dumping NFC work on the desk of a joint secretary in the finance ministry confirms the low priority attached to the institution. The commission must be an autonomous institution with adequate staff and facilities for learning from and interacting with similar institutions in other countries, especially federations.

Examples are available to confirm the benefits of involving the public with the work of the NFC. For instance, the Finance Commission of India has put all relevant material on the previous finance commissions on its website. The present (13th) commission has also invited members of the general public, institutions and organisations to advise it on its task which is given in considerable detail.

Significantly, this task is not confined to apportioning shares in the divisible pool and also includes making suggestions “for maintaining a stable and sustainable fiscal environment consistent with equitable growth”. A similar initiative in Pakistan will promote a fruitful discourse on the issue of sharing of revenues, strengthen transparency and foster a climate of mutual trust among the people of different federating units.

One may also consider the view that if a regulatory mechanism becomes too cumbersome or too controversial to be useful, or if its operational costs exceed all possible benefits, it is better to abandon such a mechanism and save both time and resources. If unanimity among the provinces is impossible, the idea of having an NFC may be dropped and some other resource-sharing formula tried. One such suggestion is that the provinces may be happy if sales tax is returned to them along with property-related taxes. This will be quite just as sales tax was taken over by the centre from the provinces soon after independence — initially for a year, then for two years and after that on a permanent basis.

Above all the role of the NFC cannot be considered in isolation from the state’s priorities and the style of governance. The centre has become much too obese and much too extravagant to be healthy and efficient. It is in danger of collapsing under its own weight. Besides controlling defence expenditure and making it subject to normal financial discipline, the centre must shed a lot of fat. But the lean and austere centre that Pakistan needs for its survival and progress suits neither the political nabobs nor the status-crazy bureaucrats.

That is a much bigger problem than the NFC’s unsatisfactory functioning. Thus NFC reform will yield the desired result only if it runs parallel to a wider overhaul of the state structure.

LIVING in Pakistan is a nightmare, with unending terrorist attacks, skyrocketing prices, loadshedding, an almost non-functional state structure and an ever-deteriorating quality of life.

Ours is perhaps the only country in the world where a prime minister’s, and later the president’s, electronic address to the nation can be grossly mishandled. With this level of performance, how can people expect their government to deliver, both in the fields of high politics (issues concerning national security) and social welfare? Prolonged periods of military rule, which targeted the political class, resulted in a general debility in the political parties. The Feb 18 general elections reversed the trend but only formally.

Instead of chronicling events that speak for themselves louder than words, the focus of this piece is on the conceptual hurdle that blocks the path of progress in Pakistan. Much fuss is made about national security. The American Gulliver is being told again and again by brave little Tom Thumb that national sovereignty will be defended at all costs. Maybe we hope that the ababils of Islamic tradition will come to our aid. It is not known for sure whether Pakistan has given a nod to American intrusion as is vaguely claimed. Moreover, America’s unmanned drones do not really need a passport to fly into Pakistani airspace. And all that Pakistan can do is to hope for succour from the said ababils.

Another important issue of national security is the safety of nuclear assets. India has never objected to Pakistan acquiring nuclear strength. We have no quarrel with our neighbours. Some say we have a threat from Israel. At the moment that country’s first target is Iran, not Pakistan.

Being at peace or at least on terms that are not hostile with all our neighbours, we have a surfeit of military hardware. We have enough guns to take on the terrorists if we have the will and also enough if some Bonapartist fancies usurping representative authority. What the country needs is not more arms but more schools, hospitals, energy, parks, sports complexes, etc.

Social security means more food, medicine, shelter, jobs, education and a peaceful, leisurely environment. What the elites from Washington to Islamabad have to offer is counter to what the people dream of, except that the fight against terrorism is dear to the people of Pakistan and the US administration. A drowning Pakistan needs airbags and other life-sustaining tools. Most of all it needs release from tension, a commodity that is available in the form of the Star Laughter Challenge from across the border. Pakistan faces no external threats; its problems are internal that can be addressed by good governance.

But good governance is nowhere in sight. The PPP government has motion but no movement. Like all populist regimes, new feet have been slipped into old shoes. The formal change has been crafted with finesse, leaving things as they were with the shuffling of a few names. A digression on populism is not intended, except as a reminder of the fact that sometimes the elite achieve their objectives by rhetorically raising vague radical slogans. No clear-cut policy or vision is projected. Things remain as they were. Old names are rolled out and new ones play the same tune.

The PPP has had its ups and downs. It has had at least two glorious moments. One, when Nawaz Sharif, its arch rival, was in power in 1997 and the PPP had only 18 members in parliament, it voted with the government for the scrapping of 58-2(b). The late Benazir Bhutto praised Nawaz Sharif for restoring the democratic vision of the father of the nation. Two, when she returned to Pakistan last year. Her sin was that she deviated from the script of serving the elites. She gauged the unrest amongst the people and forged the unity of civil society. She built bridges with all relevant segments of society, a feat the elites did not approve of and she was thus removed from the scene.

Her successors learned their lesson and reverted to the script. They assumed power but the script left them with no space for effective governance. As a rule, bigger powers make proposals only after being sure that they have the means to implement them. Prime Minister Junejo signed the Geneva Accord regarding Afghanistan with American blessings. President Zia dismissed him, only to be blasted in the skies. Mirza Aslam Beg, who took over as army chief, learned his lesson and instead of slipping into Zia’s shoes requested Ghulam Ishaq Khan to hold general elections and hand over power to the winning party.

‘Stalemate’ sums up the performance of the PPP government at the centre. It cannot manage even minor things without hassle. The PML-N government in Punjab is doing better. Wheat flour is being sold throughout that province at Rs15 per kg, while in the rest of the country it is available at double that rate. The PML-N is not encumbered by any script so it can demonstrate as much people’s friendliness as the local power structure allows. This friendliness is also seen in the honour given by the Punjab government to deposed Chief Justice Iftikhar Chaudhry.

The groundwork of a people-friendly state was laid by the Feb 18 elections, which in turn were the fruit of the confidence-building lawyer/civil society movement. Though such a state is still a dream, it is no longer a pipe dream. Tribute should also be paid to the missing persons who unveiled the horrible face of an oppressive state. Social security in Pakistan also has a regional dimension — South Asia cannot move ahead minus the second largest state in the region.

The point is that now light can be seen beyond the tunnel. It is too early to speculate about the agent of change. May be it will be one of the existing political parties, or a coalition, or maybe a new party adhering to the principles of the lawyers’ movement as its core will take the driving seat and bring a fresh breeze to this ailing land.

THE main purpose of British generals, it sometimes seems, is to say aloud the things that American generals (and British diplomats) think privately but dare not say in public. Things like: “We’re not going to win this war.”

That was what Brigadier Mark Carleton-Smith, the senior British commander in Afghanistan, said last week at the end of his six-month tour in command of 16 Air Assault Brigade. His force saw a great deal of combat and lost 32 killed, but it didn’t lose any battles. Regular troops rarely lose battles against guerillas. But there were no lasting successes either — which is also typical of wars where foreign troops are fighting local guerillas.

Carleton-Smith did not say that the foreign forces in Afghanistan will lose the war. He said that they could not deliver a “decisive military victory.” The best they might do, over a period of years, would be to reduce the Taliban insurgency “to a manageable level...that’s not a strategic threat and can be managed by the Afghan army.”

“If the Taliban were prepared to sit on the other side of the table and talk about a political settlement,” Carleton-Smith continued, “then that’s precisely the sort of progress that concludes insurgencies like this. That shouldn’t make people uncomfortable.” For the truth is that the foreign forces are backing one side in an Afghan civil war. If the war cannot end in a decisive victory for one side or the other, then it must end in a negotiated peace that is acceptable to both sides.

The reason neither side can win is that they are too evenly balanced, and each can hold its own territory indefinitely. The United States allied itself with the main northern ethnic groups, Tajik, Uzbek and Hazara, who together account for about 60 per cent of the population, in order to drive the Taliban from power in 2001. But the Taliban were and still are the major political vehicle for the Pashtuns, who are about 40 per cent of the population.

The Pashtuns were traditionally the dominant ethnic group in Afghanistan, but in 2001 they were effectively driven from power by the other ethnic groups and their western allies. That is why they are in revolt: the area where western troops are fighting “the Taliban” are all the areas of southern and eastern Afghanistan where Pashtuns are in the majority, and nowhere else. In practice, the foreigners are fighting Pashtun nationalism. That is why they cannot win.

On the other hand, and for the same reason, the Taliban cannot win a decisive victory either. They never established control over northern Afghanistan even when they ruled in Kabul in 1996-2001, mainly because the other ethnic minorities saw them as an exclusively Pashtun group. Moreover, most non-Pashtuns who did fall under their rule were alienated by their intolerance and brutality, and would certainly not welcome them back in sole power.

But a negotiated peace deal must give the Pashtuns a fair share of power at the centre, and that means giving the Taliban a share of the power. This is still seen as unthinkable in most western capitals, but it is a thoroughly traditional Afghan way of ending the periodic ethnic bust-ups that have always plagued the country, and it will happen sooner or later.

Does this mean that Afghanistan will re-emerge as a base for international terrorism? Unlikely, since it would not be to the advantage of any Afghan government, even one that included Taliban elements, to attract that kind of international opprobrium. Besides, international terrorists don’t need “bases” to prepare their attacks; a few rooms will do.

Brigadier Carleton-Smith did suggest that the foreign troops need to stay longer: “If we reduce our expectations then I think realistically in the next three to five years we will be handing over tactical military responsibility to the Afghan army and in the next 10 years the bulk of responsibility for combating insurgency will be with them.” There are two things wrong with this argument.

One is the notion that western countries are willing to take casualties in Afghanistan for another three, five or ten years. The other is that the Afghan government is not getting stronger.

In a recently leaked diplomatic cable the deputy French ambassador in Kabul, François Fitou, reported that the British ambassador there, Sir Sherard Cowper-Coles, told him that the strategy for Afghanistan was “doomed to failure.” In Sir Sherard’s view “the security situation is getting worse, so is corruption and the government has lost all trust”. The usual denials followed, but that is exactly what British officials there say in private.

So it would make sense to announce a deadline for pulling out the foreign troops and start negotiating for a final peace settlement in Afghanistan now. Waiting is unlikely to produce a better deal. Which is probably why President Mahmud Karzai said last week that he had asked the king of Saudi Arabia to mediate in negotiations with the Taliban.

— Copyright Gwynne Dyer