Poverty and inflation

PAKISTAN’s economic future is bright despite the setback caused by the October 8 earthquake, says a senior IMF official. In saying that he rhymes with the optimistic predictions of the World Bank and the Asian Development Bank, which have made intense studies of Pakistan’s economy.

The budgetary resources may, however, be strained and the balance of payments may come under stress, says senior IMF official Mohsin Khan. But these are problems that can be overcome, particularly if more of the international assistance comes in the form of grants. And the advisor to the prime minister on finance Dr Salman Shah says that 60 per cent of the over four billion dollar soft loans will be converted into grants. But it is premature to say so before the total soft loan aid is received which is spread over three years or more.

Diverting financial resources from the long-planned development to rehabilitation and reconstruction following the rendering of nearly four million people homeless and finding jobs for many among them may reduce the economic growth rate target of seven per cent by up to one per cent, according to Mohsin Khan. The IMF on its part is ready to help Pakistan to the possible extent. The World Bank and the ADB have estimated the cost of construction to be at around 5.2 billion dollars spread over three years or more.

He has already warned the government of the problem of inflation as large external funds are used for rehabilitation and reconstruction and also cautioned against increasing the external debt after it had earlier been reduced to 60 per cent of the GDP.

The Pakistan Millennium Development Goals report is also ready by now and it says one-third of the people of Pakistan are poor and 12 per cent of them face acute poverty and a great deal has to be done to eradicate the poverty. The report says that economic growth is essential for poverty reduction, but that alone may not be sufficient to do so because of the existence of high inequalities inherent in the socio-economic structure of the country.

The unequal socio-economic structure results in unequal opportunities for the neglected segments of the population, says the report. It adds, the people are deprived of the right to education or consigned to poor health because they are born poor in the remote regions of the country.

The report says inequality in capabilities shapes the chances of individuals for achieving prosperity in life. Therefore, the over-arching goal of development is to enhance people’s capabilities. The report stresses that enhancing human capabilities requires the basic right to participate in society and its political process.

The government made a commitment to raise pro-poor budgetary expenditure significantly. Notably despite containing the budgetary deficit, the pro-poor budgetary expenditure rose from Rs 151 billion in 2000-01 to Rs 278 billion in 2004-05.

The pro-poor expenditures as percentage of the GDP increased from 3.63 per cent in 2000-01 to 4.59 per cent in 2003-04 and then declined to 4.25 per cent in 2004-05. These ratios have remained short of the targets because of the larger GDP base in 2004-05. The report says that over the large five years, the pro-poor expenditures increased by an average of 16.6 per cent per annum. And the large part of these expenditures (50-54 per cent) is allocated to human development, mainly in education and health sectors.

Despite a rise in expenditure on education in Pakistan, it is still, if compared with the past, low by South Asian standards.

The report says that following the decision of the Supreme Court to make payment of Zakat voluntary, the Zakat collection has declined to Rs 5.3 billion in 2004 as compared to Rs 8 billion in 2003. While Zakat payment suffers from a low public coverage, there is a also a great deal of leakage. Both need to be improved to make Zakat more useful for the one-third of the poor.

Now a major new measure is being undertaken that can help reduce poverty in the Saarc region as a whole. That is the South Asia Free Trade Area (Safta) which is to come into effect from January 1, 2006. It was agreed to by the technical committee of the Saarc which recently met at Kathmandu. The Safta will eventually double the volume of trade in the region.

The Saarc summit in Islamabad on January 6, 2004 had decided to make Safta effective from January 1, 2006. The Saarc council of ministers wants to take the economic cooperation among its member countries several steps further and ultimately form an economic union on the lines of the European Union.

Now the first scaling down of the tariffs in the region will take place from July 2006. It will begin with the non-LDC countries in the Saarc — India, Pakistan and Sri Lanka — reducing their tariff from the existing level to 20 per cent within a two year period. By July 2008, the tariff in all member countries, including the LDCs, will be reduced to 20 per cent.

Is Pakistan ready for the liberalization of trade with India although its leaders have been equating such measures with the settlement of the Kashmir issue? It can be embarrassing for Pakistan to press for liberalization of the global trade under WTO and calling for larger trade among the OIC members if it opposes the implementation of Safta‘s liberal provisions.

Or does Prime Minister Shaukat Aziz hope that within two and a half years when the first tariff reduction becomes fully effective, the Kashmir issue would be on its way to a solution? He wants open trade with India and political talks to move in tandem. Pakistani leaders have been talking of two-year period for a settlement of the Kashmir issue or to get to grips with it prior to a solution.

While Pakistan is negotiating free trade agreements with various countries including the US and several Middle Eastern countries, president Musharraf has been calling for a far larger mutual trade between the 57 OIC member states. This is acceptable in principle to all the members of the OIC, but in fact there has been little of mutual trade for a variety of reasons.

The Islamic Development bank, a financial arm of OIC, was also set up primarily to finance trade between Muslim countries and it has been doing that job on a modest scale. The major problem is transportation, shipping in particular. Muslim countries have to develop their own shipping lines jointly to promote larger trade between them.

While president Musharraf has been calling for larger trade between Muslim countries, he is thinking of increasing Pakistan’s exports to them first. But the fact is we have very little exportable surplus. We have hardly any cotton left to export after our mills consume the available quantity. Our occasional sugar surplus needs large and uneconomic subsidies.

We have rice to export in which we have stiff competition with many countries including Thailand and India. China now wants our quality rice which is indeed a welcome development. Too much of their leather exports are under-processed. We have lost our leading position in sports goods and surgical goods, which we earlier enjoyed.

Textile products now form two-thirds of our exports. We have to produce not only far larger exportable surpluses but also seek a larger variety in exports to various new markets. And they have to be marked for their higher quality consistently, hence the appeal of the government to the industry to develop their own brands and improve their image steadily.

And we have to fight inflation at home constantly so that the exporters will not call for rebates too often. Power, oil and transportation should be cheap if we want more of the manufactured goods to be exported. In a heavily populated country with a large number of poor, the people will not accept low priced oil and cheap power only for the industries and later for the agriculturists.

Federal minister for Petroleum Amanullah Khan Jadoon promised, at the floor of the National Assembly, an early revision of oil prices, but Mr Shaukat Aziz has ruled out any reduction in oil prices. The price in the US has now risen to 60 dollars a barrel because of excessive cold there.

We have been told that President Musharraf will request King Abdullah of Saudi Arabia to resume the oil facility costing around a billion dollars when they meet for the OIC summit in Makkah. If more revenues are needed why choose only the motor car owners who have been forced to buy a car only because they have no other means of transportation? Why aggravate the inflation for the upper and the middle classes?

That the high economic growth rate leads to higher inflation, unless effective counter-measures are taken, was evident even before the Oct 8 earthquake. The quake has made the situation far worse as external funds are pumped into the country without producing anything to balance it. Fighting inflation is all the more necessary now to fight poverty particularly when food prices are the hardest hit. The challenge of fighting poverty and inflation was there even before the earthquake.

The odd couple

NOTHING succeeds like success, however simulated, and at the moment two persons — President Pervez Musharraf and Prime Minister Shaukat Aziz — are savouring their own personal brand of success.

Never before since 1999, when they first began their collaboration in the governance of Pakistan, have they appeared almost at par — as equals — as they did during the donors’ conference held in Islamabad on November 19. They were no longer performing the roles of a military president attended by his lackey civilian prime minister. Instead, they sat next to each other on the same podium, sharing the stage with UN Secretary-General Kofi Annan.

The president and the prime minister, who had boasted not too long ago that they had broken the begging bowl and would never need to rely on foreign help or aid, were now welcoming charity from relays of donors. This was begging with panache. Each donor country came with its offerings — some small, some large, some with outright gifts, some with grants-in-aid, some containing the hidden sting of repayable loans. By the evening, commitments in excess of six billion dollars had been piled up, $3.98 billion in loans and $2.29 billion in grants.

Once upon a time, Pakistan would have had to wear out its knuckles knocking on the doors of the IMF and the World Bank in Washington and the Asian Development Bank in Manila, for only a fraction of such a sum. Instead, on a Saturday in winter, donors and lenders came to Islamabad to unlock their coffers.

The glittering trappings at the conference centre were reminiscent of a Mughal durbar, where tributes would be proffered by foreign emissaries and condescendingly accepted, where each tribute was measured against expectation, and then handed over to court functionaries to be stored in the royal toshakhana, often to disappear without a trace.

How many of the commitments will fructify, how much of the pledged amount will be deducted at source to pay for costs such as aviation fuel for helicopters, food from five-star hotels for the relief workers and for the overhead charges loaded by the UN to pay for its costly headquarters in New York, and how much of it will actually trickle uphill to those shivering in the mountain heights of Azad Jammu and Kashmir, only an obsessively diligent auditor will be able to tell.

The concern of the donors was articulated by the ADB President Haruhiko Kuroda. He asked for an “effective, even and transparent utilization of financial assistance.” To this, the World Bank added its own, saying that a “coordination of reconstruction efforts, policies, procedures, regulation and oversight are required to avoid waste, fraud and distortion.” What they justly fear but cannot see is the trickle-down effect of their aid, from the ravaged slopes of Azad Kashmir to plots in Defence Housing Authority schemes in Lahore where brokers are already opening up order books.

For President Pervez Musharraf and for Prime Minister Shaukat Aziz, however, these are niggling details. They view the donor’s conference as a personal triumph, a laurel crown large enough to fit both their heads.

Since 1999, both of them have demonstrated that they can operate at the highest empyrean with impunity, General Musharraf over and above the heads of the corps commanders of which he was once the head, and Prime Minister Shaukat Aziz over and above an electorate which has served its purpose by projecting him into power.

They are both consummate performers in public, communicating with their audiences with a practised Teflon-coated ease. They have honed their skills on the job. Shaukat Aziz, chosen by the impossibly young looking but dynamic John Reed to a senior management position in Citicorp in 1990, has modelled himself more on Reed’s predecessor, the media-savvy Walter Wriston. Even though Mr Aziz is now the prime minister, he continues to retain the finance ministership because, as he mentioned privately to another recent aspirant for that post, the finance ministership is the only real job that he has. He acknowledges that he owes his position not to the obliging voters in NA 59 Attock — his constituency — but to a solitary non-voting constituent who has sustained him in office, General Pervez Musharraf.

By contrast, President General Pervez Musharraf’s constituency is myriad: it spans a rainbow of interests — from the WASP White House under President Bush through the khaki echelons of the army of which he continues to be Chief of Army Staff, to the ethnic diversity of the Commonwealth which maintains a revolving door policy regarding Pakistan and its military rulers.

After Mr Zulfikar Ali Bhutto’s petulant withdrawal in 1972, the Commonwealth refused membership to Ziaul Haq’s Pakistan until 1989 when it readmitted Benazir Bhutto’s democratic Pakistan. Ten years later, when Musharraf ousted her successor Nawaz Sharif, the Commonwealth put Pakistan on its watch list. Its forceful communique in 1999 read: “Heads of government condemned the unconstitutional overthrow of the democratically elected government in Pakistan on October 12, 1999. They believed that no legitimacy should be accorded to the military regime and called for the restoration of civilian democratic rule without delay. They endorsed CMAG’s decision to suspend the military regime in Pakistan from the councils of the Commonwealth, pending the restoration of democracy in the country.... Recognizing the unconstitutionality of the regime, heads of government urged that Prime Minister Nawaz Sharif and other detained with him be released immediately and that the rule of law in Pakistan be duly observed.”

Six years later, having reinstated Pakistan in May 2004, the Commonwealth heads of state meeting in Malta at the end of last month tamely advised General Musharraf to doff his uniform, noting “that the holding by the same person of the offices of head of state and Chief of Army Staff is incompatible with the basic principles of democracy and the spirit of the Harare Commonwealth principles. They reiterated that until the two offices are separated, the process of democratization in Pakistan will not be irreversible.”

Forewarned about this censure planned against him, Musharraf tactfully stayed away from the summit at Malta and sent Shaukat Aziz instead. Interestingly, in their communique, the heads of government urged the state of Pakistan rather than General Musharraf per se ‘to resolve this issue as early as possible, and not beyond the end of the current presidential term in 2007 at the latest.” Reluctant to strip the king and then leave him without any clothes, they gave him a further two years to stitch himself another outfit.

The Commonwealth Secretariat at Marlborough House was careless: it should have consulted its files. The Pakistan Supreme Court had allowed a similar dispensation to Musharraf in 1999, when it gave him two years to implement the Islamization of the economy. He paid no more heed to that decision than he will to this latest exhortation by an indulgent Commonwealth.

Both President Musharraf and Prime Minister Aziz have as little use for the Commonwealth as they have for domestic public opinion. They share a noon-day vision of the country they govern, describing it tirelessly to visiting dignitaries — as they did to Australian prime minister John Howard — as “a moderate and enlightened country, a vibrant democracy with a strong opposition and a vocal press.”

Other observers like the IMF, though with both ears to the ground, detect a certain disconnect between perception and performance. In its annual review, the IMF expressed its ‘concern over widespread poverty, high inflation, widening of the current account and budget deficits, continued power sector’s drain on budget and stagnation in Pakistan’s tax-to-GDP ratio.

To the average Pakistani, this is a battle between distant titans. For them, Islamabad is as far away as Delhi once was to the average citizen in Mughal times. They have become reconciled to the saccharine of self-projection as a substitute for policy. They continue to envy the limitless run of luck that sustains Pervez Musharraf. Anyone who doubts this should access the president’s website, his musings marked From A President’s Desk:

“My promotion as an army chief is next only to a miracle (in spite of my qualitative edge), seen within all the seniority manipulations, negative propaganda against me and my character assassination. Together with this turbulence in my career, I was lucky to escape certain death three times (other than during war) before I became the Chief. Circumstances did not ease up even after I reached the pinnacle of my military career. The aircraft that I was travelling in was almost made to crash by an ex-prime minister. As the president of Pakistan I have escaped assassination attempts three times. This makes for some kind of record for the Guinness Book of Records. I call myself “Lucky”.”

Anyone who nourishes a hope that both the lucky president and his equally fortunate prime minister are on the final lap of their tenures, should look for a clue in an advertisement posted recently by the sycophantic management of a recreation resort. It shows Musharraf and Shaukat Aziz walking together, deep in conversation. Above them a banner reads: “It’s not over yet.”

Iraq war & Arab media

IT seems that the Americans are realizing the costs and effects of the venture they decided to take in Iraq. The strategy, which Bush administration is presenting to achieve the victory in Iraq doesn’t seem to even impress his own party members.

The pressure of withdrawal is mounting and so are the fatalities. More than 60 per cent of the Americans are questioning whether the war was worth it. All this points to one thing: it shall not be long before a phased withdrawal of the American and British troops is announced starting around 2006. But where does that leave Iraq?

Although, it has been clear from day one that the problems, which Iraq faces today, were created by America, and it also clear that Americans seemed to have run out of choices or options to stabilize Iraq, the effects of not having the right options for Iraq, once the Americans return are equally disastrous for each and every country within the region.

During the run-up to the war, Americans asked Pakistanis and Bangladeshis to provide military support, which could play an important role in reducing the burden of maintaining law and order in Iraq. But, in the face of local public pressure, and the unilateral decision of Americans to go to war without the approval of the UN, neither of the two countries were willing to provide any kind of military support to Americans in Iraq.

The question that needs to be raised now is, what next once the Americans are out of Iraq? Almost everyone, especially Pakistanis, remember what happened in Afghanistan and the role, played by the US in the Afghan war against communist USSR during and after the war. But, what is more important to remember is the civil war and the rise of the Taliban regime, which emerged after the Americans and Russians had left the region.

And that brings us to the primary questions which need to be raised: Do liberal Muslims want another Taliban styled government in the centre of the Middle East? Do we want a civil war in Iraq, knowing that it shall spread across the Middle East once the Americans have gone?

These fundamental questions need to be addressed by all Muslim countries in region. Otherwise, the effects of an open civil war are going to be clearly visible in all the countries in the vicinity.

Unfortunately, one or two countries cannot devise a strategy to address both these questions. And it is in this perspective that the OIC needs to play an effective role in providing a solution. Pakistan, Bangladesh, and even to certain extent, Indonesia can lead in the formulation of a strategy with the blessings of the OIC, which ensures the stability of Iraq and eventually, the stability of the Middle East region.

Though it is clear from past experience that the OIC is not a very reliable forum for any serious problem resolution, yet, if this opportunity is not availed of by the OIC then once again it would have proven its incompetence. But all said, and done, the two questions haunt us if they are not tackled properly at this stage.

Some of the ways of addressing these would be:

— The UN takes administrative control of Iraq and guides the elected Iraqi government in transforming Iraq into a stable country, while the Americans are taken out of the process. The current Iraqi government would be foolish to believe that once the US is out, they will be able to control the whole country without presenting its unity, and it is in that sense that the UN needs to be actively involved.

— The OIC, along with Pakistan, Bangladesh and Indonesia actively cooperates with the UN to provide troops and other facilities to ease the daily suffering of Iraqis and to ensure stability along with carrying out reconstruction work.

And that brings one to the most important role that needs to be played by famed Al Jazeera.

Al-Jazeera from the day of its inception has played a very important role. It can be said that Al-Jazeera is the first Muslim media organization, which has demonstrated excellent credibility and an unbiased stance in most conflicts between the West and the Muslim world by highlighting the mistakes committed by the West. But unfortunately, the role it has played in Iraq shows the conflict as between the Iraqis, struggling to push US out of Iraq.

It is high time that Al-Jazeera revised its role and started looking at the cementing the differences between Shias, Sunnis and Kurds in Iraq. Al-Jazeera is a widely viewed television channel and if the conflict resolution is shown in an unbiased and a constructive way then it is very likely that the predicted civil war can be averted. An open civil war among Shias, Sunnis and Kurds is in no ones interest and if Al-Jazeera can bridge the gap among 3 communities to cement their differences then it would have achieved something, which Americans have failed to achieve in two years.

If we can show ourselves only as Muslims without showing that we are Shias, Sunnis or Kurds then we can achieve the stability we desire, but to achieve that, each and every one needs to play a role, including, OIC, Pakistan, Bangladesh, Indonesia and of course, Al-Jazeera.

Focus on Central Asia

IS RUSSIA a partner of the United States in the war on terrorism? You wouldn’t know it from the bitter campaign Moscow is waging to thwart President Bush’s democracy agenda in Muslim Central Asia.

Mr Bush rightly believes that political liberalization in the energy-rich and mostly authoritarian republics that lie north of Iran and Afghanistan is essential to denying Al Qaeda and other Islamic extremist movements influence or bases in the region. Yet Moscow insists on portraying US encouragement of free media and free elections as a plot to extend western influence at Russia’s expense. Russian President Vladimir Putin offers a warm embrace to any autocrat who rejects reform.

The most blatant example of this hostile strategy came Nov. 14, when Uzbekistan completed its coverup of a massacre of opposition supporters in the city of Andijan by sentencing 15 men to prison. Uzbek President Islam Karimov’s refusal to accept Western criticism of the slaughter or the subsequent show trial led him to break a strategic cooperation agreement with the United States and order US.forces out of an air base they had used for operations in Afghanistan since 2001. But Mr. Karimov’s handling of Andijan was praised by Mr Putin, who on the day of the sentencing hosted the Uzbek strongman to sign a new treaty of alliance — with Moscow instead of Washington.

Uzbekistan thus joined an emerging Moscow-led bloc of dictatorships. Belarus, home of Europe’s last strongman, and Turkmenistan, ruled by a despot whose cult of personality rivals that of Kim Jong Il, are charter members; Mr. Putin is also working hard to win over authoritarian Armenia, Tajikistan, Kazakhstan and Azerbaijan.

Through his diplomats and the Russian media, he conducts a mendacious propaganda campaign, arguing that US support for independent civic groups, free media and opposition political parties is a cover for CIA-sponsored coups. He presses Central Asian governments to expel US forces from bases while offering energy and military deals of his own. He publicly applauds fraudulent elections and crackdowns on opposition movements. Russian influence is one reason that a Bush administration effort to press for free and fair elections this fall in Azerbaijan and Kazakhstan was mostly unsuccessful. Both countries are about to become major oil and gas exporters, and both have leaders who aspire to close relations with the United States. Far from using democracy as a pretext to advance US economic interests and military influence, Mr. Bush risked those interests by pressing Azeri President Ilham Aliyev and Kazakh strongman Nursultan Nazarbayev to allow their opponents to freely challenge them at the polls. Despite some modest concessions by both rulers, the results were meager: International observers declared that Kazakhstan’s presidential election, fell far short of democratic standards.

—The Washington Post