Oil prices hurting growth

WHILE meeting in freezing Moscow last week the G-8 finance ministers said the soaring oil prices posed a threat to the prospects of higher economic growth in 2006. The joint communique issued after a stormy debate over the current situation, they said the overall global growth rate remained solid and is expected to continue in 2006, but the risks remained, particularly from high and volatile energy prices.

The soaring oil prices continue to be of grave concern to the non-oil poor and rich states alike and threaten to reduce the growth prospects of many developing countries. The rich countries can transfer the impact of the oil prices on their economies to the developing countries through higher-priced exports, as has been happening since 1973 when the prices shot up for the first time.

While the oil prices have come down in a small way following the disclosure of a larger than expected oil reserves in the US, the prices still remain high around 65 dollars a barrel. The US was really interested in keeping the oil prices down and the oil supply steady as it imports half of the oil it consumes and is a real oil guzzler.

The Saudi minister for oil Ali Naimi said in Houston, US, the oil prices should be between 45-50 dollars a barrel to ensure the existing global supply level and increase the global output by 1.4 million barrels a day in the coming years. Ali Naimi‘s forecast of increase in consumption in 2006 is 400,000 barrels per day lower than that of the international energy agency. But Saudi Arabia intends to boost production by 1.5 million barrels a day over the next 4 years, with a total output of 12.5 million barrels a day.

Meanwhile, Pakistan has been trying to get two billion dollars worth of Saudi oil through a special financing arrangement but the efforts have fallen through. King Abdullah of Saudi Arabia, to whom the request was originally made by President Bush in Riyadh and then repeated during his recent visit to Pakistan, has not acceded to that .

The earlier Saudi oil facility was worth about a billion dollars a year and that followed the western economic sanctions against Pakistan after its nuclear explosions in 1998. Originally it was meant for two years but lasted for five years.

Pakistan again made a request for the Saudi oil facility following a record trade deficit of $5.6 billion for the first six months of this financial year primarily because of the higher price of oil. As against that, the budgeted trade deficit for the whole financial year is four billion dollars. The exports are to fetch $17 billion while the imports are to consume $21 billion.

One reason why Saudi Arabia may have declined to provide the assistance sought in the oil sector could be the much-boasted economic success of Pakistan and its bright prospects including the economic growth rate of 8.4 per cent achieved last year and seven percent expected this year. We cannot combine claims of great success in the economic field with requests for special favours from friends, particularly in regard to the 110,000 barrels of oil we import from Saudi Arabia in a day.

But the trade deficit for first six months is large and unless that is brought down the foreign exchange reserves of 11.5 billion Dollars can evaporate fast. However, the situation has been saved by the overseas Pakistanis’ remittances of around four billion dollars, the foreign investment, portfolio investment and the sale proceeds from privatization. All that reduced the government account deficit to two billion dollars even when the trade deficit is $5.6 billion.

The oil import bill has risen to three billion dollars in six months compared to 1.87 billion dollars in the same period last year, which means a rise in oil consumption by 62 per cent in terms of cost. Pakistan’s oil need is 240,000 barrels a day but produces only 63,000 barrels a day. So 177,000 barrels is imported daily.

The smallest quantity of oil comes from neighbouring Iran — 6,000 barrels. Other imports are 45,000 barrels from Dubai and 15,000 from Qatar. In view of the fear that at some point oil prices may ultimately touch 100 dollars a barrel, Pakistan has to do all it could to produce more energy locally including large supply of hydel power from the five reservoirs, more of nuclear energy and more of alternate energy. And the efforts to get power from coal in Thar, where a Chinese company has been engaged in view of China’s vast experience in this area, should be stepped up.

Pakistan has also come up with a nuclear energy development plan beginning with a far larger nuclear reactor than the two at Chashma which now produce 300 MW each of nuclear power. The KANUPP in Karachi is also to be refurbished and the facility expanded.

And despite the US opposition, Pakistan and India are determined to go ahead with the seven billion dollar Iran-Pakistan-India gas pipeline. Pakistan is sending a delegation to Turkmenistan to negotiate the deal to bring gas from that Central Asian State via Afghanistan. It is imperative that all such resources should be fully explored and energy at the cheapest cost must be availed off.

And of course far more than the 100 oil and gas wells planned for the current year should be drilled and foreign investors encouraged to look for oil and gas with greater vigour. A new oil exploration policy is to come up soon to encourage new foreign and Pakistani companies. The effort has to be for self-sufficiency in energy and to develop the maximum capacity possible as otherwise the industrial expansion plan and the far larger employment creation sought will fail.

But the government is facing a financial crunch right now. Apart from the record trade deficit there is a large current account deficit and the budget deficit may exceed seven per cent of the GDP. Besides, the government’s domestic borrowing has increased enormously. In the first six and a half months of this financial year, the trade deficit exceeds the target for the whole year, and the borrowing figure is Rs 105.475 billion. Such deficits are to be expected in the wake of the enormous earthquake and rehabilitation efforts. Much of the $6.5 billion of relief and rehabilitation funds in kind and money are still to become available. The donors are slow to act while president Musharraf wants them to be quick. Meanwhile the government is borrowing more money from the banks.

In 2004, the government raised 500 million euros through a euro bond, in 2005 it raised $600 million from abroad through the Sukook bonds and now it is coming up with a sovereign bond which may seek to raise up to a billion dollars. Prime minister Shaukat Aziz says the government does not need the money urgently, but is only testing the international waters or Pakistan’s position in the global bond market.

Anyway the government has to be on guard when undertaking large financial commitments and what matters is not only how the fund is raised and how well it is used. They have to be used constructively and productively so that servicing the loans becomes easy.

Along with heavy government borrowing, the private sector borrowing from the banks during the six and a half months had risen to Rs 268 billion. Last year in the same period, Rs 286 billion was raised from the banks by the private sector. The gap between the two periods is small and this year’s private sector borrowing from banks may soon overtake the last year figure.

All this should be upsetting for the new governor of the State Bank Dr Shamshad Akhtar. Such monetary movements are contrary to the rather tight money policy she wants to pursue to keep the inflation down.

The target for monetary growth for this year is 12.81 per cent. In 2004 the monetary growth was 19.30 per cent and in the previous year it was 19.62. In such conditions inflation has to increase although Dr. Shamshad believes that inflation cannot be controlled through monetary control alone.

But the government is afraid that if the monetary policy becomes too tight, the economic growth may come down. But economic growth along with high inflation can be very counter productive and be ultimately self-defeating. So the officials have to be on guard instead of sacrificing everything at the altar of higher economic growth fuelled by inflation.

The $20 million rumour

(Art Buchwald is recuperating from surgery. In his absence, here’s a substitute column by Andy Rooney.)

THERE are rumours in the newspaper every day about who will replace Bob Schieffer — who replaced Dan Rather who replaced Walter Cronkite — as anchor for the “CBS Evening News.” One rumour is that CBS boss, Les Moonves, has offered Katie Couric, the NBC “Today” show star, $20 million to take the job.

I have worked at CBS since 1949. I like it here and I’m proud of it — with reservations. I think my boss, Les Moonves, is a smart executive. I don’t think he gives a damn about news but I think he’s a smart executive.

Here’s what I think a smart executive would do in this case: He would set out to get the top rating for the “CBS Evening News” by making it the best news broadcast again. It was that for many years until a businessman named Larry Tisch took over CBS with more money than brains and decimated its news division in 1987 by firing 200 people and cutting the budget for the Evening News more than in half.

Here’s what I’m imagining a good guy like my boss, Les Moonves, will do (you’ll notice I can’t say enough good things about my boss): He’ll abandon the idea of getting Katie Couric for $20 million and take that money and instead add it to the “CBS Evening News” budget. That would bring the money they have to spend collecting news up closer to what it used to be when Walter Cronkite was the anchor 25 years ago.

Bob Schieffer is a good old friend of mine and he has been very gracious about the Katie Couric rumour. I don’t know how much he makes. I haven’t been able to bring myself to make a guess, nor ask him if he thinks she’s worth about 20 times as much as he is. Bob must be a constant embarrassment to my friend, my boss, Les, because all he keeps doing as a temporary replacement in the CBS News anchor chair is increase the ratings month after month.

I’m guessing, but say the budget for the “CBS Evening News” now is $35 million a year. Twenty extra million would give the show a big boost and bring it closer to what ABC and NBC spend on their nightly news broadcasts — about half as much, probably. The $20 million wouldn’t be paid to one person like Katie Couric, though. With that $20 million, they could hire 50 more reporters, producers and editors and set out to broadcast the best news programme on the air seven nights a week.

You could get a good, experienced reporter for $250,000. A producer would work for less. The big saving would be on the anchor. Traditionally, the anchorman — usually a man — has made most of the money. Under the new deal, the anchor would be nothing more than a good, cheap, handsome newsreader with a new suit. There would be no need to pay someone, man or woman, millions of dollars a year to read and say “thank you” to the correspondents after they gave their reports.

Both ABC and NBC have a dozen good correspondents CBS could hire away with little parts of Katie’s $20 million. Les could reopen all the CBS foreign news bureaus that were closed in cities like Bonn, Berlin, Buenos Aires, Anchorage, Warsaw, Mexico City and Rio de Janeiro. He would give the new reporters time to look for and develop stories in these places that are important to the world, even though most Americans are largely ignorant of them.

Reporters don’t get a story every time they go out looking for one, so they’re an expensive part of news-gathering and a luxury that all three networks have cut down on. The CBS audience will be vastly better informed because of Katie Couric’s $20 million, and if I know Katie, which I don’t, she’ll be proud of herself for staying where she is for a piddling little $14 million. “CBS Evening News” viewers will be a better-educated group, and we can all hope these better-informed American voters will go to the polls in 2008 and elect a brilliant president who will lead us out of trouble.—Dawn/ Tribune Media Services

The racist cartoons

THE disgraceful racist cartoons of the Prophet Mohammed originally published by a sensation-seeking Danish newspaper have produced an international firestorm of hysteria and racism.

Mobs of enraged Muslims have rioted from Morocco to Indonesia and burned Danish and Norwegian embassies. Editors of other European newspapers that ran the offensive cartoons piously insist they did so to defend the sacred right of free speech.

This writer detests any form of censorship, including so-called ‘hate laws’ that are really modern forms of heresy and blasphemy statutes. But free speech, as the great American jurist Felix Frankfurter said, does not include the right to scream ‘fire’ in a crowded movie theatre.

And that’s just what the European newspapers did. They were trying to boost circulation and pander to anti-immigrant right-wingers by attacking Islam.

Nor is it a coincidence these grave insults occurred in Denmark. Its current rightwing government has been close to President George Bush, sent troops to Iraq and Afghanistan, and has adopted an unfriendly policy towards Denmark’s small Muslim community and the ummahh. While the Danish government had no direct responsibility for the cartoons, it helped foster a climate of hostility to Muslims.

This whole ugly business is really about anti-Islamism — the modern version of 1930s anti-Semitism. Today, promoting hatred and scorn for Islam and Muslims has become the only socially and legally acceptable modern prejudice in western society.

Just questioning the Jewish holocaust in Germany or Austria results in a jail sentence. Doing the same in Canada gets you thrown in prison or expelled. In the West, it’s totally a taboo to say homosexuality is wrong, or women are less intelligent than men. But it’s OK to slander Islam.

The Danish paper that ran the racist cartoons ‘to defend free speech’ refused in 2003 to run satirical cartoons of Christ, saying ‘it would provoke an outrage.’ So much for claims of defending free speech.

America’s four leading evangelical Protestant leaders, reverends Jerry Falwell, Franklin Graham, Pat Robertson, and Marvin Olasky preached a ‘crusade’ against Iraq. Graham branded Islam ‘an evil and wicked religion.’ They called the prophet ‘a terrorist.’ Among American evangelical Christians, 87 per cent supported invading Iraq and hoped to convert Iraq’s Muslims to Christianity.

Italian propagandist Oriana Fallaci churns out best-sellers calling Islam a dirty, backwards creed of violent thugs. In Paris, a Jewish newspaper editor, who should know about promoting hate against minorities, ran the Danish cartoons in his newspaper.

In liberal Holland, it’s cool to despise Muslims. In America, pseudo-historians and professional hate-mongers wage jihad in the US press against all things Islamic.

One Danish cartoon of Prophet Mohammed shows him with a long, hooked nose, thick lips, a sinister, malevolent glare on his ugly, semitic face and a curved dagger in his hand. Change the caption ‘Prophet Mohammed’ to ‘Jew swine’ and you have the exact double of Nazi anti-Semitic hate cartoons of the 1930s.

That’s what this is all about. Modern anti-Semitism, reborn. What Europeans are saying through these cartoons is, ‘we hate Muslims. We want all Muslims out of Europe.’ In the 1930s, Europeans held the same sentiments for Jews.

There can be no doubt all Muslims and Islam have been gravely offended. But having said this, too many Muslims have been reacting hysterically by rioting and burning embassies. The Prophet Mohammed and Islam don’t need rioters and arsonists to defend them.

In an act of pure childishness, Iran’s largest newspaper says it will solicit and run cartoons of the Jewish holocaust, proving there is no sickness as contagious as stupidity. This is no way for adults to behave.

Muslims suffered 150 years of the most brutal European imperialism and exploitation. Millions of Muslims were slaughtered by European and Russian colonialists, though we never hear about this green holocaust. Europe’s 20 million Muslims are third-class citizens. Muslims have every right to anger.

But where were all these angry Muslims when Serbs were massacring 250,000 Bosnians, gang-raping thousands of Bosnian Muslim girls and women, and blowing up mosques? Why have there been almost no protests over Russia’s horrifying genocide in Chechnya? Over, outside Pakistan, protests against India’s brutalities in Kashmir. Or the US invasion of Afghanistan and Iraq, and Australia’s annexation of East Timor?—Copyright Eric S. Margolis 2006

Criteria for OIC membership

SAUDI King Abdullah’s reported remarks pertaining to observer status for India at the Organization of Islamic Conference (OIC) appear to have stunned Pakistan’s foreign policy establishment. This is not the first time such an option has been put on the table. Indeed, previously too a similar situation had caused Islamabad to threaten to withdraw from the OIC if India were admitted against Pakistan’s wishes.

Why is it that Pakistan’s foreign policy establishment is outfoxed repeatedly on this issue while the Indians seem to be advancing their agenda forward with great perfection? To begin with, only very infrequently in the past has Pakistan’s foreign policy establishment lived up to the challenges posed to them. They have repeatedly fumbled for clear and workable answers to important questions, defendable positions on issues, and realistic strategies to advance Pakistan’s interests abroad.

The double irony of the issue is that the makers of our foreign policy cannot even claim to have not seen this coming. In recent years, certain countries with significant Muslim populations have stepped up the pressure on the OIC to admit them as observers — and subsequently as full members — to the organization that boasts a membership of more than 50 countries with majority Muslim populations.

The reason often advanced by countries seeking or having observer status, most notably India and Russia, is that membership in the OIC would enable them to better serve the interests of their large and growing Muslim populations. This logic raises several interesting questions. How can a membership in an organization that has never really achieved anything in the four decades of its existence be of any value to countries like Russia or India?

If the Russian or Indian governments were to do anything positive for Muslim populations in their country or in territories under their control, the first place to start would be to improve the lives and wellbeing of Muslims in Chechnya, Kashmir and Gujarat rather than attempt to become a member of the OIC. What, if any, are the true motives behind their eagerness to join the OIC?

The more likely seems to be that both Russia (which already has observer status) and India would like to play a more “active” role in the affairs of the OIC. While both these countries have a role behind the scenes in OIC deliberations, primarily through their influence on several Arab countries, formal membership in the organization would make that relationship both legal and permanent. This would further dilute the OIC’s already weak position on issues that do not resonate well with Russia and India, namely, Chechnya and Kashmir.

It would probably be difficult for Pakistan or any other member of the OIC to keep the floodgates closed against India for too long. The shifting global geopolitical dynamics since 9/11 and the prevailing mood make it necessary for Islamic countries to show greater transparency in their dealings with the rest of the world. The million dollar question then is whether and how the OIC would be able to safeguard and further the interests of the Muslims around the world. Who would be allowed to come in and who would remain out? What would be the new identity of the OIC?

Once the floodgates are flung wide open would Israel and the United States — as occupiers of large Muslim territories in Palestine and Iraq and hence having legitimate interests to represent the interests of their Muslim minorities, at least in principle — also be allowed to become members of the OIC? The OIC must address these questions in a proactive and definitive manner that is reflective of a confident and effective organization. This is especially true today as the OIC embarks on an effort to reform itself and become more relevant to changing realities in the 21st century.

Consequently, there is a dire need for the Pakistani foreign policy establishment to move away from its fossilized mindset and think out-of-the-box. Only through creative thinking, meticulous execution, and visionary leadership can Pakistan and the OIC transform this potential threat into an opportunity for its members and over one-and-a-half billion Muslims around the world. Wouldn’t it have been better if the Pakistani foreign policy establishment, instead of maintaining its usual deafening silence and defensive rhetoric, had responded to the challenge in a more realistic manner?

For example, a message that welcomed the aspirations of India and Russia to do better vis-a-vis the rights of their Muslim populations along with the desire to develop a set of objective criteria to facilitate and ensure that would have gone a long way in making the OIC a more effective platform for Muslims around the world.

Achieving the above objective would have required developing and defending the case for expanding the membership of the OIC (the rationale) beyond the Muslim majority countries that it is currently restricted to, designing an objective mechanism for deciding which countries to include or exclude (the eligibility criteria), and laying out a plan to smoothen the transition to a much larger OIC (the process).

Thankfully, there are examples for such arrangements that may provide some guidance in this endeavour. One of the ways to make the OIC more meaningful to the collective wellbeing of Muslim communities around the world is to use its membership as bait to bring improvements to the lives of minority Muslim populations. For example, the OIC can adopt criteria similar to the very comprehensive accession targets adopted by the European Union. Even before a country’s application for admission into the EU is considered, it must fulfil an extensive set of qualitative and quantitative criteria from the economic, social, and political realms.

The OIC too can, in principle, adopt a set of qualifying conditions that every non-Muslim country seeking an observer status must fulfil before its application is entertained by a standing committee on memberships. These conditions might include meeting pre-specified targets on freedom of expression and religion, discrimination and Islamophobia, human rights and the liberty of Muslims, and parity in economic and social conditions of Muslims versus non-Muslim populations.

As the applicant countries begin to fulfil the base-level eligibility criteria, they may be granted an observer status (based on the recommendation of the standing committee and a majority vote of existing members). The observer status would allow these countries to observe the OIC’s activities and begin to contribute to certain areas of OIC operations. However, these countries would remain on the watch list for continued progress on the above set of criteria, becoming eligible in five years’ time for associate membership which would allow them to contribute more fully to all OIC activities without the right to vote.

In the final stage of the process, associate members, upon fulfilling an even tougher set of criteria and on the unanimous recommendation of existing members, may graduate to full membership with voting rights.

A process like the one suggested above would allow the OIC to objectively evaluate the applications for membership for countries without resorting to any form of favouritism. It would also provide an opportunity to the aspirants to demonstrate their own commitment and sincerity in using the opportunity to participate in the OIC in precisely the manner they claim they would i.e. to advance the interests and improve the lives and wellbeing of their Muslim populations.

Most importantly, however, it would make the OIC a more inclusive and effective group of countries (both Islamic and non-Muslim) and serious in advancing an Islam-friendly foreign policy agenda and providing it with the appropriate leverage and policy influence beyond that of the 50-odd Islamic countries — something that it seriously lacks today. It would also provide the kind of collaborative and consultative platform focused on issues of relevance to Muslims around the world that is necessary to avoid the much-touted clash of civilizations between the Islamic and western worlds.