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Majyd Aziz Interview to Value Chain monthly magazine

Value Chain Monthly Magazine recently talked to Majyd Aziz, Former President Karachi Chamber of Commerce and Industry, to solicit his views on the economy, especially the Federal Budget 2013-14. (The interview done on June 23, 2013 was published in the July 2013 issue

1. On the face of it, the recently announced federal budget has not imposed a new indirect tax except for a 1% increase in GST. Do you agree with this view that no new indirect taxes have been imposed?

Yes, GST has been raised from 16 percent to 17 percent and FBR expects to collect over Rs 63.5 billion while at the same time it estimates an additional Rs 18.5 billion to be realized through Federal Excise Duty.

2. What in your view are the venues for increasing direct taxes?

The prevailing culture of people to keep away from the tax net is one prime factor in government depending on indirect taxes to achieve the targets. However, the worst part is that it is through the complicity of corrupt elements in FBR that people are facilitated in evading their tax responsibilities. Moreover, FBR has seldom played the role of a facilitator and so there is a sense of averseness when it comes to entering the tax syndrome. It is therefore more convenient for FBR to reach towards the revenue target by relying more on indirect taxation.

The country has become a laughing stock in the comity of nations since her tax-to-GDP ratio is about 8.5% and continuing to decrease every year. The ideal way to collect direct taxes is to reduce the percentage of income tax and making it attractive for taxpayers to document their businesses or earnings. Although the Finance Minister did announce a reduction of 1% in corporate tax, i.e. from 35 to 34%, the bare fact is that it created ripples and not waves in corporate corridors.

It is incumbent upon FBR to identify tax evaders, to formulate a practical strategy to induce them to pay taxes, and to ensure that those who are identified are not allowed to escape the net. In well-established societies, people who pay taxes are aware that in return they would be able to get good schools, better health facilities, peaceful law and order environment, workable and sustainable physical infrastructure, accountability of errant bureaucrats and politicians, and a better and safe future for themselves, their families and businesses. When the state abdicates its responsibility, when the state wastes precious resources, and when the state treats citizens with scorn and disdain, then it loses the moral high ground to demand taxes and levies from those citizens who are obligated to pay their share in the country’s financial resources pool.

3. Will the 1% rise in GST have a significant impact on the cost of doing business and on inflation?

Government spin doctors regularly show their faces on various TV talk shows and vehemently and forcefully try to impress upon the viewers that the added 1% is not something to worry about and that there would be no negative impact on inflation or even on cost of doing business. The worrisome thought is that for the next five years, the country would be listening again to ill-informed political sycophants in the same manner and style witnessed in the last five years.

Why wouldn’t this increase in GST have an impact? There is a multiplier effect on everything that costs more or costs less. It is very simple to say that the end-user or end-consumer would not feel the added cost and would bear it in normal stride. On the contrary, whenever prices rise, for whatever reason, the impact is immediately felt and there is then the reaction to take this increase, add some more, and then pass it on. In cases where it is impractical to pass the added cost, then the producers absorb the increase and, in the process, either reduce their profit margin, either cut corners, or resort to non-documentation tactics. Another factor is that in many markets, the goods are often sold on credit and most of the time, the settlements are delayed or the credit period is longer. In that scenario, the working capital of the seller comes under pressure since the tax portion is also part of the credit given to the buyer.

4. People, business, and industry rightly expect the state to repair the infrastructure, especially the power sector, but this can’t be done without higher tax revenues. Then why is a rise in taxes resented by them?

There is generally a trust deficit between the business sector and the tax collectors. At times, there are many different tax collecting agencies, each with its own priorities and own dynamics. Trade and industry, as well as households, all expect the government to plan and provide the required and needed infrastructure so that the wheels of economy move smoothly and the citizens enjoy quality of life. Inspite of continuous lobbying and representations, Pakistan’s trade and industrial sectors are being denied their rightful share of sustainable infrastructure and the blame more often than not lies at the portals of the policymakers and the government of the day. The availability of resources is fundamental for development of any infrastructure and the low resource mobilization precludes any notion of initiating mega infrastructure projects.

The situation becomes more depressing when the government has to resort to external financing and agreeing to stringent conditionalities set by the international development financing institutions. These measures further alienate the people from the government and at times become the catalyst that sparks discontent and restlessness in the country. However, the scenario becomes deplorable when the government squanders away the resources on frivolous adventures and non-developmental expenses. That is why any increase in duties and taxes also results in agitation by trade and industry.

5. The Federal PSDP has been allocated Rs 540 billion out of which Rs 222 billion will be spent on repairing the power sector. Do you think this investment will improve electricity production and cut losses?

Public Sector Development Projects are meant to being about the positive change in the country and through which various facilities and improvements are conceived, planned and approved. Usually, due to myriad reasons, PSDP funds are under-utilized and the blame eventually is placed on non-implementation of the projects. Furthermore, whenever FBR is unable to reach revenue targets and the non-developmental expenses become a budgetary headache, or at times when natural calamities inflict monumental losses of lives and assets, the government diverts allocated PSDP funds to tackle these issues. Therefore, while PSDP funds are supposedly the outcome of a planned vision, the performance at the end of the year tells a different story.

The allocation of a formidable amount of nearly 50% of the Federal PSDP (including Federal financing of Rs107 billion while another Rs118 billion to be arranged by the Water and Power Development Authority (WAPDA) from its own kitty) towards the power sector manifests the government’s desire to address its election campaign promise to resolve the menace of loadshedding and power outages. Among the various measures in the energy strategy, such as resolution of the circular debt, prompt availability of fuel, fast track conversion of generation to coal, immediate introduction of renewable energy, etc, a very crucial step is to rehabilitate and upgrade the existing power network. Years of neglect, corruption, sabotage, use of shoddy material and other factors have affected the network in many areas. Even USAID has undertaken to provide funds and expertise to improve the power network in selected areas. The proper and judicious utilization of the funds would go a long way in bettering efficiency, reducing transmission and distribution losses, providing proper voltage to end-consumer, and maybe, just maybe, reduce costs for the power producing units. Hence, this step of the government needs to be conditionally lauded provided it achieves the purpose and objective.

6. The budget assumes that in 2013-14 exports will touch $26 billion. Will that be possible?

The government is to be complimented for focusing on a doable target rather than setting unconsidered export targets. There are many factors that debilitate a high enhancement in export figures. The horrible infrastructure scenario is a significant cause for snags in improving the country’s production of goods and services. These shortages also result in high production costs due to non attainability of economies of scale. The country’s agriculture output is also pathetically low with an annual growth not exceeding 3 to 3.5%. The agriculture sector still relies on out-dated farming equipment and methods and there is low awareness of seed technology and productivity enhancement tools. Inheritance plays a major role in division of agriculture lands and this cultural custom always impacts the cost of production and reliance of modern farming equipment. Thus Pakistan is not able to produce substantial cash crops at cheaper prices.

Pakistan has not been able to channelize software exports through a transparent and friendly official process and thus most of the software exports are out of the legal domain. Information technology software development is a 30% annual worldwide growth opportunity that this country should not miss. Mineral exports have picked up substantially in the last few years. However, the major impediment has been the mindset of the miners and the middlemen who do not subscribe to global market dynamics. They take the prevailing price as the benchmark figure and are averse to reducing it when world demand slows down. This creates frustration among exporters and the hard-earned space in global minerals market is lost to other countries whose miners are tuned in to the world market trends.

A very important factor that can enhance the export base is the attitude of the government and the official policy makers in export promotion. The present scenario is that there is a Trade Development Authority of Pakistan that is more or less concerned with improving the trade base and facilitating exporters. However, the desired advancement and effectiveness of this vital organ is nothing to write home about. Furthermore, the steps taken by the government in areas such as increase of sales tax, the withdrawal of subsidies, the late payment of duty drawback and rebate cheques, the display of cronyism and favoritism, and the proverbial red-tape and bureaucratic indolence, have all contributed towards the stagnation of exports. The stranglehold of big time exporters and godfathers, especially in the affairs of export based trade associations and chambers, have demoralized small and medium exporters who suffer from a perpetual lack of a level playing field.

There is this hope that Pakistan would be able to obtain GSP Plus status from the EU on January 01, 2014. This would surely enable the exporters, especially textiles-based, to increase exports to EU countries. At the same time, there is a need to introduce Track II diplomacy by the business community by lobbying vigorously in Washington with Congress, with labor federations, with government officials, and with business counterparts so that Pakistani products also get a wider window for entry into the United States at competitive rates vis-à-vis regional competitors. Moreover, efforts should be made to enhance exports to Afghanistan, China and India. This strategy would pave the way for boosting the export figures otherwise the stagnation in exports would in a couple of years would prove to be an unmitigated disaster.

7. To reduce the cost of doing business and contain inflation, the exchange rate of the Rupee must be stabilized, in fact improved by at least 5% but for that we need higher exchange reserves. Besides borrowing from the IMF, what other options Pakistan has and how useful they could be?

There is scant possibility of reduction in cost of doing business while the hope is that inflation would be contained in single digit figures. It should be noted that external circumstances impact upon the domestic cost of production, such as global oil rates, strong foreign currencies, and changing goalposts through various policies (introduction of Non-Tariff Barriers, denial of preferential trade facilities, regional economic blocs, etc). The incidence of imported input in textile exports is over 30% and therefore this also affects the cost of production. The continued deterioration of the Rupee in the last five years from Rs 60 to nearly Rs 100 has had a wrecking-ball impact on the various inputs.

Normally, a depreciating currency does help a country in marketing products at a favorable rate in the global marketplace. This induces buyers to source their requirements from a country that has a low currency rate, skilled manpower, and capacity to produce. Notwithstanding these advantages, Pakistan has not been able to cash in these advantages, albeit in whatever status these are. Therefore, improvement in the value of the Rupee would not bring about any marked improvement in the cost of production.

The country’s Foreign Exchange Reserves continue to dwindle down inspite of pronouncements from the State Bank of Pakistan. The situation is precarious, to say the least, and these are less than two months of imports bill. The inclusion of reserves held by banks and private citizens as if these are Treasury’s reserves is another way of hoodwinking the world. Recently, the IMF team was here and probably not satisfied with the presentations given by the Pakistani economic managers. A loan of $5 billion is being sought. What this new loan would do is to rollover the outstanding loan already due to IMF. The proverbial begging bowl has been polished once again.

Pakistan’s finance managers are banking on a steep increase in foreign remittances from expatriates and expect this amount to cross $15 billion. They are hoping that the Pakistani Diaspora would use official channels to remit the money. The government is also contemplating new incentives to boost up foreign remittances. The financial managers are advised to study the Indian, Sri Lankan and Philippine models as these are success stories. The distressing news that Saudi Arabia would deport over 50,000 Pakistani workers should be viewed with serious consternation. This would negatively impact on the inflow of remittances.

Pakistan can be the recipient of foreign exchange through export proceeds, remittances, foreign investment –portfolio and capital, grants, and foreign loans. It is advisable and important that the government concentrates more on generating revenue from domestic resources and the ideal way is to broaden the tax base, remove untargeted subsidies, facilitate capital investment, reduce the GST rate so that more units are brought into the net as it would increase revenue and not decrease as is publicized, and more importantly drastically reduce non-developmental expenses, especially colonial-era ostentation, casual foreign visits, all kinds of wastage, unbridled corruption, and excessive unannounced holidays. Prosperity comes through a full force activity of the economy. As US Congressman and Vice Presidential candidate Paul Ryan stated: “Borrowing and spending is not the way to prosperity.”

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HOW THE US NABBED BIN LADEN – Abbotabad Commission report

OBL in Abbotabad (Credit: Pakistankakhudahafiz.com)
OBL in Abbotabad (Credit: Pakistankakhudahafiz.com)
ISLAMABAD: The Abbottabad Commission Report, which is yet to be made public, contains a treasure trove of information on the hunt for the world’s most wanted man – Osama Bin Laden.

Its findings reveal that the arrest of Khalid Bin Attash (an Al Qaeda member who was involved in the pre-9/11 attacks such as on USS Cole and the embassies in Africa) in ‘2002’ from Karachi led to the first major breakthrough – he is the one who identified Abu Ahmed Ali Kuwaiti (the Kuwaiti born Pakistani who was OBL’s right hand man and courier and the man who led the Americans to Bin Laden.

After this information came to light, the Kuwaiti intelligence service was contacted but it could not provide any details about the man.

During the search for this man, CIA provided four phone numbers between “2009 to Nov 2010” to Pakistan but without any details as to who they were searching for, a source privy to the report’s details has told Dawn.

Dawn has learnt that these numbers “most of the time remained off” but while the ISI kept the CIA in the loop it did so “without knowing the context and to whom these numbers belonged”.

Now in retrospect, the commission report confirms Attash’s disclosure – Kuwaiti was OBL’s right hand man.

According to what the commission has discovered, he was with OBL’s family in Karachi when it moved to the port city in Oct/Nov 2001.
In 2002, when the family (including OBL’s wives) moved to Peshawar, Kuwaiti was with them and this is where OBL joined them – in mid-2002.

From here they moved to Swat where OBL was visited by Khalid Sheikh Mohammad.

A month later, KSM was arrested in Rawalpindi, prompting the scared OBL family to move to Haripur.

Kuwaiti and his brother Ibrar (who had joined the fugitives in Swat) were with OBL and they all stayed in Haripur till 2005.
And it is here that the move to Abbottabad was planned and executed by Kuwaiti. He is the one who purchased a plot in Abbottabad by using a fake identity card and also supervised the construction of the house, which says a source was custom built.

It contained three complexes. “One open compound, an annexe where Kuwaiti and his family lived and the main three storey house,” said the source, adding that the two top storeys were used by OBL and his family.

The youngest wife stayed on the second floor while the older wives – Sharifa and Khaira – stayed on the lower floor.
Ibrar and his wife lived on the ground floor.

The source explained that the house was built so that the children of Ibrar could not see OBL.

The commission has been told that OBL never had a phone line, an internet or cable connection either in Swat, Haripur or Abbottabad though a dish was used to watch Al Jazeera in more than one city that the families stayed in.

Dawn has learnt that the commission has pointed out the violations committed by the residents of the Abbottabad House which remained unchecked by the authorities at the local level.

For instance, it has noted that a manual ID card was used to purchase land even though a computerised CNIC had been made mandatory in 2004 by Nadra – “the manual NIC was accepted by the Revenue Department, Cantonment Board and others,” said the source, adding that the identities and the addresses were never verified.

He also said that the third floor was built in violation of the building plan and once again no authority intervened.
In addition, the commission has noted that “the fort type construction remained unnoticed by cantonment board, police, intelligence agencies and the locals. The occupants also remained unchecked for non-payment of property tax since 2005”.

When the compound in Abbottabad was stormed by the Navy Seals in the middle of the night, OBL’s first reaction was to tell his family to stay calm and recite the kalima.

When the Seals reached Laden’s room, he is said to have a weapon in his hand and was searching for a grenade on a shelf — he was shot as he turned around, the source has told Dawn. It was at this point that Amal and OBL’s daughter Summaya rushed at the men to stop them, leading to Amal’s bullet injury. Summaya and Kuwaiti’s wife were asked to identify OBL after which the rest of the inhabitants of the house were told by the Seals that Laden had been killed.

Last but not least, Dawn has learnt that the commission has given recommendations to the government that are aimed at averting another May 2 like operation.

It was not possible to find out whether or not the report has investigated and/or made any recommendations to prevent fugitives such as OBL from hiding in Pakistan. Neither is it clear whether or not the commission has held anyone responsible for the presence of OBL in the country or the May raid by the Americans.

The recommendations that Dawn has learnt about are focused on checking American activity in the country and averting operations by outside forces by suggesting that the role of the post of chairman joint chiefs of staff committee be enhanced for more effective coordination between the armed forces. It has also recommended strengthening the National Security Council so that it can take immediate steps as the commission has noted that certain high government functionary could not be contacted during operation.

The commission has also recommended a probe over the issuance of visas to a large number of US contractors who established a spy network within Pakistan.

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Haqqani rejects OBL commission’s findings

Hussain Haqqani (Credit: Pakistan.com)
Hussain Haqqani (Credit: Pakistan.com)

WASHINGTON, July 11: Former Pakistan ambassador to the United States Husain Haqqani has rejected the Abbottabad Commission’s suggestion that as ambassador he issued visas without authorisation or was responsible for CIA agents coming into Pakistan in large numbers.

Mr Haqqani said in a statement that the US Navy SEALS who found Osama bin Laden did not come with visas and the entire controversy over visas had been manufactured to distract attention from the two vital questions. “The first question is, why Pakistan’s bloated security agencies failed to find OBL for nine years and the second, how were the US SEALS able to come into Pakistan without detection by our security forces,” he said.

The former ambassador said the commission interviewed him on Dec 19, 2011 in Islamabad and he informed it that he did not have access to official records for visas at the time but the commission had not recorded that point in its report. He added that the figures for visas were provided by officials at the embassy and the foreign ministry after he had resigned and to say that these came from him was “an absolute falsehood”.

Mr Haqqani also said that giving a visa to a person does not make him invisible within Pakistan. “Entry of that person is still recorded at the airport and he can be followed like thousands of Pakistanis and foreigners are followed by intelligence agencies,” he said.

 

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Pakistan President’s Security Guard Killed – Washington Post

Bilal Shaikh killed (Credit: nation.com.pk)
Bilal Shaikh killed (Credit: nation.com.pk)

ISLAMABAD, Pakistan — One of Pakistani President Asif Ali Zardari’s most trusted aides was killed in a suspected suicide bombing in the volatile port city of Karachi on Wednesday as he stopped his armored vehicle to buy some fruit, police said.

Pakistan has suffered a spate of attacks since Nawaz Sharif was sworn in as prime minister last month, underscoring the challenges facing the nuclear-armed nation in taming a Taliban-linked insurgency.

A senior police officer in the city said Bilal Shaikh — Zardari’s security chief, who was always spotted next to the president during public appearances — and two others were killed in a prosperous area of eastern Karachi.

“It seems that the suicide attacker walked up to Bilal Shaikh’s vehicle and blew himself up outside the front passenger seat of the vehicle where Shaikh was seated,” the officer, Raja Umar Khattab, said. About a dozen people were wounded. A police escort was accompanying Shaikh’s sport-utility vehicle at the time of the attack.

No one asserted responsibility for the blast, which took place on the eve of the start of the Muslim holy month of Ramadan, which begins in Pakistan on Thursday.

The latest wave of attacks has ended a period of relative calm after a May election that marked Pakistan’s first transition between elected civilian governments. In early June, Sharif won a parliamentary vote to become premier for the third time.

Last weekend, at least five people were killed when a bomb ripped through a busy restaurant street in the eastern city of Lahore, Sharif’s home city. On June 30, at least 28 people were killed in the southwestern city of Quetta when a suicide bomber struck in a largely Shiite neighborhood.

Shaikh, who had survived an assassination attempt near his home in Karachi about a year ago, used to change his routes several times while traveling around one of Pakistan’s most violent cities.

Like Zardari, he belonged to the Pakistan People’s Party, which had been in power before the May election. Taliban-linked militants had previously targeted the secular party.

Zardari and Sharif issued separate statements condemning the attack, a private TV channel reported.

It was the first attack in Karachi since mid-June. At least nine people were killed when a bomb targeting the convoy of a senior judge exploded in the old city area. The judge survived. The Pakistani Taliban asserted responsibility for that attack.

— Reuters

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MQM chief being probed for money-laundering, hate speech: BBC

MQM chief Altaf Hussain (Credit: siasat.pk)
MQM chief Altaf Hussain (Credit: siasat.pk)
LONDON, July 12 : The BBC’s flagship programme ‘Newsnight’ has said that Muttahida Qaumi Movement (MQM) chief Altaf Hussain is being directly investigated for money laundering worth at least £400,000 pounds as well as for incitement to violence.

The BBC’s star interviewer Jeremy Paxman disclosed that that the Metropolitan Police had seized hard cash from two properties in two blocks — £150,000 from the MQM office and £250,000 from the house in Edgware owned by Altaf Hussain. MQM’s Deputy Convener Farooq Sattar accepted that the money had been seized by the police but protested that the Met police had failed to follow the procedures and should have provided a receipt of the items taken away.

The BBC said that “the police found hundreds of thousands of pounds of unaccounted for cash and that led to a money laundering investigation”. He questioned if Altaf was “using his London base to incite violence in Pakistan” or if his speeches were a breach of the law.

These revelations were part of a documentary the BBC broadcast focusing on the alleged violent politics of MQM and the allegations surrounding the party.

The documentary contained video clips of Altaf Hussain on different occasions – cooking, joking, singing and making potentially violent statements including “we’ll prepare your body bags” and “don’t blame me if you get killed by our supporters”, “it would be in the UK’s best interests to stop hatching conspiracies implicating me in this murder case (a reference to Dr Imran Farooq’s case)”, “we’ll tear open your father’s abdomen to get our freedom”. The BBC said that the police are now “assessing whether those speeches and others like them” breached the law of the UK.

Jeremy Paxman posed the question at the start: “Supposing if it (Britain) was offering sanctuary to an organisation that was using Britain as a base from which to threaten and persecute others?” and then went on to describe the MQM as “one of the most feared political organisations in Pakistan”.

Speaking from outside Altaf Hussain’s house in Edgware, BBC reporter Owen Bennett Jones pointed out that a police raid had taken place there on June 18 this year in connection with the Imran Farooq murder. He said that Karachi may be far away from Edgware but Hussain “exerts total control over his party”.

Legal expert Ali Naseem Bajwa QC, who also defended the accused during the spot fixing trial involving Pakistani players here, said that Hussain’s Teen Talwar speech against the Pakistan Tehreek-e-Insaf (PTI) activists in Karachi and other similar speeches believed to be inciting violence may potentially be a “terrorism offence”. He said it was clear from Hussain’s speeches that there is a of threat use of force, made for a political cause and designed to influence the government and “all seem to be made out”.

Bajwa commented that there clearly is a case to answer and “it appears an intention that the listener or the person against whom a threat is being made should take it seriously”.

Farooq Sattar, when asked about an alleged threat by the MQM chief issued to the Supreme Court of Pakistan, said: “I categorically deny and refute that Hussain would have ever said what you are saying” and said that these speeches may have “some sort of emotional outburst”. Sattar said that the MQM was open to correction and Hussain has always retracted statements that may have hurt anyone.

The documentary featured a renegade MQM activist Naim Ahmed who alleged that the orders to kill people in Karachi came from London and a policeman who said he had fled Karachi because his life was at risk from the MQM. It’s not clear at this stage whether the Met police will interview the former MQM activist about his past. Ahmed told BBC: “They (the MQM) are not a peaceful party, they are a militant group, they are like a bunch of mafias …. They are an ideal party for violence.”Ahmed said that the youth in Karachi involved in violence told him that “we got our order from London.”

The BBC also featured a former Karachi police officer who alleged that the party was involved in violence and threats. The same police while applying for asylum said that “the reason he claims asylum is because of his fear of the MQM who have already killed his wife and brother because of his activities as a police officer against them”.

This case is interesting because while granting asylum to him a senior judge Lord Bannatyne accepted on 11 November 2010 that “the MQM has killed over 200 police officers who have stood up against them in Karachi” and that his brother was killed two days after catching people wall chalking “He who is a traitor to the leader deserves to be killed” and that “attempts were made at a high level in the MQM to settle this issue with the appellant but he refused and threats to his safety were made if he did not settle the matter”.

Dr Sattar denied all charges and alleged that the left-of-centre BBC has been “influenced” by “pro-Taliban” and radical forces for the preparation of the Newsnight. He said the BBC has used Hussain’s statement “out of context”. He said Altaf Hussain never said he will put his opponents in body bags. “It’s a malicious propaganda and a media trial” against a secular and middle-class party “by the forces of status quo and corrupt political culture”. He said there is no proof of the MQM’s involvement in acts of terrorism in Karachi.

MQM Coordination Committee leader Khalid Maqbool Siddiqui said on Thursday that the broadcast of Newsnight shows that an organised conspiracy against the party has begun. He said the party had full faith in Altaf Hussain and programmes like Newsnight will help bring workers come closer to their leader.The Metropolitan said it will not comment on the Newsnight revelations about the amounts seized from three MQM properties.

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Rethinking Development

Good development experts have failed to get across a basic truth to Pakistan’s politicians and economic planners: If you are on a dirt road, fill the ruts – don’t dream of bullet trains and flyovers! One has to get the basics right before anything else can work. This obvious fact failed to register with the government and the Election Commission as it set in motion the recent ballot-box democracy exercise, allowing law breakers of all shades a free hand in returning to parliament. They overlooked the fact which every cook knows: clean the pans before preparing fresh meals! For those undaunted by this recent failure and blessed with an optimistic spirit, a potpourri of home truths is laid out.

A poor country like Pakistan cannot have sustainable development without reducing its population significantly through enlightened family planning. (It is best not to use the euphemism ‘developing country’, which we were in the 1960s when an attempt was made at population control.) How can we get back on track? A global perspective will help.

About 3 million children in poor countries die annually of diseases that can be prevented by basic healthcare and vaccination. The cost of providing a package of basic vaccines to a child is about Rs. 3000 – the price of a good meal in a luxury hotel. Pakistan has about 3% of the world’s population of 7 billion. Therefore roughly 250 kids die here daily. What’s the cost of avoiding these deaths? Just the price of one lavish wedding reception daily! And as for the basic healthcare for all, nothing is more important than providing potable water through community outlets, which is easily affordable.

Enlightened education, particularly of females, that encourages critical thinking is another key area needing urgent attention. Attempts at improving higher education level over a decade have overlooking the more critical lower levels where irreversible damage is presently done to impressionable minds. Education when viewed holistically should integrate all levels of education, including informal education, which brings the adult population up to steam and encourages lifelong learning. But who is going to do this?

The standard of pedagogy at all levels is poor. This failing can be corrected by a nationwide program of teachers’ training, principally in English communication skills. The world’s knowledge will continue its exponential growth in this language and we need to build on our advantage in English from the colonial era. Shortage of master trainers will require importing talent and where better to find it economically than India. Even more important is the provision of fast internet access nationally in neighborhood community cybercafés — that double up as cultural centers.

Large-scale provision of inexpensive multi-media projectors in institutions would allow students to view off-line programs of the best teachers globally with the local teacher acting as a facilitator. Our teachers and professors should use them as role models, while weaving the knowledge from the Net into the Pakistani context for their students. Above all we need a rethinking of the curriculum across the board, cognizant of the amazing range and quality of knowledge now on the Net.

Pakistan’s radio and TV are largely news and entertainment outlets than need redirection towards worthier goals of enlightening, lifelong learning. The models of the BBC in the UK and PBS and NPR in the USA – live and on the Net – can show us how this can be achieved. Such tools of the new media will help achieve full literacy in the country faster than the mere 5 years that it took some South American countries to do so using the ideas of Paulo Friere.

I conclude with brief reference to three commonly voiced concerns: energy, human and environmental security.

Instead of lurching forward into dangerous technologies such as nuclear and coal, we need to focus on our natural abundance of sunshine and hydropower (about which much has been written). While wind technology needs exploration, the area calling for immediate implementation is solar thermal, i.e. direct capture of heat energy from the sun’s rays to turn turbines for power generation – an option cheaper than wind energy. It has the advantage of our engineers accomplishing this largely themselves. At the other end, appropriate technologies such as green roofs (or simply oil painting or installing reflective high insulation tiling) could cool our homes and reduce cost, as can improving efficiency of industry, vehicles and other energy guzzlers. Some complex problems have cheap, simple solutions, see: http://tinyurl.com/kg4ows4.

Human security issues require that we establish not just peace but cordial relations with India, Afghanistan and Iran and open our borders to free exchange of people and commerce. Let’s be honest and admit that Kashmir cannot be snatched from India – ask the experienced retired general under house-arrest in his farmhouse in Islamabad! Money for wasteful military gadgets can then be diverted towards human development.

Human security would be best advanced by providing decent livelihood to the poor and disadvantaged — gimmicks such as the expensive Income Support Program will fail. What are needed are low-cost projects which provide employment and honorable income for the multitudes of unskilled and uneducated, coupled with literacy and skills training. One such project ought to be for countrywide reforestation – green cover is well below 5% of the land-area; it ought to be at least 5 times higher. The environmental and social benefits of it would be enormous.

Publicity-attracting expensive mega-projects have been dear to our leaders. The real skill of wise leaders, though, lies in generating a sense of self-worth among the citizens. Ensuring self sufficiency through transforming the country from the bottom up is the way. The new government must take up this challenge.

The author is a physicist and environmentalist

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New Budget more ‘Business Friendly’ than People Friendly

Pakistan's budget presented (Credit: cnbc.com)
Pakistan’s budget presented (Credit: cnbc.com)

The first Rs3.6 trillion budget of Nawaz Sharif government, presented by Finance Minister Ishaq Dar in the national assembly within a week of the government formation, appears more ‘business friendly’ than people friendly.

The electorate that voted Nawaz Sharif to power might not easily accept additional burden of price increases through the increase in General Sales Tax (GST) by one per cent to 17 per cent. Their reaction will set the tone of debate in the National Assembly.

The budget, if approved in the current form, may boost investment, revive growth and enable Pakistan to qualify for the IMF loan facility as it meets pre-conditions of the key donor. The man on the street, however, might find the year ahead more challenging economically as his real income declines because of the inflationary impact of the taxation measures proposed.

The government in its first defining policy move proposed people to endure the pain of adjustments now, to enjoy gains of growth later. For economic stabilisation the budget 2014 increases the GST to 17 per cent and revises upward the income tax rates, among other measures that could hit the masses.

The corporate Pakistan, which has been reluctant to invest in the country all through Pakistan People’s Party (PPP) rule during past five years resulting in depressed three per cent average growth, has been cultivated by revising downward the corporate tax rate by one per cent from 35 to 34 per cent with promise of decreasing it to 30 per cent in four years. It will increase corporate profits by neat one per cent in the next fiscal.

The government looks keen to revive the confidence of the big business to induce them to move ahead with aggressive investment plans they have been holding back for better times. “For the big boys of business in Pakistan future has arrived,” commented an analyst.

The budget is a typical PML-N document reflecting its economic philosophy of an unfettered market economy, it speaks of homework the party must have done long before assuming power as the document does not seem to be prepared in haste. It has all those signature initiatives that are considered hallmarks of Sharif’s rule in Pakistan.

There are all kinds of low ticket initiatives for public consumption (youth internship, micro credit, income support, technical training, laptop distribution, etc) but the focus of the development budget would be on infrastructure projects (motorways and railways).

“The budget package if endorsed by the parliament will infuse confidence in the private sector that already see Nawaz Sharif as champion of market economy. I will not be surprised if by the end of the fiscal Pakistan surpasses the growth target as public and private sector investment gain steam” a senior business leader told Dawn.com over telephone.

FM Ishaq Dar proposed upward revision in GST from 16 to 17 per cent on the floor of the assembly. It would make all products dearer by at least the same percentage, though the price spiral often enhance the impact of inflationary measures and lead to more than proportional rise in prices.

He projected to chop circular debt of energy sector to reduce by as much as about half of current Rs500 billion in 60 days. It was, however, not clear thus far how he intends to do that.

The budget assumes to cover the revenue shortfall through foreign inflows. The details of sources of these inflows are not clear.

There seems to be meek effort to encourage documentation by introducing tax incentive of two per cent for firms dealing with registered suppliers and distributors.

“The budget is in line with corporate sector expectations. It will improve the business environment as the government has respected IMF’s advice and is targeting to bring the deficit down from current 8.8 to 6.3 per cent by the end of next fiscal year, a reduction of exactly 2.5 per cent suggested,” Sayem Ali, Standard Chartered spokesperson on economic policy said commenting on the budget.

“Market will cheer cut in corporate tax rate. The GST revision will not affect companies as they will pass it on to consumers. All in all the budget 2013 is a good news for the capital market,” he added.

Author is the business editor at Dawn

 

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Good Governance is Key to Solving Pakistan’s Energy Crisis

In Pakistan’s energy scenario, the chickens have, literally, come home to roost. Years of indecisiveness coupled with the hackneyed assertions that Pakistan has more electricity than required has manifested into a situation where the nation’s foundations are now shaking. New words have entered the domestic lexicon and even the uninitiated are recognising and understanding the ramifications of these new or oft-used words. Circular debt, Rental Power Projects (RPPs), Independent Power Projects (IPPs), NEPRA, PPIB, Discos, power outages, etc are casually floated around every now and then. Moreover, WAPDA and KESC have become words of ridicule for residents in small hamlets and all the way to metropolitan cities. It seems that, today, electricity can bring political parties into power or even consign it into the wilderness.

With the advent of the new government in Islamabad, all eyes are on the actions that Prime Minister Nawaz Sharif will take to tackle this issue. It is not possible to wave the magic wand and say, “Voila! Let there be light”. What is more constructive is that all alternative channels be energised to lessen the magnitude of the power crisis. Experts and laymen have been huddling to come up with some pragmatic solutions as there is no other choice but to take the bull by its horns.

The distressing fact is that even though alternatives are available or could be harnessed, the proverbial bureaucratic red-tape, the high incidences of corruption, the inability to rewrite the rules and regulations, and the dishonourable vested interests have impeded the momentum so much that just trying to get out of these tentacles has become a gargantuan task for any investor or policymaker. Everybody and his next door neighbour are talking about the wonders of Thar coal, wind or solar power, cheap Hydel power through dams that are susceptible to provincial politics, and of course generating energy through biogas, garbage, or even imported tyres. There is also talk about fast track conversion of power plants on imported coal.

And even though the solutions listed above are doable and feasible, and some may be done on a fast track, frankly, many alternatives are still a long way into the future. What should be done immediately is to revisit the various rules and regulations that hamper or slowdown the efforts of investors and get these amended, modified or removed. These steps would introduce the concept of Merchant Power Plants (MPP) in the country.

The government must pave the way for MPPs by making it easier for investors to penetrate this field and take advantage of the back-breaking shortage of electricity. There is a need to allow potential investors to enter into a comfort zone in this sector. There should be no restriction on the use of fuel or on the minimum capacity for the MPPs. However, in keeping with the vision of the government to utilise coal, initially imported too, it is recommended that coal-based projects be encouraged. It is a good omen that NEPRA recently announced an upfront tariff of 9.65 cents per unit for large coal-based projects for 30 years while for less than 200MW it would be 8.275 cents. It is hoped that NEPRA will soon decide the tariff for less than 50 mw.

Merchant Power Plants (MPP) are not new in today’s world. Investors have developed over 200,000MW of power plants in the United States, while India has an active MPP programme too. MPPs are technically different in the sense that they are unlike the power plants operated by WAPDA or KESC who distribute power at a set price that is determined through a mechanism and approved by a regulatory body. They are legally and economically different from IPPs and plants owned by traditional power companies in Pakistan or, for that matter, even captive power plants of the industries. Unlike IPPs, the MPPs have no single sales contract for the term of their life and there is no guarantee about their continued income.

It should be understood that MPPs will not be large power plants and only generation-based. What is important is that capacity should not be the limiting factor. There are three guiding points that justify the case for MPPs. First and foremost is the yawning gap between installed capacity, between actual generation, and between immediate consumer demand. The second fact is that investment in power plants is still not forthcoming at the speed that is imperative. The third argument is that too much emphasis on regulations and the dependence on WAPDA or KESC are impeding the distribution of electricity.

Therefore, MPPs should be set up and their viability and feasibility would become sustainable through three options that could be availed by a potential MPP. An example of a MPP could be a large industrial unit that has set up a captive power plant of, say 30MW.

This unit can firstly use power for self-consumption, secondly under the system of wheeling, sell extra power to WAPDA or KESC or use the existing power lines for transmission to consumers within the area, and thirdly set up a grid to supply power to units within its own proximity. Of course, if there are more MPPs in any sector they could share ownership of the transmission lines to attain economies of scale and reduce investment costs. In each case, the rate per unit could be negotiated between the supplier and user rather than going through a plethora of documentation, useless inspections, mind-boggling regulations, and slow process of approvals. Thus, electricity would be treated as a commodity with its own market dynamics. This could attract investors from the stock exchanges and thus, in effect, become a sort of retail power market.

The rationale for allowing MPPs is pragmatic. At present the transmission and distribution losses are abnormally high and the main reason is theft, corruption, and free electricity. Secondly there is excessive governmental interference in the workings of the present energy sector companies. Thirdly, rates are regulated by the government and inefficiencies, management inadequacies, theft, overstaffing, cost of subsidies, etc are factored in to calculate the rates. Fourthly, since the government is unable to rein in the galloping circular debt, the impact is passed on to the consumer. More importantly, the gap between generation, transmission and distribution would not be reduced any time soon. Therefore, MPPs can be a game changer and for that reason should be debated and discussed by the economic planners of the country on an urgent basis.

As US Congressman from Iowa Steve King once stated: “That’s the key: get the constitution in place. Get rule of law in place, capital will come, electricity will follow.” This, in short, is the answer to our energy crisis.

The writer is former president of Karachi Chamber of Commerce and Industry

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New Baloch Stakeholders Rekindle Hopes for Ending `Disappearances’

Naseer Memon (Credit: tribune.com.pk)
Naseer Memon (Credit: tribune.com.pk)

The political sagacity of stakeholders in Balochistan has rekindled the fading hopes for restoration of peace and prosperity in the province. For the last several years, Balochistan has remained a tinderbox, with hundreds of people brutally killed in an orgy of extrajudicial murders and targeted shootings. The state had virtually abdicated the province and left it at the mercy of an assortment of militant outfits and corrupt politicians. Local people, especially the educated young, are frequently picked up and their mutilated bodies are dumped and often brutalised by carnivores in desolated areas. Dozens of young Baloch are still missing and their familes are inconsolable — no state institution has as yet been able to adequately address their demands despite making skyrocketing claims.

Hopes were attached with the previous regime when the PPP government was ruling both the province and the centre. Although a series of measures were introduced to sedate the restive province, a lack of political will stymied the desirable results. Aghaz-e-Huqooq Balochistan, the 18th constitutional amendment and 7th National Finance Award (NFC) all failed to alter the grotesque ambience. Huge financial resources were funnelled and a special job quota was allocated for the province, but the cesspool of corruption and bad governance eroded all potential benefits. The share of Balochistan increased from 5.1 per cent in 2006 to 9.09 per cent in the wake of the 7th NFC. As a result of that, Balochistan’s share increased from Rs45 billion in 2009 to Rs83 billion in 2010, Rs93 billion in 2011 and Rs114 billion in 2012-13. The province also received an additional Rs10 billion against a surcharge on natural gas. In 2012-13 the province earmarked 35.8 billion for development projects and this year, Balochistan was the only province with a surplus budget, yet only a pittance reached the masses.

The Balochistan conundrum merits a genuine effort and not empty overtures. While the previous government made generous financial allocations for the province, it installed a corrupt and inefficient team to fix the issues of the province. Ghost projects, unbridled crime and unhindered piling of dead bodies sufficiently testify to the lack of sincerity on the part of the previous regime. The province remained a hotbed of violence and crime and Islamabad remained mostly indifferent. Not even a semblance of government was felt there for the last five years, which engendered persistent despair and anguish among the local people.

The choice of Dr Abdul Malik Baloch, a consensus candidate with proven integrity, as the chief minister of Balochistan augurs well for the province. With a credible Baloch nationalist as chief minister, a pro-democracy progressive PkMAP representative in the Governor’s House and a sensitised and steadfast government in Islamabad, there would be in place the best possible combination to extricate the province from the quagmire of crisis. An immediate challenge for the new government would be to ensure that no more dead bodies are received and missing people are retrieved to pacify the enraged and traumatised Baloch. A transparent governance structure would be the next desire of the people of Balochistan. Judicious use of development spending can bring some solace for the disgruntled masses. Dr Malik’s government would have to confront a number of other irritants. In the long run, the right over decision-making and benefits accruing from Gwadar port and other coastal resources would make up the political agenda of the province. Education, health and drinking water services are also in tatters. The province merits a long-term development plan by harnessing the enormous potential of mineral resources of the province. Projects like Saindak and Reko Diq should benefit the local population on priority. A leadership with prescience and commitment can bring Balochistan back from the brink.

Published in The Express Tribune, June 11th, 2013. 

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‘US secretly collected 13.5 bn reports from Pakistan in March’

NSA Whistleblower Edward Snowden (Credit: businessinsider.com)
NSA Whistleblower Edward Snowden (Credit: businessinsider.com)
LONDON, Jun 10: The United States National Security Agency (NSA) has intercepted 13.5 billion reports for intelligence purposes during a period of 30 days in March 2013 from Pakistan.

The UK’s Guardian newspaper has acquired top secret documents about the NSA data mining tool, called Boundless Informant, that details and even maps by country the voluminous amount of information it collects from computer and telephone networks.

Iran was the country where the largest amount of intelligence was gathered, with more than 14 billion reports in that period, followed by 13.5 billion from Pakistan. Jordan, one of America’s closest Arab allies, came third with 12.7 billion, Egypt fourth with 7.6 billion and India fifth with 6.3 billion.

The focus of the internal NSA intelligence agency tool is on counting and categorising the records of communications, known as metadata, rather than the content of an email or instant message.

The Boundless Informant documents show the agency collecting almost 3 billion pieces of intelligence from US computer networks over a 30-day period ending in March 2013. One document says it is designed to give NSA officials answers to questions like, “What type of coverage do we have on country X” in “near real-time by asking the SIGINT (signals intelligence) infrastructure.”

An NSA factsheet about the programme, acquired by the Guardian, says: “The tool allows users to select a country on a map and view the metadata volume and select details about the collections against that country.”

Under the heading “Sample use cases”, the factsheet also states the tool shows information including: “How many records (and what type) are collected against a particular country.” A snapshot of the Boundless Informant data, contained in a top secret NSA “global heat map” seen by the Guardian, shows that in March 2013 the agency collected 97bn pieces of intelligence from computer networks worldwide.

The disclosure of the internal Boundless Informant system comes amid a struggle between the NSA and its overseers in the Senate over whether it can track the intelligence it collects on American communications. The NSA’s position is that it is not technologically feasible to do so.

At a hearing of the Senate intelligence committee in March this year, Democratic Senator Ron Wyden asked James Clapper, the director of national intelligence: “Does the NSA collect any type of data at all on millions or hundreds of millions of Americans?”

“No sir,” replied Clapper. Judith Emmel, an NSA spokeswoman, told the Guardian in a response to the latest disclosures: “NSA has consistently reported — including to Congress — that we do not have the ability to determine with certainty the identity or location of all communicants within a given communication. That remains the case.”

Other documents seen by the Guardian further demonstrate that the NSA does in fact break down its surveillance intercepts which could allow the intelligence agency to determine how many of them are from the US. The level of detail includes individual IP addresses.

On Friday, in his first public response to the disclosures this week on NSA surveillance, Barack Obama said that that congressional oversight was the American peoples’ best guarantee that they were not being spied on.

“These are the folks you all vote for as your representatives in Congress and they are being fully briefed on these programmes,” he said. Obama also insisted that any surveillance was “very narrowly circumscribed”.

Emmel, the NSA spokeswoman, told the Guardian: “Current technology simply does not permit us to positively identify all of the persons or locations associated with a given communication (for example, it may be possible to say with certainty that a communication traversed a particular path within the internet. It is harder to know the ultimate source or destination, or more particularly the identity of the person represented by the TO:, FROM: or CC: field of an e-mail address or the abstraction of an IP address).

“Thus, we apply rigorous training and technological advancements to combine both our automated and manual (human) processes to characterise communications — ensuring protection of the privacy rights of the American people. This is not just our judgment, but that of the relevant inspectors general, who have also reported this.”

She added: “The continued publication of these allegations about highly classified issues, and other information taken out of context, makes it impossible to conduct a reasonable discussion on the merits of these programmes.”