Gaining while it lasts

Whether globalization means re-entry of imperialism under a new label, or an efficiency-driven mantra for direct producer- consumer relations, it still remains the dominant game of our contemporary world. Whether we like it or not, the countries as well as the companies, are better off learning to use the globalization to their advantage and come out the winners in the game rather than be at its receiving end.

Pakistan is already up against the latest round of global competition as the $400 billion world trade in textiles and clothing has moved out of quota allocations and entered the WTO arena of global competition from January 1 of 2005. How will Pakistan fare in this global shake-up?

Looking at its many advantages in textiles, Pakistan is expected to increase its market share at the initial stages of this race. But the more important questions are: How big a winner will it be? Would the country be realizing the full potential of its many advantages and secure a big share of this $ 400 billion market? And, more worrisome, would Pakistan be able to consolidate its initial advantages and sustain a winning position in the face of competition from over 80 countries that will also be exerting for a bigger piece of the same pie?

Textiles have been in the vanguard of the industrial revolutions in many countries, and often been the first industry to be set up in most countries. As the countries have moved up through second, third and subsequent waves of industrialization, they have added synthetics/plastics, consumer electronics, engineering, information technology and other sectors as additional building blocks of their industrialization.

But Pakistan has largely remained a single-industry country which means that the risks of failure to optimize the benefits from the global opportunities in textile trade would send shockwaves throughout the economy. As the entire chain - from cotton production, to textiles to trading - affects the livelihood of a vast majority of the country's population, and generates about 70 per cent of its export earnings, this should be a matter of serious concern to everyone in the country.

The powerful forces of the current wave of globalization have already enveloped countries in different ways - not all of which are to their liking or of their choosing. In the overall index, Pakistan is more integrated on the consumption side of the global equation. It figures as a highly globalized country in cultural, information, travel, political, security and financial terms than, for instance, China, India and Malaysia. But on the production/ supply side of the global equation, Pakistan has low ranking and is placed way down along with Myanmar and Zimbabwe among the countries whose economies have not been very successful in producing for the global markets and benefit from the global outsourcing of jobs and opportunities.

In textiles, Pakistan has many natural advantages, and so far it is these that have been making major contribution to its global market share. Its land, water and climate combine to create the fourth largest producer of raw cotton in the world. But when this raw material is processed through its engineering, management and marketing systems, the country slides to eighth position in export earnings from textiles and further down to beyond 10th position in the higher value-added clothing sector.

The critical element in the downward slide in the value-addition chain is the widely prevailing low productivity of its enterprises. The numbers and the quality of human resources needed to achieve production efficiencies in textiles and other industries are still not being produced and trained by our education system.

Officials and spokespersons of every country are generally eager to claim high levels of efficiency and productivity. But, being a 'low cost, high quality' efficient producer of goods and services has meaning only in a competitive setting - how it fare in relation to the production efficiencies of other competing countries.

No one has given a better lesson to the world on 'productivity' than China which has become the manufacturing house for the whole world. Its production of 'low-cost, high-quality' goods has not only taken businesses and jobs out of the developed countries but even from many developing countries whose 'low-cost, low-quality' producers could not stand the competition from the Chinese enterprises.

Next door India has also put a similar gridlock on worldwide software services because of the productivity of its 'low-cost, high quality' services supplemented by its long traditions of English language and Anglo-Saxon laws. Its wealth generation from software services now accounts for more then 40 per cent of its total export earnings, all of which is man-made wealth produced by the quality of its human resources.

Of the many wonders of its productivity, one of the most impressive is how China has beaten even Mexico in supplying many industrial goods to the US market. Among the many benefits of Nafta (North American Free Trade Agreement of the US, Canada and Mexico), Mexico had counted a lot on its cheap and abundant labour and close proximity to the US to supply goods to that huge market. And it succeeded very well in attracting many US companies to invest in production facilities there.

But as the productivity of China's 'low-cost, high quality' manufacturing increased, not only the American but even many Mexican-owned companies wound up their operations and relocated these in China. Today these China-based enterprises are able to supply the US market with many products more competitively than those located just across the US border inside Mexico.

With such high levels of production efficiencies, the capital ceases to be a scarce resource as global flows of investment rush in to flood competitive enterprises. The eight to ten per cent annual growth rates of China and India as also of Singapore and Malaysia over the years, are largely financed by the heavy inflows of foreign investment attracted by the productivity of their enterprises.

For the big winners of globalization such as China and India, however, the future is looking even brighter than before. Projected into the future, their growth rates would take China's current GDP of about two trillion dollars to $16 trillion and India's current GDP of $700 billion to about five trillion dollars by 2025. Most observers agree that by 2050 the six largest economies of the world would include only two from the current G-6 countries - the US and Japan - the other four in the Big Boys Club are expected to be China, India, Russia and Brazil.

Pakistan's traditional problem of the scarcity of capital could also be solved by increasing the productivity of its enterprises and creating an environment that makes the country in real sense an attractive destination for investment flows. It had in fact started on this track back in 1989 - two years before India did. It had opened its enterprises to foreign investment and competitiveness, and set up Board of Investment to provide help in developing new opportunities, increasing production efficiencies, joint venturing, technological transfers and creating a friendly environment for investment.

But the benefits of any good strategy could accrue only when it is sustained over the long term. This requires a broad-based consensus on essential policies among the main power brokers which unfortunately is more an exception than a rule in our governance. Because of policy somersaults, Pakistan's competitiveness as a country has declined and in 2003 it stood at 73 compared to Malaysia at 29, China at 44 and India at 56 according to a survey conducted by the Geneva-based World Economic Forum.

Consequently, the investment flows into the country have suffered, and instead of raising the FDI, has been on a downward slide. By the year ending June 2004, the country received only about $ 850 million of FDI even when the proceeds of the privatization were added. That is only 2/3 rd of the $ 1.2 billion of investment received in 1996, even without the proceeds of privatization.

Every industrial country and every seriously industrializing country in the world has had a separate and distinct organization to address the whole range of issues of industrialization from research to productivity to marketing. Pakistan continues to be one country that insists on trying to industrialize without creating a support system for it. No wonder, such half-baked attempts have produced poor results in terms of industrialization.

After over half a century, it still remains a single-industry country. In such a situation, while certain individuals are able to use their leverage with the governments and secure solution of their individual problems, the industrialization of the country as a whole is left without a god-father to address the collective issues and mobilize support for their solution.

A Confederation of Pakistan Industry (CPI) should therefore be created to provide an effective support system to industrialization in the country. Japan has had Keidanren, the UK has Confederation of British Industry (CBI), Korea has Federation of Korean Industry ( FKI), India has Confederation of Indian Industry (CII), Italy has Confindustria and so and so forth with other countries. A CPI is not a replacement or a substitute for chambers of commerce and industry but an additional body with a more focused approach to tackle industry-related issues and improve the competitiveness of its enterprises.

Pakistan's narrow industrial base is also holding it back from successfully challenging the forces of globalization. With a population of 150 million, Pakistan has less than 50, 000 registered companies (public and private as well as local and foreign). As against this, Hong Kong, with a population of just seven million, has nearly 500,000, - ten times the companies that are doing business in Pakistan. The country needs to encourage new comers into industry and open up its very promising agro-based and IT sectors to usher in a new era of industrialization.

In fact, a large part of the $ 12 billion of funds which returned to Pakistan after 9/11 should have been guided towards investing into these and other productive sectors rather than into land speculation and current consumption, thereby pushing up inflationary pressures in the economy.

As globalization of textile trade sinks in, the textile industry is going to undergo a major restructuring in Pakistan. While the big industrial houses are well placed to use globalization to their advantage, many others will find the going too hard to handle.

There would be great many mergers and acquisitions in the industry to consolidate and improve efficiencies and these need to be conducted properly. The country also needs to update its corporate and securities laws to ensure that the interests of small investors and other stakeholders are not wiped out in the ensuing M&A activity.

The natural advantages of Pakistan will help increase its market share in the early stages of globalization of trade in textiles and clothing. But if the productivity and competitiveness of its industries is not increased by a focused and effective institutional support system, the country runs the risk of seeing its early gains wiped off by tough competition from others in the global market place.

E-mail: smshah@alum.mit.edu

Raking up the past

Ayaz Amir's column published ten days ago, in which he stirred up some of the embers of a once pleasant past, and lamented how depressing life in the land of the pure had now become, struck a sympathetic chord in those writers who embark on national soul searching on a regular basis.

On the last of the winter afternoons, when I sat on my lawn and soaked up the sun, and listened to the quiet friction of foliage, I too thought about how the quality of life in Pakistan has changed; how through the gradual passage of time many of the values that were once instilled into us by the British have been eroded and become irretrievably remote.

One is referring, of course, to things like fair play, sticking up for the underdog, the capacity for tolerating another point of view, however unpleasant, a sense of humour and the ability to laugh at ourselves. Secularism and the rule of law, along with politeness, consideration for the elderly and chivalry towards members of the weaker sex are naturally part of the same cultural package. But regrettably, all these things seem to have disappeared.

They have been replaced by political boorishness, religious intolerance, the machismo that is a natural corollary of military rule and the increasing influence of paramilitary authority, with its own hierarchy and pecking order, that is in evidence everywhere.

Coupled with gross indiscipline, the inability of the state to curb the increasing wave of lawlessness, a growing population, creeping inflation, water shortages, electricity breakdowns, the failure of the government to punish stone age customs which have been outlawed but are being defiantly practised, and the gradual erosion of a fragile, educated middle class, which in India and western democracies provides a measure of stability, the future in Pakistan looks pretty grim.

The prime minister naturally doesn't think so. He has a way with words and his latest message to the world is that Pakistan is a futurist state. It is not very clear what he means by this, because nobody has as yet heard of any plans to get rid of the donkey carts and the touts who hang around the passport office. However, like all honest economists in developing countries, who have a pack of tax-dodging industrialists snapping at their heels, he believes the future is exceptionally bright.

For a fortnight, he has kept the nation in suspense as the projected growth rate has oscillated between seven and eight per cent. Interestingly enough, there is every likelihood that he will achieve this target, as he is operating from a relatively low base. But, as has been pointed out so many times, economic progress is really quite meaningless unless there are corresponding improvements in the social and administrative sector.

A very basic question that has been asked a number of times before, but which nobody in a position of responsibility is prepared to answer, is: why can't the three public utility bills be issued on the same date? Why do the authorities expect the poor citizen who doesn't have a peon or a servant to make three separate trips to the bank? Besides being a sheer waste of time, it has become more expensive now that the price of petrol has gone up twice in a month.

The chief executives of the three public utilities, telephone, gas and electricity, instead of behaving like emissaries of the old Ottoman Empire should get together and decide, for a change, to be consumer friendly.

The city of the Quaid is still recovering from the paralysing traffic jams caused by the president's visit to Expo. However, the next time he or the prime minister visits Karachi, it would be nice if one of them made a surprise visit to the Civic Centre, in order to see just what a senior citizen who doesn't know the corps commander, the military secretary to the governor or the SHO of Lines Area has to endure after purchasing a car.

If the late Tony Hancock, Britain's favourite loser, had had this unique experience and had been asked to produce a documentary on the institution in which Parkinson's and Murphy's Law operate at the same time, he would probably end up asking the question: why doesn't the prime minister decentralize the whole ruddy business and hand over the job of car registrations and transfers to the local post offices? After all, in Britain, the postal services do considerably more than sell stamps and deliver parcels. They also assist a citizen in acquiring or renewing his passport.

One of the things that Ayaz Amir touched on was the sense of gloominess that exists. This certainly nicks the nerve. The absence of a sense of humour in our society is particularly grating. One does come across the occasional lecture or seminar in Urdu devoted to the subject of what makes people laugh. But the approach is invariably academic with the lecturer plucking references from vernacular poetry or literature, rather than the slipstream of experience.

In 40 years of television the producers haven't been able to come up with more than two amusing series, one of which was destined to go off the air due to the usual official intolerance. The offensive episode was the one where an anchorman who is reading the daily bulletin makes certain that every bit of news pertains to, or revolves around Bunder Road.

When a colleague asks him why this particular thoroughfare has been the focus of every strike, opening ceremony, traffic accident, suicide and overflowing drain, the anchorman retorts by asking: why should every news item commence with a reference to Saddar? The sarcasm was not lost on the audience.

In Urdu this word has a double meaning and besides city centre, also means president. Apparently the archdeacon of obscurantism and repression, Zia-ul-Haq, like Queen Victoria, was not amused. In fact, the only bit of caustic humour to which I was recently exposed was when a car dashed into a taxi. Both drivers were without licences. In 10 seconds flat a crowd of 40 onlookers had formed.

The ensuing dialogue was most instructive. The Urdu language was given a fresh dimension after being enriched by a new vocabulary. After the initial exchange of unpleasantries, both drivers explored a number of possible incestuous relationships that the other was supposed to have indulged in; and even the attendant policeman marvelled at the extent and range of the permutations used.

Local advertisements in the press and on television also reflect the general mood. They are sombre, straight-laced and generally boring. They lack the subtlety and humour of some of the recent Indian TV commercials, which often sparkle with wit and innuendo.

The one about the bridegroom on his wedding night who has an expression like a basset hound, and uses a pair of scissors to cut off a designer label from a portion of his costume, while his bride spends the 10 most anxious seconds of her life, was absolutely hilarious. And so was the one about the fierce, trigger-happy, gun-toting relic of the Indian feudal class who spares the life of one of his subjects after he produces mouth-watering pizza.

In spite of brave attempts to do something different, the majority of the plays still gravitate towards the usual hackneyed themes of unrequited love, matrimony and corruption where lachrymose actors bemoan their fate. Even when an enterprising PTV executive decided to screen the sophisticated "Yes Minister" series shortly after it had been released by the BBC, a senior functionary of the Sindh government made certain that the episodes were stopped as they might have reflected on the ineptitude and corruption of the ministers.

The pace of life along with reading habits has also drastically changed. Shortly after independence, when the prehistoric trams trundled along their metal veins and a commuter could travel from Empress Market to Keamari for a sixteenth of a rupee, Elphinstone Street had 12 bookshops that ranged from the small kiosk stuck into the wall, to the larger well-equipped establishment.

There were a couple of goldsmiths and shoe shops and a tobacconist. Until a few years ago a journalist writing for this paper pointed out that in Saddar jewellery shops outnumbered bookshops by 51 to one, and even that gallant relic of gentler and nobler times was eventually driven out to the suburbs. A futurist state? Hardly. But one must admit, it has a great past.

Time to announce a timetable

In their January 25 op-ed, Henry A. Kissinger and George P. Shultz argue against setting any American exit strategy to a calendar. That is an argument the Bush administration has, at least for now, itself endorsed.

Kissinger and Shultz's logic would be right for the Balkans, or Germany and Japan after World War II, or any nation-building effort not challenged by a strong insurgency. But such logic does not apply in Iraq, where the resistance appears to be gaining most of its growing strength from indigenous hostility to the foreign military presence.

No exit strategy for the US-led coalition in Iraq should be abrupt or radical. We must not cut and run. We should not plan to withdraw our forces entirely by any set date. And we should announce a schedule for partial withdrawal only in conjunction with the new Iraqi government being formed. But the case for a fairly prompt major reduction in foreign forces, announced publicly and set to a schedule, increasingly appears to be the best way to help produce a stable Iraq under a government accepted as legitimate by most of its people.

Admittedly, foreign military forces are still a necessary part of the solution in Iraq. Without them the country would probably wind up in civil war. The likely results would be ethnic cleansing, a sanctuary for terrorists and a mockery of the US claim that it overthrew Saddam Hussein's regime in part to liberate the Iraqi people.

But US-led coalition forces have also become part of the problem. It is now inescapable that they are helping fuel the insurgency. While measuring the size of any guerrilla movement is always difficult, the best estimates are that the resistance has grown over the past year from some 5,000 hard-core fighters to 20,000, despite US forces having arrested or killed 15,000 enemy fighters.

To be sure, part of that strengthening resistance is made up of Baathists who will continue to oppose any representative Iraqi government even if most US forces are withdrawn. But it's hard to believe that the numbers of such dead-enders have been growing much. And, yes, there are foreign jihadists. But the latter group appears to number no more than 1,000 to 3,000 people.

Most of the growth in the insurgency, it appears, has come from a third group: Sunni Arab Iraqis who were "fence-sitters" in the early months after Hussein fell. They now seem motivated primarily by anger at foreign forces, which they perceive as occupiers caring little about the well-being of Iraqis, instead wishing only to exploit Iraq's oil or use its territory as a springboard for further hegemonic activities. In addition to those taking up arms, large percentages of Iraqis are sufficiently angry at the United States that they are not providing the kind of human intelligence needed to defeat the perpetrators of violence.

January 30 historic elections, despite their many virtues, are unlikely to change these dynamics among the Sunni Arab population in particular. Even many Shias celebrated the elections as a further step toward reclaiming their country. Thus, developing a withdrawal schedule would not run counter to the message of the elections but would build on that positive message. It would also remind the Shias, as well as the Kurds, of the need to integrate Sunnis into the government and security forces.

The perception of coalition forces as latter-day imperialists is, of course, fundamentally unfair and wrong. But it is widespread. With Iraqi unemployment stuck in the 30 to 40 per cent range, most infrastructure performing no better than under Hussein, and crime rates apparently several times what they were during the later years of his rule, many Iraqi realities are working against us too.

The above assessment suggests that Washington and Baghdad would actually improve their prospects for defeating the insurgency and stabilizing the country by publicly announcing a plan for gradual but substantial coalition troop withdrawal. We should commit to redefining the mission mandate for foreign forces, reducing their role as much as possible after a new Iraqi constitution is ratified and a more permanent government is elected in late 2005.

And we should aim to have two-thirds to three-quarters of our forces out of Iraq by mid-2006.

This timeline would also allow Iraqi security forces ample time to complete training and get on-the-job experience. After the drawdown, remaining coalition forces might number 30,000 to 50,000, conducting training and providing quick-reaction capability to back up Iraqi security forces. This should be enough to prevent the worst-case outcomes of a return to power by Baathists or other extremists, or a chaotic situation in which al Qaeda could find refuge.

There are clearly risks in this strategy. But a central fact about Iraq today is that no strategy is risk-free. Even if we can stomach the casualties and the costs, there is no guarantee that indefinite continuation of the current mission will produce victory. Rather than reinforce failure, we need to find a new approach.-Dawn/Washington Post Service

The writers are associated with the Brookings Institution, US.

US threats to Iran

Convinced that his re-election for a second term was a vote of confidence for his unilateralist policies, President Bush has not considered it necessary to make a course correction, despite the setbacks suffered in Iraq.

With the neo-cons around him again in full control, the reliance on threats of regime change is back, to the consternation of those who have been advocating a return to the diplomatic path. The new secretary of state, Ms Condoleezza Rice, promised resort to diplomacy in her confirmation hearings. However, President Bush has already hurled threats of military action against Syria and Iran. Syria has kept a low profile, but the Islamic regime in Iran has responded with defiance.

Following the attack on Iraq in February 2003, Iran had adopted a compliant posture, when the US accused it of conducting a secret programme to develop nuclear weapons, and opened its installations to more searching inspection by the IAEA. Some of the documents it made available, even pointed a finger at Pakistan whose leading nuclear scientist had apparently figured in the transfer of sensitive technology.

Iran's willingness to cooperate with the IAEA was found reassuring by the leading European powers, namely Britain, France and Germany, which sought to conclude an agreement whereby Iran would cease uranium enrichment in exchange for access to technology for its peaceful goals in the nuclear field. The US, however, continued to accuse Iran of persisting in its goal of developing nuclear weapons that were found specially menacing by Israel. The pressure for military strikes on Iran came mainly from Israel and its supporters within the Bush administration.

The US hostility towards the Islamic regime in Iran, goes back to February 1979, when the religious elements led by Imam Khomeini overthrew the Shah of Iran, who was a trusted ally of Washington. During its first decade, while Khomeini was alive, Iran followed a hostile policy towards the US, whose diplomats wee subjected to a siege in the American embassy that lasted for more than a year.

An attempted military operation by the US did not succeed, but left behind a legacy of suspicion and mutual rancour. The failure of the attack carried out by Iraqi strongman Saddam Hussein in 1980 with Washington's encouragement to bring down the revolutionary regime in Iran only deepened Washington's enmity towards it.

After the Cold War ended in 1989, a year that also witnessed the demise of Khomeini, the Islamic regime in Iran abandoned its policy of seeking to destabilise pro-West regimes in the region. However, Teheran's continued support to the Palestinian cause in the Middle East, and specially its backing to militant groups, such as Hezbollah in the Lebanon, led to it being designated as a terrorist state. As US hostility has continued and has been reflected in many warlike acts, including the shooting down of an Iranian passenger plane, Iran has maintained a high state of readiness to withstand this hostility.

Israel has always backed strong measures against Tehran, and after the 9/11 terrorist attacks, Iran has been singled out as an Islamic country that is hostile to both Israel and the US. In his State of the Union message in January 2002, President Bush included Iran in what he called the "axis of evil", the other countries being Iraq and North Korea. Thus Iran has remained high on the list of countries accused of patronizing terrorism, and of developing weapons of mass destruction that pose a threat to the US and its allies.

Even though no link was established between Iran and the terrorists involved in the 9/11 attack, who were all Arabs, Iran was firmly included among the terrorist states, because of its support to the militant groups fighting Israel. Iran had further attracted condemnation for not supporting the US-backed peace process in Palestine, even though Yasser Arafat and the mainstream Palestinian organizations agreed to participate in the process.

When President Bush decided to launch a war against Iraq without a UN mandate, Iran was critical of the decision, which it saw as a step towards subjugating the Islamic world. However, the government in Tehran was careful not to take any openly hostile steps that could attract heavy retribution. On the contrary, Tehran sought to assuage US concerns about the nature of Iran's nuclear programme, by cooperating with the IAEA, with which it signed a protocol in 2003 to permit a more through inspection of its nuclear installations.

The increasing bellicosity in the US stance against regimes considered hostile after the re-election of President Bush has led to efforts both by EU countries and by the broad international community to discourage resort to pre-emption by Washington. Britain, France and Germany have sought to remove concerns over Iran's nuclear programme by engaging the government of the Islamic Republic in negotiations, and by persuading it to agree to a suspension of uranium enrichment, which Washington regards with extreme suspicion.

However, Iran also maintains that the provisions of the Non-proliferation Treaty, which it has signed, allow nuclear experiments and processes in pursuit of peaceful goals related to economic development. Indeed, the utterances of the Iranian leaders reflect a determination to safeguard the sovereign rights of the country and not to submit to what they consider to be US blackmail under Israeli pressure.

Facing US hostility, Iran has been engaged in developing closer relations with major Asian powers, including China, India as well as Russia. In fact, with its influence in Europe on the wane, Moscow has responded positively to Teheran's quest for security through defence-related deals as well as on peaceful nuclear technology.

The construction of a nuclear power reactor at Bushehr has been strongly objected to by Washington, but Russia maintains that the reactor is under IAEA safeguards. After a period when the finalization of the agreement to operationalize the reactor had been delayed, Iran has recently agreed to return the spent fuel from the reactor to Russia. As a result, the reactor will now be completed.

The main US objection to Iran's construction of nuclear power reactors is that being rich in oil and gas, Iran does not need to develop unclear power. Iran's response has been that its oil and gas are located in areas removed from population centres, and resort to nuclear power is the most practical solution to its power deficit Furthermore, oil is a non-renewable resource, and peaceful use of nuclear technology is the answer many advanced countries have sought for their energy needs.

As the US sabre-rattling against Iran has mounted, the leading EU powers which have been engaging Iran on the nuclear issue, have been counselling restraint, and urging that peaceful dialogue is the answer. The IAEA director-general Mohammad Elbaradei, has also favoured the path of negotiations, to meet the proliferation concerns of the US. The Iranian leadership has relatedly stated that its nuclear programme is peaceful, and that it stands ready to open any of its nuclear research sites to examination by the IAEA inspectors.

Pakistan feels deeply concerned over the threats being hurled by the hawks in Washington. We have developed a friendly relationship, as well as a certain strategic partnership with the US in the war against terror. At the same time, Iran is an important neighbour and friend and both countries attach importance to good neighbourly relations rooted in history and culture.

The possibility of US military action against Iran is viewed with the utmost concern, as that will produce turmoil and instability in our neighbourhood. Pakistan is therefore playing a discreet role to remove mistrust between the superpower, and a friendly Islamic neighbour.

The whole region extending from the Middle East to West and South Asia has witnessed war and instability for nearly a quarter of a century, and Pakistan has a stake in peace and stability returning to the region. As such, the cooling of tensions, by resort to the established mechanisms of negotiation rather than through force, corresponds with the sentiments of the people of the entire region, as well as the aspirations of world opinion for a peaceful international order.