Case for lower bank rates

FINANCE MINISTER Shaukat Aziz has asked the banks to lower their lending rates and offer innovative services like hedging, equity investment, cash-management, venture capital and remittance products. He has also stressed the importance of developing new techniques of risk management, mobilizing funds by offering term-finance certificates and utilize the 1.7 billion dollars of foreign exchange deposits that they now have to finance foreign trade. At the same time he has asked the businessmen to keep “mounting their pressure on the banks for lowering their interest rates.” He made these observations in his keynote address which he delivered at a seminar in Karachi on Tuesday on the subject of “Challenges and Potential of Small and Medium Enterprises”, and also when he spoke to the bankers and the trading community separately.

Banks in Pakistan have had plenty of local liquidity for long. Additionally, they now have as much as 1.7 billion dollars in foreign exchange deposits to count on and utilize. But the problem is that they continue to remain hidebound by their highly conservative and traditional approach to banking operations, the most limiting of which is their lending rates which are perhaps the highest in the world today. Of course, their working on efficient lines has alternately been hampered by swings from excessive government interference to harsh accountability measures. But now that these constraints have been minimized and a more congenial environment has been created, there is no reason for them not to rationalize their lending rates. Keeping the lending rates unreasonably high has been one of the reasons for massive bank defaults in the country. Banking being a purely commercial function, one has to keep the product moving out of the shelf to make a profit. By keeping the lid tightly on disposable funds, a bank can only harm itself and deprive the economy of its legitimate share of financing.

It is time the adequate operating room that has been made available to the banks was used to provide the needed capital to the industry and trade at a reasonable cost and in the form suited to their needs. The businessmen, on the other hand, need also to make full use of the present macro-economic stability in the country to play their rightful role in the development of the national economy. Pakistan’s foreign exchange reserves are nearing five billion dollars. The debt reprofiling has enabled Pakistan to reduce its repayment burden by 2.7 billion dollars in the medium term. The 1.4 billion dollars of the cash grant which the country received in recent weeks from donors has also more than compensated for the losses suffered on account of cancellation of export orders and revenue declines since September 11 last year. All these developments have enabled the country to cope well with the aftermath of both the international war against terrorism and the massing of Indian troops on our border.

The economy has become resilient enough, as the finance minister pointed out, to preclude even the need for imposing any ‘war tax’ to meet the exigencies of the Indian challenge. The private sector has already been recognized as the engine of growth. Therefore, it should take the right business initiatives in the right direction, without looking up to the government for more and more crutches. And when the businessmen make profits from their enterprises they must meet their financial obligation to the nation by paying taxes and other duties. This would enable the government to provide them with the needed social and physical infrastructure to increase their productive efficiency and profits.

Fire in Islamabad

INTERIOR MINISTER Moinuddin Haider stated the obvious when he said that the fire which gutted the 16-storey Shaheed-i-Millat federal secretariat complex on Tuesday evening should serve as a lesson for us. The worst fire in the history of the capital has not only revealed the utter hopelessness of the capital’s fire department and the pathetic antiquity of its equipment, but also exposed the gross inadequacy of the administration in coping with any kind of emergency. The fire started from the top 16th floor at about 6.15 pm and worked its way down, floor by floor, until the wee hours of the morning. Some 1,000 fire fighters from the Capital Development Authority, the army and navy were helpless against the raging inferno simply because they didn’t have the kind of ladder and water cannon to fight fires at this height and of this intensity. The only water cannon that was available could not reach beyond the 8th floor and even this water cannon’s nozzle was damaged during the operation. Frantic calls to the air force and army aviation for helicopters to help douse the flames also proved unavailing. The fire fighters could only watch on as the fire engulfed the building floor after floor just as the top administration officials and other passers-by at the scene did.

Although there were no casualties as the building was empty at the time of the fire, an inquiry should be held into the incident to ascertain the cause of the fire, especially since some important documents of the interior ministry relating to fire-arm licences and the religious groups are believed to have been kept in the building. Not only does the capital’s fire department need to be immediately modernized, but also the entire emergency response machinery is in dire need of better coordination. It is more than just the right kind of equipment that we lack. We need to have a proper and comprehensive emergency response plan that can be put into action whenever required.

Dutchmen’s murder

THE murder of two Dutch passport holders has served to highlight the murders and gross human rights violations that characterize the Indian occupation of Kashmir. According to the version given by Indian security forces, the two attacked a Border Security Force patrol with knives and were then shot dead. However, according to the brother of one of the murdered Dutchmen, they were all tourists and had no political motives in visiting Srinagar. He said the two saw the Indian soldiers manhandling a Kashmiri woman. They objected and got involved in a fight with the Indian soldiers, who shot and killed them. Discarding the brother’s view of his sibling’s death, it would appear ridiculous that trained terrorists would use knives to attack well-armed soldiers. That even Farooq Abdullah, the puppet chief minister, should suspect foul play and order an inquiry shows the BSF men murdered the two Dutch tourists in cold blood.

If they were not foreign nationals, their murder would have gone unnoticed, for it is on tyranny and wanton human rights violations that the Indian rule thrives. If two Kashmiri men had objected to the BSF men’s maltreatment of the woman, their murder by the Indian soldiers would have hardly got known to the world. Instead, the Indian publicity machine would merely have reported the death in a shoot-out of two more “terrorists.” One hopes the inquiry will serve to establish the truth behind the loss of two innocent lives.