THE YEAR END REVIEW

The eventful year 2000 paves way for the years to come

By AMANULLAH BASHAR
Dec 25 -31, 2000

Though the beginning of 2000 witnessed a sluggish start both on economic and political fronts, the finish of the year seems to be full of events.

The resolution of 3-year old tariff dispute between WAPDA and Hubco, approval of IMF programme, arrival of Parco refinery into production, revival of Iran-Pakistan-India gas pipeline, defence exhibition 'IDEAS 2000', local body's elections, consent to public Hamood-ur-Rehman Commission report were all of national significance from economic and political point of view. However the exile of former Prime Minister Nawaz Sharif and his family was of course the event of the year.

The present government sees the decision of Nawaz Sharif's exile as of economic and political significance for the country. Nevertheless, it is the time, which always proves or disproves the perceptions.

Since the release of Nawaz Sharif or technically speaking his exile has set an example, people in general are expecting release of other politicians on the same pattern. Reports are already appearing regarding possible release of Asif Zardari in similar fashion.

There is another school of thought, which believes in chain reaction of the decision and may incite other politicians to get the similar treatment. The reports appearing in the press regarding possible exile of Asif Zardari seem to be the link of that chain. If other political convicts were also allowed to leave the country it would help keeping major political forces away from Pakistan hence giving a walk over to the present regime to carry out economic and political reforms without any interruption from political opponents. People having economic and political insight are however attaching significance to the sequence of events such as approval of IMF package, exile of Nawaz Sharif and resolution of WAPDA-Hubco issue.

The word about exile of Nawaz Sharif and family spread like jungle fire on December 10, 2000 when the media gave headlines treatment to the event in and outside Pakistan. Obviously, the event was talk of the town and still occupying focal point space in the newspapers.

Though it was the decision taken by the Chief Executive Gen. Pervez Musharraf, however for formal procedures, President Rafiq Tarrar pardoned Nawaz Sharif's 25-year jail sentence and exiled the former prime minister and his family to Saudi Arabia. The court decision regarding disqualification of Nawaz Sharif for 21 years would also stay and his 70 per cent properties would be set for the various default payment and clearance of loans and defaults.

Those accompanied by the exiled Nawaz Sharif include his father Mian Sharif and mother Shamim Akhtar, wife Kulsoom Nawaz, jailed son Hussain Nawaz, daughter-in-law Saira Hussain, grandson Zakariya, daughter Mariam Safdar their two kids Mehrunnisa and Junaid, Abbas Sharif, his wife Safia and two sons Yousuf Abbas and Aziz Abbas, brother and former chief minister Punjab Shahbaz Sharif his wife Nusrat Shahbaz and daughter Rubab Shahbaz.

Chief Executive Gen. Pervez Musharraf, while taking the nation into confidence over the decision, has said that the decision to exile Nawaz Sharif has been taken in the best and larger interest of the country. The decision would introduce a new political culture and leadership, ushering in a new era of hate-free politics. It would also introduce politics of reconciliation; the Chief Executive expressed the hope.

'It will usher in an era of money free politics', it will bring in an overall political harmony and political stability, he said.

The decision will contribute positively towards economic development. It would also correct international perception against Pakistan. He felt that the decision had a massively positive impact internationally and all the Muslim and Western countries have appreciated the move. There must be some good reasons that led to this decision. There is difference of correct and popular decision and when important decisions are taken all the aspects must be observed before making an important decision. When there is unpopular decision then there should be courage and conviction for it said Gen. Musharraf. He said that he has taken this decision above his personal interest. "Justice demands that punishment should not be vindictive. The element of vendetta should be shunned," he said. According to Chief Executive, Crown prince of Saudi Arabia had requested for his exile, which was accepted after thorough analysis. Giving the details and political aspects of the decision, Gen. Pervez Musharraf said that the country would enter new era of politics. Referring to political atmosphere during past 12 years in the country, he said leaders of two major parties Nawaz Sharif and Benazir Bhutto were busy in the politics of hatred. When one became Prime Minister the other would not cooperate and try to oust the other after two years. At that time there were two presidents and three prime ministers. Each of them cancelled development projects initiated by the other during his tenure and the country became a graveyard of development projects. Who is the biggest loser? Certainly Pakistan, the Chief Executive observed. The economy of the country deteriorated due to these reasons. The prestige and reputation of Pakistan was also deteriorated abroad, affecting the economy and foreign investment. Recalling his visit to Karachi Overseas Chamber of Commerce, he said that businessmen told him that investment shies out of Pakistan because there was no sustainability. The policies of the government are not credible and sustainable and have no continuity. The national economy suffered due to these reasons during the last 12 years and due to politics of hatred between these two leaders of Pakistan Peoples Party and the PML, he regretted.

The politics of money was also introduced during the last 12 years and these two leaders are responsible for that. They corrupted all the institutions. Both the leaders who were against each other are now trying to make coalition in a very awkward manner, however nobody would allow them to exploit this country anymore, he said. Regarding the world opinion about the decision of exile, Musharraf said that world leaders have written letters, congratulating on this bold decision describing it as the demonstration of tolerance and moderation. Extreme action against political leaders is not appreciable in the eyes of world community because of backwardness and rigidity. All these things create negative impact on foreign investment. General Musharraf was confident that the decision would improve Pakistan's image in the world and investment climate in the country.

WAPDA-HUBCO

The resolution of the three-year old dispute between WAPDA and Hubco, of course a nasty obstacle in the way of economic growth of the country, no doubt is one of the major achievements of the present regime. The trouble between the two power companies is stated to be a gift of the inefficient political governments, which in effect harmfully eroded the image of the country. The present regime has played the role as troubleshooter by bringing the nasty issue to an end.

The agreement actually is an outcome of extensive discussions in recent weeks between three parties at the highest level. Signatories of the agreement are M. Zafarullah Khan, Secretary of Water and Power, on behalf of the President of Pakistan. Lt. Gen. Zulfiqar Ali Khan Chairman WAPDA and Mohamed Alireza Chairman of Hubco, Peter Giller, International Power's Chief Executive Officer, joined Mr. Alireza in representing Hubco in the negotiations.

Reduction in power tariff is the gist of the agreement enabling WAPDA to save $63 million per annum.

The revised agreement would provide power to WAPDA at a reduced rate of 5.6 cent per kWh instead of previously charged 6.6 cents.

The agreement is expected to generate a cash flow of 10 million pound sterling to International Power. In addition there will be a receivable due to Hubco reflecting past underpayment for electricity. One third of the total receivables will be paid on March 31, 2001, it is learnt.

The issue was formally resolved when Mohammad Alireza, Chairman Hubco and Lt. Gen. Zulfikar Ali Khan, Chairman WAPDA reached an agreement on Dec 18, 2000. The analysts however feel that there seems to be much more than it meets to the eye behind the agreement.

Before reaching a resolution, a nightlong meeting between the highest government authorities and the Hubco representatives was held to sort out the problem.

As a result of this agreement two foremost obstacles in correcting the country's external imbalance have been overcome with the resolution of the Hubco dispute only a few days after the signing of a stand-by agreement with the IMF.

It is hoped that in the process, the way has been cleared for improvement of relationship with prominent international investors to serve the cause for privatization of public sector units such as PTCL, KESC, PSO, Habib Bank and other units waiting for privatization.

Settlement of the chronic Hubco issue soon after resumption of IMF programme indicates that the two issues were interconnected, the experts feel.

Economists analysts feel that the settlement of the issue would greatly help paving the way for investment especially from external resources besides rebuilding country's image.

Under the agreement the two parties have agreed to withdraw all allegations against each other which include withdrawal of civil and criminal cases against Hubco. According to reports the government would move a request to the courts that an agreement has been reached and the government would not pursue the cases and then the courts may discharge the cases.

According to Chairman WAPDA, the two parties would withdraw cases against each other pending in the international court. The agreement between WAPDA and Hubco may lead to save $56 million a year with a cumulative effect of $3 billion over the life span of 27 years of Hubco project.

Initially the Hubco had been charging 8.77 cents per kWh, which amounts to Rs5.22 while WAPDA was receiving only Rs3.22 per kWh. Agreements with other IPPs have already been reached and they have reduced their tariff to 4.7 cents from 5.7 cents per kWh, which would save another 3 billion dollars to WAPDA over the life span of the projects.

IDEAS-2000

Ideas-2000 was an impressive 4-day international defence exhibition held at Karachi in November last. The exhibition was first of its kind ever held in Pakistan. Defence chiefs and ministers attended it from some 40 countries.

The defence products, especially Al-Khalid and Alzarar tanks, built with Chinese assistance proved to be the main attraction of the event. Malaysia and Saudi Arabia were among several other countries to have shown interest in buying arms from Pakistan. According to Maj. Gen. Ali Hamid, chief coordinator of the exhibition, Saudi Arabia is interested in the Mushshak trainer aircraft and Malaysia has shown keenness on anti-tank missile systems and the Agosta submarines. The large scale-manufacturing sector except the textile sector is showing hopeless results for the last many years. The defence exhibition has kindled the hopes for the large scale-manufacturing sector to operate on the scale of the economy if Pakistan enters the exports of its defence production at a large scale.

Economy

Pakistan's economy had to go through difficult times for the second consecutive year in 1999-2000 and despite a 4.8 per cent growth in the economy average income of each Pakistani stood below Rs2000 per month.

According to annual report released by the State Bank of Pakistan (SBP) last month, the gross domestic product (GDP) grew by 4.8 per cent mainly due to a 7.2 per cent growth in agriculture sector. Major crops recorded an impressive growth of 13.1 per cent against targeted 3.2 per cent, manufacturing sector saw a nominal growth of 1.1 per cent against the targeted 6.2 per cent. The large manufacturing sector recorded a regression of 0.7 per cent. The services sector grew by 4.5 per cent against the target of 5.2 per cent. Pakistan avoided defaulting on foreign debts. The government managed to pay $3.7 billion to foreign creditors and deferred payments of $3.9 billion through rescheduling and rollovers. According to report, the country may have to defer foreign debt payments of $2.2 billion through rescheduling during the current fiscal. At the end of June 2000, total foreign exchange liabilities stood at $37.3 billion or 61.3 per cent of GDP including foreign debts of $32.7 billion or 53.8 per cent of GDP. The total debt including domestic and foreign debts stood at Rs30.95 trillion or 97.5 per cent of GDP in 1999-2000, up in volume from Rs29 trillion in the preceding year but down in terms of GDP percentage in 1998-99, the total debt of the country was almost equal to the GDP.

Sugar

While other major crops like cotton, wheat and rice performed well, the sugar sector continued to be a problem area for the government, millers, and growers as well as for the consumers. During the year sugar price witnessed an increase of Rs10 per kg as in the early part of the year it was being sold at a price of Rs18 per kg, which gradually jumped, to Rs.27-29 per kg during the year. The sugar sector also witnessed the worst ever crisis when the sugar mills were forced to shut down the crushing operations due to non-availability of sugarcane. The growers were demanding Rs60 per 40 kg instead of the official price of Rs36 per 40 kg. Though the millers were agreed to pay even Rs45 but the growers believed to be backed by political forces turn down the offer forcing the mills to shut down their crushing operations. The crushing operation was resumed when the growers succeeded to bargain a price of Rs50 per 40 kg. Although the crisis were over yet experts feel that the price of sugar may not come down from Rs29 per kg during next year. The increase in sugarcane price will add 8.7 per cent to the cost of production while levy of sales tax at 16.6 per cent may bring the cost at Rs27 per kg, if Rs2.5 were included as the trade and other incidental the selling price may oscillate between Rs29-Rs30 per kg during next year.

Power devolution

The first phase of the party-less, local government elections in 18 selected districts of the country will be held on Dec.31, 2000. The results of these elections would be announced by the Election Commission on Jan.6, 2001.

Another feature of this local government system is that for the first time 18-year old people will be allowed to cast votes as the government had reduced the age limit from 21 to 18 for exercising the voting rights.

The Chief Executive brushing aside all rumors regarding postponement of the elections on account of legal hitches has assured the nation that the implementation of the devolution plan would continue without any hazard.

The elected representatives at district level would be given administrative authority. District Coordination Officer and all government staff would be subordinate to the Nazim elected under this system. Financial authority would also be delegated to the elected representatives. Under the system speedy justice would be provided at the lowest level. District level judiciary would be restructured and conciliation courts would be set up at union council level so that dispute resolution could be done before litigation process starts. Under the system a new Act would be enforced replacing Police Act 1861 that is 140 years old and has already lost its utility in the present situation. These steps are expected to create a revolution in the political set up of the country.

In the first phase, elections are going to be held in Bannu, Lucky Marwat, Dera Ismail Khan and Tank district of the NWFP, Dera Ghazi Khan, Rajanpur, Layah, Muzaffargarh, Sargodha, Bhakkar, Khushab and Mianwali districts of Punjab, Larkana, Jacobabad and Shikarpur district of Sindh, Kech Gwadar and Panjgur districts of Balochistan.

The districts selected for the second phase of election to be held in February are Kohat, Hangu, Karak, Mardan and Swabi in the NWFP. Bahawalnagar, Bahawalpur, Rahim Yar Khan, Gujranwala, Hafizabad, Gujrat, Mandi Bahauddin, Sialkot and Narowal of Punjab. Naushahro Firoz and Nawabshah in Sindh and Naseerabad, Jaffarabad, Jhal Magsi and Bolan in Balochistan.

Outlook

Some positive rather corrective decisions taken by the government during the year 2000 have provided basis for the economic managers to produce good results. The resolution of WAPDA and Hubco dispute would not only open the gates for foreign investment but certainly help carrying out the privatization of large public sector units successfully in the year to come. Though the people at the helm of affairs are the claimant of taking political and economic decisions in the larger interest of the nation yet the benefits of these steps have not reached to the grass root level so far. People generally expect some relief whenever a new team come to power and people were naturally were attaching similar expectations with the present regime. Instead of getting any relief people are faced with unabated price increase of essential items. The price hike has further reduced the buying power of the common man. Irrationally imposed taxes, surcharge and additional surcharge on electricity consumption have become difficult to swallow any more. There is an urgent need to take remedial steps to bring down the electricity charges to an affordable level. Increase in oil prices is not the only reason for making the electricity charges unaffordable in effect it is because of a number of taxes, levies, surcharge and additional surcharge making electricity as the most expensive thing of the daily life.