An import-dependent economy

DEVALUATION of the rupee has been ruled out as an option for solving the external account problems of the country. There is almost total unanimity on that by now in official and non-official circles. That remedy has been tried too often in the past with little success. When less devaluation proved futile, more devaluation had to be attempted in desperation but to no avail.

And that has brought down the rupee from 3.30 to a dollar in the 1950s to 61 now, while the Indian rupee stands at 44.7 to a dollar after gaining by Rs1.50 in a year. We should avoid the Pakistani rupee going the way of the Bangladesh taka and the Sri Lankan rupee.

Pakistan’s traders usually clamour for devaluation of the rupee when their exports face resistance abroad and achieve that at the end. But now that the rupee has remained steady for several years, largely due to a weak US dollar, Governor of the State Bank of Pakistan, Dr. Shamshad Akhtar says that devaluation of the rupee can hurt the exports. It might be helpful to other economies whose exports are less dependent on heavy imports, but not to Pakistani exports which are dependent largely on imported inputs.

Our export industry is dependent on imported machinery, spare parts and raw materials except cotton, leather, chemicals and packaging materials. The energy they use is often produced by imported furnace oil as also the transport vehicles which are imported and assembled here. If we discount the foreign exchange cost of all these inputs from the export earnings, the net gain may be too small and in some cases nil.

For all the imported inputs we use, we are not exporting much of the value-added products. And by exporting low count yarn, we may be losing more foreign exchange than earning more. If in such circumstances we devalue the rupee further, we may lose more foreign exchange earnings through trade than gain more.

In items like sugar we do not make any attempt to export as our product costs far higher than international prices. The yield per acre of sugarcane is very low, the sucrose yield of the cane is poor and the sugar manufacturer’s costs are high. Hence instead of exporting sugar when we have a surplus, we import more and more of sugar and have contentious arguments over that.

A State Bank study places the import content in Pakistan’s exports at 37 per cent. For raw materials the imported part is 24 per cent and 16 per cent in case of capital goods. How these figures have been worked out is not clear. When it comes to capital goods, most of the inputs are imported which makes the production of such goods too costly. Hence the manufacture of textile machinery has made little headway despite the fact the country has over 300 textile mills. Textile mill owners are hence clamouring for the import of Indian textile machinery made under license from foreign manufacturers.

It is in this context that the World Bank has given the ranking of 74 out of 175 countries in terms of the cost of doing business there. Singapore tops the list, and New Zealand comes second and the US is at No. 3.

Now adding to the cost of doing business in Pakistan is the frequent wheel jam strikes. There was one such strike called by the Pukhtuns of the city, who control its public transport, last Friday and we had another effective strike called by the MQM on the Friday before. Last Friday’s strike was said by the industrialists to have cost the industry a loss of Rs2.4 billion including export contracts which could not be honoured as the deadline for the delivery of goods could not be observed.

Next year is the election year and protests and processions can be plenty and that is the anti-thesis of the interests of trade and industry at a time when there is a heavy trade deficit. Hence the Federation and the Karachi chamber have appealed to the political leaders to confine their protests to the assemblies and leave the roads alone which are even otherwise clogged with immobile traffic.

Next year is also the year for tourists to discover Pakistan with the slogan “Destination Pakistan”. Prime Minister Shaukat Aziz wants the tourists not only to pass through Pakistan on their way to India, but make Pakistan their destination and spend a long time here discovering the natural beauty of the country and its rich cultural heritage and religious sites.

If they come in sizable numbers in Pakistan, they would not want to be held up on the roads and face violent protests in a country with too many fire arms and too much ammunition which are too freely used.

The strikes are also a matter of concern for women who become entrepreneurs and are exporting garments at good prices. They do not want their cargo to be held up on the roads or at the port and see their export orders cancelled. They cannot afford to make a very poor stock and fail because of the useful political convulsions.

Such strikes can deter foreign investment as well from the UAE groups as well which now wants to set up a new city in Karachi at a cost of dollars 43 billion on two islands which are being vacated now. Investors want political stability and social peace for making large investments.

If the tourists are to come here in large numbers next year and feel comfortable, then streets should be cleared of the crimes now called street crimes. It is one thing to snatch mobile phones by the dozen everyday and quite another to relieve women of their jewellry. And there are bank robberies and snatching of money as the customers come out with that from banks. What is worse is resistance to such crimes which is fatal in too many cases.

The government says the banks should arrange for their own security, but in many cases the bank guards were found involved in the bank robberies. In other cases the police men were involved in such crimes.

It is said by officials that rapes do take place in New York as well but there are no gang rapes and not at least in police stations. Here too many crimes take place in police stations, hence people avoid reporting crimes to the police.

Even if they do, getting an FIR registered is an uphill task and in rape cases they are too slow to act and if the offending parties are powerful, registering the FIR is resisted as much as possible. Hence the difference between simple street crimes and other crimes which can be fatal for their victims should be acknowledged and dealt with effectively.

It is said that poverty and unemployment are the driving force behind street crime. But what is obvious is those who commit street crimes and small thefts with impunity and reap large rewards ultimately turn into big criminals because of the large rewards and impunity to punishment if they have the right links or adequate lootsharing arrangement.

Kidnapping of persons particularly from well-to-do families is committed by equally well-to-do persons. Last week a case came to light of a student of a business college in Mirpurkhas of having being kidnapped by two of his friends. One of the kidnappers was a feudal lord’s man and the other a son of a cadet college principal. They demanded a ransom of a million rupee for each. As the amount was not delivered, they tortured him unendingly and finally strangulated and killed him.

This is the level of social behaviour we have come to acquire. So we cannot sit back and say only street crimes are common here and which also happen in New York. In many cases greed is the driving force behind such crimes.

Unless such crimes are suppressed as they begin taking shape, they will spread and assume diabolic proportions. And more well-to-do young men will get involved because of the large gains they can make quick. When resisting simple theft can invite a gun shot from the criminal shows that crime in society has reached dangerous levels. If a father cannot save his daughter from robbery or a husband protects his wife while being robbed we are living in too dangerous times and the government has to act decisively and quick.

It all has to begin with the reform of the police. The people’s faith in the police should be re-established through a radical change in the role of the police as crime fighters.

In such a context the World Bank has given very poor marks to the labour conditions in Pakistan. A study by the bank shows that Pakistan has the largest number of temporary employees in South Asia — 36 per cent of the labour is temporary. The temporary staff in India is 13.15 per cent and in Bangladesh it is three per cent because of strong trade unions. Such large number of temporary employees is not good for social stability or steady economic progress.

The informal sector in Pakistan is also very large. It consists of 73 per cent of the work force in rural areas and 67 per cent of the workers in urban areas. Such figures make the World Bank show real concern for the large mass of people who will be displaced by the large five dams led by the Kalabagh dam and Basha dam which are to be built soon.

Lack of concern for the welfare of the masses and the misery of the poor are major causes for crimes. The government and the political parties should have real concern for the welfare of people instead of taking their problems lightly and promising their solution at a distant date.

The Iraq report: a prognosis

THE Iraq Study Group Report authored by former Secretary of State James Baker and former Congressman Lee Hamilton is the current hot topic in America. It is also one of those “incredible phenomena” that only America is capable of producing out of a hat and that it calls policy.

After more than three years of waging an all-out war on Iraq, has it now dawned on the policymakers in Washington that there was something seriously wrong with the war? But the tragedy of this episode is that the realisation, if any, of the futility of the war has come about after enormous pain and destruction have been inflicted on the hapless people of Iraq.

In trying to find out what was really wrong about the scheme of things in the Iraq war in the American perspective, one comes across ample evidence of sheer stupidity and absurdity. Even so it is better late than never because so much of humanity has been at risk ever since the war began in 2003.

There are of course any number of explanations that have been given in the past and are likely to be pressed into service by way of ex post facto justifications for the Iraq war. But one has already had enough of them to need any more. There was also the loose talk of Iraq being in possession of weapons of mass destruction which to date has proved to be an absolute hoax since they were never found. There were poppycock theories about the involvement of Saddam Hussein with Al Qaeda and in the 9/11 happenings in New York and Washington.

Now, of course, we have a policy about-turn with the convening of the Iraq Study Group which consists of some very big names from the American establishment — James Baker and Lee Hamilton and, of course, Lawrence Eagleburger who is now the president of Kissinger Associates, a Washington firm of consultants. One wants to know how and why this study group was convened and went into action so very fast and produced a report for the urgent consideration of the Bush government.

Was it only the electoral defeat of the Republican Party in the mid-term congressional polls last month which resulted in an about-turn on the very rationale of the Iraq war?

Paradoxically, it was the very same Henry Kissinger of Kissinger Associates and Eagleburger who were supporters of the decision to invade Iraq and bring about a regime change in that country. It makes business so much easier if the same client turns up again in search of advice as to what to do when he finds himself landed in a deep ravine. That is precisely what has been happening in Washington on a regular basis.

Needless to say, for several decades now, the making of US policies has effectively slipped out of congressional control because of policy subterfuges, for example in the shape of the above-mentioned consultancy firms which alternatively travel under the label of think-tanks and that take it upon themselves to act as policy advisers and make enormous profits by way of professional fees for whatever advice they render to gullible clients.

One of the perennial problems faced by all US governments is that they hardly have any solid professional advice coming to them from permanent civil service cadres.

This is because at the senior level functionaries are political appointees with a propensity to render soft advice or, alternatively, refer matters to consultancy firms/think-tanks which again tend to give loaded personality-oriented advice.

The Iraq Study Group, I have no doubt, is just another consultancy service put together by the United States Peace Institute in order to find a subterfuge to cover up the Bush administration’s monumental blunders in the formulation and conduct of its Iraq policies. US foreign policies are officially known to be formulated on a bipartisan basis. But this is more in theory than in practice.

Through the last five years (2001-2006) that the Bush administration has been calling the shots, it has been extremely arrogant in its behaviour towards the Democrats in both Houses of Congress.

With the new party configurations in Congress having heavily altered in favour of the Democrats following the mid-term elections, the Bush administration is most likely to lose a lot of ground to the Democrats in the day-to-day running of the government.

No wonder then that the Bush administration has now devised a cover for its own safety via the Iraq Study Group report which is primarily authored by James Baker who, apart from all the government positions held by him in the past, remains a steadfast friend of the Bush family.

Let us not forget that when President George W. Bush’s first-term election almost ran aground during the ballot count and the subsequent judicial scrutiny, it was James Baker who rescued the presidential candidacy of George W. Bush.

All the options contained and discussed in the Group’s report are indeed those that were always available to the US government to adopt and even implement in order to de-escalate the situation that is spiralling out of control in Iraq and in the Middle East in general.

If one goes through the report of the Group one finds very little that is new. It is in essence a bail-out plan that has been organised by the senior Bush for his blundering son who has the good fortune of becoming president not once but twice. To that extent it is a very astute act and a well-crafted political plan to finally rescue what is left of the political career of George Bush.

In politics as well as in life in general it is always handy to have one’s father around and especially if he provides a bevy of influential persons of the standing of James Baker and Henry Kissinger who are always ready to help a patrician family keep itself continually propped up.

What is being engineered behind these Iraq Study Group moves by George W. Bush and his father’s cronies is a way to somehow stave off the countrywide disenchantment with them.

Losing both Houses of Congress to the Democrats was bad enough, but the fundamental issue is that of the president having lied consistently to the American people on Iraq. What is staring George W. Bush in the face is the real possibility of his impeachment by a Congress that is now controlled by the Democrats.

A promise in peril

THE Iraq Study Group’s recommendations will accomplish nothing in Iraq. Its expressions of “gratitude” to those of us Iraqis who fought on the battlefield for freedom and liberty ring hollow. The report ignores our accomplishments, dreams and sacrifices in favour of a concern for those whose ultimate goal is the destruction of democracy.

Our federal constitution, which the majority of the Iraqi people voted for, is treated flippantly, as though it were a negotiable document rather than the hard-fought result of lengthy negotiation among those willing to participate in the new Iraq.

Further, the study group’s approach is driven by the concerns of the countries in this region rather than by the concerns of the Iraqi people.

Many Iraqis, especially the Kurds, are justifiably concerned about this. No one from the study group visited Iraqi Kurdistan, which the group admits is safe and pro-American, and where there has not been a single US casualty since the war.

Kurds not only fought alongside Americans but lost some of our best men to American friendly-fire incidents. Yet we staunchly support the work of the coalition and are eternally grateful for the sacrifices the American people have made for our future.

The report is right to acknowledge that part of the problem in Iraq is America’s inability to distinguish friend from foe. Unfortunately, Baker-Hamilton fares even worse in this regard. This comes as little surprise, since it was partly written by those who orchestrated the saving of Saddam Hussein in 1991.

To call upon Iraq’s neighbours, which have chosen Iraq as a place to fight the United States, is a grave mistake. Seeking their participation would inevitably backfire. They would not only contribute to the instability within the country but would implement agendas in direct contradiction to America’s occupation goals.

The plan would reward regimes that have undermined the U.S. effort at every turn. Iraq would fall under the regional powers, and the Iraqi people would come out the losers. Any vacancy left in Iraq by the coalition forces before Iraq is ready to stand on its own would be filled by those opposed to democracy.

American credibility would dissipate, and any chance for success in Iraq would evaporate. If this comes to pass, hopes for real democracy in the Middle East will be history. The regional powers that border us have an interest in keeping us weak and divided.

Once again Kurds are about to be sold out. Should the U.S. administration adopt the recommendations of Baker-Hamilton, the Kurds will be sacrificed to protect the interests of Iraq’s neighbours. We were massacred in 1975 and 1991 by Saddam Hussein because we thought that our commitment to democracy and tolerance made us natural US allies. We responded then, as we did four years ago, to American calls for the introduction of a new era in the region. Like Americans, we dream of a better future for our children, one in which they can grow up without deformities caused by chemical attacks on our villages.

It is true we fly Kurdish flags. This is yet another similarity we have with Americans, who are proud not only of their country but also of the accomplishments and unique identities of their states. The harbinger of successful democracy in the United States was the willingness of its founders to recognize the particular interests of states and to craft a constitution to safeguard their rights.

Baker-Hamilton would deny Iraqis the same rights and thus doom our efforts to construct a system in Iraq that protects all its citizens. It would strip Kurdistan of rights it has negotiated with the central government to protect it from abuses like those it has suffered in the past. We should not forget that over-centralisation has been a disaster for the Iraqi people.

Iraq’s constitution should be treasured. Iraq’s neighbours should not be allowed to violate our sovereignty. Democracy and federalism are the popularly chosen basis of the new Iraq. Never again should Kurdish wealth be stolen to finance genocide against the Kurdish people.

While Kurds welcome American troops into their homes, Baker-Hamilton proposes that the United States revise its policies to meet the demands of those firing at its soldiers. According to the study group, we are all part of “a problem” that needs fixing, and we are equally unworthy of America’s protection. Don’t sell us out to our authoritarian neighbours and those who are terrorizing our communities.

We agreed democratically to participate in this project because we were guaranteed the rights needed to protect our people. We Kurds are asking President Bush and America to remember the sacrifices we have made to keep your loved ones safe in Iraq. We are asking you to keep a promise where those before you have failed. —Dawn/Washington Post Service

The writer is the director of the Intelligence and Security Agency of the Kurdistan Regional Government in Iraq and a high-ranking member of the Kurdistan Democratic Party

The war is already lost

ONCE a war goes badly wrong and its justifications are shown to be lies, to insist that a “democratic” Iraq is visible on the horizon and that “we must stay the course” becomes a total fantasy. What is to be done?

In the US a group of Foggy Bottom elders was wheeled in to prepare a report. This admitted what the whole world (Downing Street excepted) already knew: the occupation is a disaster and the situation gets more hellish every day. After US citizens voted accordingly in the mid-term elections, the White House sacrificed the Pentagon warlord, Donald Rumsfeld.

The warlord of Downing Street, however, is still at large, zombie-like in his denials that anything serious is wrong in Baghdad or Kabul. Everything, for him, can still be remedied by a dose of humanitarian medicine (a poison so powerful and audacious that no resistance is possible). His desperate attempts to play the statesman have made him a laughing stock in friendly Arab capitals and Baghdad’s Green Zone. Iraq is the umbilical cord that ties him to his fate.

Meanwhile, the old men in Washington recognise the scale of the disaster. Their descriptions are strong, their prescriptions weak and pathetic: “We agree with the goal of US policy in Iraq, as stated by the president: an Iraq that can govern itself, sustain itself and defend itself.”

Elsewhere they recommend a deal with Tehran and Damascus to preserve post-withdrawal stability, implying that Baghdad can never be independent again. It was left to a military realist, Lieutenant-General William Odom, to demand a complete withdrawal in the next few months, a view backed by Iraqis (Shia and Sunni) in successive polls. The occupation, Kofi Annan informs us, has created a much worse situation than under Saddam.

How different it was in the heady days that followed the capture of Baghdad. Two lines of argument emerged in the victorious camp. The Pentagon wanted a quick deal with Saddam’s generals to establish a new regime so that the US and subsidiary troops could withdraw to bases in northern Iraq and Kuwait to police the outcome. The state department and its Downing Street auxiliary wanted the ruthless application of “hard power” and a long occupation to establish a new Iraq as a model of US “soft power” for the entire region.

This was never a serious option. It is the unconditional US support for Israel that precludes any possibility of soft power in Iraq or elsewhere. Using Fatah to promote civil conflict in Palestine is unlikely to improve matters. Even the most pro-US Arab regimes in the region - Saudi Arabia, Egypt, Jordan and the Gulf states, which do Washington’s bidding - permit virulent denunciations of western policies in the media to keep their own citizens at bay.

None of the scenarios being canvassed in Washington, including by the Democrats, envisage a total US withdrawal. That is a defeat too unbearable to contemplate, but the war has already been lost, together with half a million Iraqi lives. Trying to delay the defeat (as in Vietnam) by sending in a “surge” of troops is unlikely to work.

The British parliament, even more supine than its US equivalent, voted against any official inquiry (not even a Hutton) on British involvement in the war, when they knew that a majority in the country was opposed to a continuation of this conflict. Blair’s ideological zealotry has helped destroy Iraq, revive the Taliban in Afghanistan, increase the threat of terror in Britain and introduce repressive laws that were not enforced even in the second world war. His own wretched party and the opposition have acquiesced in these repellent measures. Time for a regime change at home. —Dawn/Guardian Service