Stock crash probe takes a new turn

THE forensic investigations into the March 2005 stock market crash took a new turn last Thursday when the National Assembly’s standing committee on finance and revenue was informed that data pertaining to the booking of shares had disappeared from the records of both regulators and brokers. Apparently, on the basis of the evidence presented before the NA standing committee, the data went missing some time after the former chairman of the Securities and Exchange Commission of Pakistan (SECP) was suddenly removed and before the present incumbent took charge of his office in January this year. The relevant data that mysteriously disappeared are required to be preserved for at least five years. These missing data provide further circumstantial evidence of what happened in the March crash. In the absence of this vital source of information, it is quite intriguing why forensic investigations were ordered and that too with a delay of six months. The decision to do so was taken by the SECP on January 9 and the American investigators were hired in July. The inevitable result was that the forensic investigations were hampered by the absence or lack of reliable data. The foreign firm, which was paid a handsome amount, duplicated the work of the Task Force and some of its observations were highly controversial. Not only were specific wrongdoings not identified, though broadly categorised, the whole process also exposed the limitation of the available data in any effort to improve the risk-management system in a highly volatile equity market.

Now, the NA standing committee has directed the SECP to launch an investigation into the mysterious disappearance of the data and institute criminal charges against the errant brokers once the data analysis is completed. Given the current weak status of the SECP, the parliamentary committee needs to continuously monitor progress till such time that the culprits are brought to book. The way the crash issue has been handled raises some very basic questions about the future of the stock markets. Clearly, the systems and institutions required for the healthy development of the market are not in place. The regulators are not strong enough to check any possible collusion between the government and the major market players. In the absence of social controls over business, the market can neither be disciplined nor can rampant market abuse be curbed. Investors need an even playing field: it is competition that imparts efficiency to the market. The way the government and the regulators have responded to the manipulations of the market by leading brokers has not served the best interests of the bourses. The government is trapped in a vicious circle of wrongdoings.

A positive side to the whole affair is the persistence with which the National Assembly standing committee has pursued the matter, kept the issue alive and demonstrated its determination to bring things to their right conclusions. To prevent meaningful discussions, the forensic report was presented to the standing committee just half an hour before its scheduled deliberations. But the NA committee has not been deterred by the diversionary and other tactics of the government and has kept the authorities subdued. The process demonstrates how transparency and accountability can be better managed by even not so strong a parliament. Accountability is best served by democracy.

Turmoil in Gaza

THE situation in Gaza has worsened, and the ceasefire worked out on Sunday does not seem to be holding. At least three lives have been lost, Palestinian Foreign Minister Mahmoud Zahar’s car has been attacked, and Hamas gunmen opened fire at President Mahmoud Abbas’s guards at a training camp. The Hamas government led by Mr Ismail Haniye is 11 months old, but there has been no progress either in the direction of securing an Israeli withdrawal from Palestine or — more regrettably — in developing internal stability. On the first question, Hamas is not to blame, for Israel and its supporters made it clear from day one that they would not let the Hamas government settle down. First Israel held up the Palestinian Authority’s share of revenue; then Washington and Brussels decided to cut off all non-humanitarian assistance to the PA. This led to the denial of salaries to PA employees who took to the streets. Worse still, the US and EU stopped commercial banks from carrying on normal financial transactions with the PA. This was done to deny the aid promised to the PA by some Arab countries, Iran and Russia. In desperation, President Abbas requested cash so that salaries could be paid to the suffering PA employees. Israel, which had not negotiated even with Yasser Arafat when Ariel Sharon was prime minister, found in Hamas’s refusal to recognise the Jewish state a ready-made excuse for not negotiating with the PA.

The second question — a Palestinian consensus — is a greater cause for concern. Fatah seems not to have reconciled to loss of power. Hamas in turn has not shown the ability to carry all Palestinian factions along and form a coalition government. The immediate cause of violence is President Abbas’s decision to call an early election. The best course for him would be to continue to work for a government of national unity. A fresh appeal to voters is a justified way of breaking a deadlock in established democracies. But doing so in occupied Palestine where there are no democratic traditions will only lead to more violence, even civil war, for Hamas has already threatened to boycott the polls. One hopes that the mediatory efforts by Egyptian and Palestinian teams will succeed.

Promoting performing arts

THE Punjab governor’s initiative in asking the Lahore Arts Council (LAC) to institute performing arts classes at the intermediate and bachelor’s levels is welcome. The LAC has been offering diploma courses in various disciplines of the performing arts since 2003, and it has the venues and the wherewithal to move on to offering such courses right up to the degree level. Graduates from the LAC can then take up performing arts disciplines at the postgraduate level too now that the master’s faculty is in place at Punjab University. Lahore’s National College of Arts and a private-sector university in the city also offer degree programmes in a number of performance disciplines. Professional training in music, acting, scriptwriting, editing, production, filmmaking, choreography, etc, has become a need as new TV channels, bands, theatre groups, cultural festivals and even talented young filmmakers have emerged lately on the thriving entertainment scene. The natural talent and flair for performing arts among the youth need to be honed in a professional manner; the arts councils across the country should emulate the lead provided by Punjab in this sector.

Many big cities in the country already have arts councils and their performance arenas; but these for years have only seen sporadic activity even though annual budgets exist for holding cultural shows on a regular basis. Together with the higher institutions and the National Academy of Performing Arts, set up in Karachi in 2005, which requires that applicants must have an intermediate certificate to enrol in its classes, the arts councils can provide the missing link between college and postgraduate studies in the various performance disciplines. This should be instituted as part of the culture/education policy at the national level, so that the downward slide seen in the standard of performing arts since the obscurantist years of Gen Ziaul Haq can be reversed.

US political system and its strength

By Muhammad Ali Siddiqi

AMERICA’s conduct of foreign policy issues, especially those concerning Muslim countries, often makes people in this country ignore some of the positive aspects of America’s political and social values, especially the strength of its democratic institutions.

In the last four decades, grave constitutional and political scandals have rocked America, involving two presidents, one vice-president, an attorney-general and other high-ups, but the commitment of its people and leaders to democracy and all that the word stands for have not eroded America’s position as the supreme power.

Whether it is Watergate or the Monica scandal — both of which rocked the presidency — or foreign policy issues, adherence to democratic norms and the reverence which the American people have for their constitution have enabled them to pull their country out of crises without impairing its vitality.

The Iraqi cauldron and the rising American casualties have created a crisis which is not of the same intensity as that unleashed by the Vietnam war in the ‘70s, nor does the Iraqi situation have domestic implications for the Bush presidency of the “fatal” kind the Watergate and Monicagate had for Richard Nixon and Bill Clinton. The former was pardoned by Ford, while the latter narrowly escaped impeachment.

Nevertheless, the results of November’s mid-term elections and the subsequent behaviour of the “ruling party” — America has no such concept — have demonstrated that, notwithstanding the unilateralism that is often attributed to the Bush administration, basically it is the will of the people as represented by Congress that decides the issues of the day in America.

America’s focus earlier this month was on the Iraq Study Group report, which calls for an American withdrawal by the first quarter of 2008 and for a revival of the peace process to resolve the Arab-Israeli conflict. The report was presented to President George Bush by the group’s two co-chairmen, former Secretary of State Jim Baker and former Congressman Lee Hamilton, and there is no doubt that it must have shaken him, because for all practical purposes, it constitutes a denunciation of his Iraq — in fact, the Middle East — policy by calling not only for a withdrawal from Iraq but also for “engaging” Syria and Iran for a role in resolving the Iraqi crisis. The latter especially amounted to showing a red rag to a bull. Yet President Bush had to show full respect to the report, even though he made it clear that nobody should expect him to accept the report in its totality.

It may be noted here that both Baker and Hamilton are “former” but the authority they have come to wield through the report because of its bipartisan character, the popular support it has received and the respect it has drawn from Congress and the media have made even the most ardent Bush supporter to be on the defensive. Left to him, Bush would never have sacked Rumsfeld; what made the defence secretary resign was the will of the people as seen in the outcome of the mid-term elections.

Coinciding with the ISG report was Robert Gates’s appearance before the Senate Armed Services Committee. He was grilled by the Senators and asked to explain why his nomination by the president should be confirmed and whether his views were acceptable to Congress, the ultimate authority in matters of appointments to cabinet posts. This system is a manifestation of what in America is called “the sunshine law” that seeks to divest the working of the government of its arcane character and throws it open to public scrutiny.

The concept of congressional hearings does not find a mention in the American constitution. But it has grown over the decades to become a healthy and vital feature of American constitutional practices and goes to show how the state’s legislative arm checks the exercise of authority by the executive. In the British parliamentary system, the opposition in the House of Commons may have the pleasure of tearing the prime minister and his appointee apart, but there is nothing the House can do to abort the appointment. In sharp contrast in America, no presidential appointment is final unless it is confirmed by the upper house.

We can see the power of this legislative veto in the way the senate frustrated the appointment of three of Bill Clinton’s nominees — Zoe Baird and Kimba Wood for attorney-general, because both were found to have violated the relevant law by hiring illegal immigrants as nannies for their children; and Lani Guinier as head of the civil rights division of the justice department because it transpired during the senate hearings that Lani, a black, had racist views as contained in her articles in the law journal of the college where she taught.

The US senate is the world’s most powerful upper house for two reasons: first, unlike the tradition that money bills are the sole prerogative of lower houses representing the people, the US senate has a say in money bills, though “revenue bills”, as the Americans call them, must originate only in the House of Representatives. Second, the senate plays a major role in shaping foreign policy: it deals with aid bills and has the authority to order cuts if it feels that the amount of aid in a given bill is not justifiable. Besides, all treaties with foreign governments must be ratified by the senate.

This role in foreign policy matters stems from the fact that the senate represents the 50-odd constituent units, which jealously guard their right to have a say in matters affecting war and peace and to examine the treaties and alliances which could empower the federal government to drag them into war without their knowledge and consent.

Thus, all treaties and pacts which the federal government signs with foreign countries remain provisional till they are ratified by the senate. The clearest example of the senate’s power in foreign affairs was seen in the second decade of the 20th century. Woodrow Wilson, the man behind the League of Nations and the statesman made famous by his 14 points with their emphasis on all nations’ right to self-determination following the end of World War I, died a broken-hearted man because the senate refused to go along on the relevant treaties.

The other aspects of the checks and balances built into the system, the president’s veto and “pocket veto”, and the court’s powers to strike down a law it thinks violates the spirit of the constitution are beyond the scope of this article. But we can clearly see that the American political system did not crack much less collapse in the aftermath of the Watergate and Monicagate because of the American leaders’ strict adherence to their constitution.

We have heard much about accountability since Ziaul Haq’s days, but as we all know, military and political governments have used it as an instrument of persecution against politicians not on their right side. What we see in America is perpetual accountability in which acts of malfeasance are dealt with by the system after the media highlights them. During the Clinton presidency, a White House aide was sacked because he used an official helicopter to go to his golf course.

Even though his colleagues offered to pay for the fuel spent, that did not spare him the media’s wrath, and he lost his job. Similarly, among the charges levelled against Al Gore by the media was that he used White House telephones for party purposes. One also knows that apart from sex-related allegations against Clinton he was also criticised for making a phone call to a friend in the UN to get a job for Monica, an intern.

We claim to be Islamic, but going by our practical standards, these would hardly fall within the category of corruption.

We must end with Iqbal:

Soorat-i-shamsheer hay dast-i-qaza may wo qaum; karti hay jo her zaman apnay amal ka hisaab. (That nation is like a sword in Destiny’s hand which continually examines and scrutinises its actions.)

Screeching brakes

RECEP TAYYIP Erdogan is doubtless pleased Tony Blair is passing through Ankara between the EU summit in Brussels and his Middle Eastern tou. But the Turkish prime minister may feel like the man who has been told he is not welcome at a party only to find a key member of the organising committee dropping in with a bottle anyway.

EU leaders avoided the long-predicted “train wreck” but still made clear that Turkey’s membership bid is in big trouble. The hope is that freezing a chunk of the entry negotiations will force it to open its ports and airports to traffic from Cyprus.

The dispute is real enough, and unsurprising, taken the deadlock over the divided island now Nicosia has a veto like everyone else and is still boycotting the breakaway north. But the danger is that it is becoming a flimsy excuse for anti-Turkish prejudice.

It was no coincidence that Nicolas Sarkozy, the likely rightwing candidate for the French presidency, chose to signal that he might block Turkish membership, if elected. These are the wrong sort of messages to send to Europe’s only Muslim democracy and likely to set back the cause of reform.

The “slow down, we’ve moved too fast” reflected the backlash that began last year when French and Dutch voters threw out the EU constitution. It will not stop Romania and Bulgaria bringing the membership to 27 when they join on New Year’s Day.

The fact is that enlargement has been a huge success, promoting prosperity and stability for new and old members alike.

— The Guardian, London


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