DAY OF RECKONING

SHABBIR KAZMI
Mar 24 - 30, 2008

Every year on 23rd March Pakistanis celebrate the anniversary of "Pakistan Resolution" passed on this date in 1940. At the venue they have built a tower and named it "Minar-e-Pakistan". This monument signifies the solidarity of all the provinces and also highlights the spirit. However, one often feels that the nation has failed in achieving the real objectives for which thousands of people had laid down their lives and migrated from different parts of undivided India to an ideological state. There are only two countries in this world, which have been created on ideology, Pakistan and Israel.

From the day one the opponents of Pakistan have been conspiring to destabilize the country and many of its citizens have been playing as puppet in their hands. The basis of creation of Pakistan was "Two Nations Theory". The biggest dent to this faith was caused by turning East Pakistan into Bangladesh. Though, Hamood-ur-Rehman Commission Report has not been made public, the overwhelming consensus is that the residents of East Pakistan were first turned hostile against the federation. Once the hostility reached its peak India was invited to intervene, a war was fought and over ninety thousand soldiers and high ranking armed forces personnel were taken "Prisoners of War" by India. This gave India the courage to propagate that the Two Nations Theory was wrong.

INDIA A HINDU STATE

Lately, India has also responded very critically to a resolution passed by the Organization of Islamic Conference (OIC) on Kashmir. Its contention is OIC has no locus standi to pass such a resolution and that Kashmir is an integral part of India and the conference should not try to intervene in the internal affairs of the country.

Is it not a shame that a Hindu state has been given "Observer" status at the OIC? India has proved itself to be a Hindu state by while denying right of self determination to Kashmiris "another division of India on the basis of religion would not be allowed". This statement is often given by the Hindu politicians while talking about resolution of Kashmir issue. These statements have fully exposed the hypocrisy of Indian leaders. From day one Indian politics has been dominated by Hindu extremists, from Patel to Advani and to Shushma.

India has made various assaults on Pakistan but could not achieve its ultimate goals due to international pressure. Having realized this, now it is following multi pronged policies. On the international front it is constantly blaring "Pakistan is a terrorist state" despite committing the worst human rights violation in its own country. It is invading Pakistan's culture and has been so successful that now Pakistani children often ask "Dadi ki arthy kub uthhay gi". Women feel pride in wearing bindya and mangal suttar.

India is also trying to weaken Pakistan's economy through smuggling. On one hand it is not willing to accept Pakistan as an equal member of SAARC but to fool the world has given Pakistan MFN status. It often refuses to honour export contracts, export substandard food stuff to Pakistan and propagate "Basmati" brand of rice, a product of Indian origin. It is true that India does not miss any chance to malign Pakistan, but nation has to identify RAW agents, who are embedded in our society. Unless they are weeded out Pakistan would continue to suffer from Indian hegemony.

Pakistan has attained the strongest deterrent against India, in the shape of atomic capability. However, arsenal supremacy is of no consequence if the country's economy remain fragile. Let every Pakistani accept the fact that country's economy is very fragile. It is not capable of facing exogenous shock, be it external or internal.

DEMOCRATIC PROCESS

The general elections were held on 18th February but the elected representatives have not been able to form the government as yet. People who are not the elected representatives are trying to impose their decisions on the parliament. The parliament is not being given a chance to elect leader of the house (prime minister) and leader of the opposition.

It seems strange that every one wishes to be part of ruling junta and not ready to sit in the opposition. Efforts are being made to form "unnatural alliances". In this game some of the most important issues needing immediate attention of the elected government are being made either by the caretaker regime or simply deferred.

One of the most important issues facing the country is ongoing activities of terrorists. Nothing seems safe from the most sensitive installations to the markets, from the life of President to an ordinary vendor and from tribal area adjoining Afghanistan to the places of worship. It seems that certain quarters are trying to challenge government's writ and prove that it is incapable of controlling the situation.

Assassination of Benazir Bhutto, carnage and looting in the aftermath all were aimed at proving that the sitting government is incapable of managing affairs of the country therefore; the country needs change of regime.

First there was hue and cry that President Pervez Musharraf was involved in pre poll rigging now efforts are being made to create constitutional crisis. In this endeavour political leaders forget that they are not trying to dislodge Preverz Musharraf but creating constitutional crisis. Creating crisis is very easy but resolving it may not be possible.

THE US FACTOR

All the political leaders claim to be the most patriotic but are trapped in a vicious circle. They are trying to portray that Preverz Musharraf is towing the US agenda but are also seeking its blessing by meeting its ambassador and counsel general. Whether one may like it or not Pakistani establishment can hardly think of going against the US dictate. Anyone trying to violate this taboo has to face death, be it hanging of Zulfikar Ali Bhutto, exploding of aeroplane of Zia-ul-Haq in the air or mysterious assassinations of Liaquat Ali Khan and Benazir Bhutto.

The prevailing state of affairs is because of the US foreign policy aimed at gaining maximum supremacy in the South East Asia and the Middle East. In Asia the US considers China its biggest enemy after the fall of USSR. India is being pampered as the "super power of the region" to contain China but the Indian ambitions have to be contained also. India was not a partner in "war against terror in Afghanistan" but is fully involved in its reconstruction.

GEOPOLITICAL SITUATION

Pakistan is also being prepared by the US as buffer state in case it decides to impose war on Iran. The US policy towards the Middle East is aimed at getting complete control on oil and gas reserves and the logistics. Presence of Osma in Afghanistan, weapons of mass destruction in Iraq and Iran producing atomic warheads all are hoax calls to create a justification for attacking these countries and the writing on the wall is "Pakistan has to meet the same fate because it is not capable of safeguarding its atomic installations.

A number of strategic sectors i.e. banks, telecommunication, oil and gas exploration have already gone under the control of foreign investors in the name liberalization, deregulation and privatization. The situation would have not been alarming had the regulators playing their due role. Ironically, the regulating authorities can be termed "toothless and sleeping watchdogs". Be it transfer of management control of KESC or PTCL the entities were sold at buyers' terms and conditions.

One has often heard expressions like "Pakistan on the crossroads or facing severe economic crises'. The frequency of such statements become more frequent at the time a new incumbent takes change or the rulers face imminent change. It was only recently that the government kept on telling the masses that the economy is on growth trajectory. The economic indicators also improved by the economy seem to have lost the steam.

OIL STIGMA

The problems currently facing Pakistan can be divided into two broad categories i.e. external and internal. Economies of most of the non-oil producing countries are feeling the pinch and Pakistan cannot be an exception. However, Pakistan government continues to collect billions of rupees as tax on POL products and also claims to be paying huge subsidy on energy products but prices remain unaffordable.

Paying subsidy cannot resolve the problem; in fact the severity is expected to aggravate because there seems to be no ease in oil prices. Problems of Pakistan are unique because the country has failed in developing alternative sources of energy as well as focusing on energy conservation. Pakistan has huge reserves of coals, potential for producing 40,000MW hydel power, unlimited opportunities for producing wind and solar energy but of no consequence. The country is still dependent on fossil oil for power generation.

Gas and electricity companies suffer from huge transmission and distribution losses. Persistent hike in tariff was considered a way out to improve cash flow of these companies but each hike contributed towards further increase in pilferage. Accumulating losses of electricity distribution companies are on the rise and circular debt becoming an insurmountable issue. Gas distribution companies have been guaranteed 17.5% return on operating assets but country continues to face extensive gas load shedding.

Industrial units are full of complaints about eroding competitiveness in the global markets. It is true that high energy cost and persistent increase in interest rates have been increasing cost of production and cost of doing business but have the sponsors ever bothered to check the wastages and inefficiencies? Cost of agriculture products is high because of low yield due to improper crop management and inadequate use of crop nutrients. Two of Pakistan's key industries are agro-based but continue to suffer due to shortage of basic inputs, cotton and sugarcane. Yield of these two crops in Pakistan is about half of the yield achieved in India. Instead of increasing productivity the farmers continue to demand increase in support price. Since the policy makers are under the influence of feudal lords, price increases are awarded without realization that there has to be a limit and industries cannot pass on the increase to end consumers.

US RECESSION

The US economy is facing recession which is also impairing economies of other countries. In an attempt to minimize the adverse impact of sub-prime loan crisis and avert possible recession the US Fed has been reducing interest rates. As against this, Pakistan's central bank is bent upon increasing interest rates. The policy planners are fully aware that hike in interest rate is not helping in containing inflation. The policy planners also know that Pakistan suffers from cost-pushed inflation but continue to say that increase in M2 is the prime reason for inflation.

It is true that one of the reasons for hike in import bill is sky rocketing oil prices but can the policy makers deny that at present the country is importing sugar, fertilizer, cotton, which the country has been exporting in the past. Increase in per capita income has increased demand for a number of products but domestic industries are incapable of meeting the demand and these products have to be imported, be it cars and motorcycles or food products. However, the policy planners have failed in identifying what is necessity and what is luxury.

Ex-prime minister Shaukat Aziz used to boast about the inflow of foreign direct investment and portfolio investment. Bulk of the inflow was due to privatization or selling family silver. Influx of billions of dollars in telecom sector and import of millions of cellular phones just could not increase GDP size or exportable surplus.

Despite knowing that Fertilizer Policy 2001 has not been able to encourage fresh investment in the fertilizer sector the policy planners did not bother to change it. The same is also true about power generation. There has been a lot of criticism on Power Policy 1994 but no large size IPP has been established in the country. The result is country facing a shortage of about 5,000MW.

Different analysts give figures about the shortfall. WAPDA and PEPCO believe their numbers are right but one could only shed tears on their ignorance. These people have been talking about surplus generation capacity in the past. During Mian Nawaz Sharif's regime the authorities were talking about export of electricity to India, even at that time load shedding was a norm.

WAY FORWARD

As the new government is about to sworn in it is the collective responsibility of all the stakeholders to join their hands in resolving the prevailing problems. The first step will be to prioritize the issues, formulate immediate, short term and long term strategies and announce appropriate policies to achieve the stated objectives. The most crucial part will be defining the timeline for implementation of the policies.

The top most item on agenda should be containing the adverse impact of rising POL prices. Since it is a global phenomenon, not much can be done. Having said this, the government should abolish all types of taxes being charged on the POL products. This would automatically free the government from paying any subsidy. However, this has to be done in an appropriate manner and no effort should be made to include any tax in the cost of product. Analysts say the government has already made some of the taxes integral component of the cost.

Overcoming load shedding is not impossible without adding new generation capacities. In order to facilitate additional capacity coming on line the government should call tenders for the establishment of six units of 500MW each at least, four in Punjab and two in Sindh. The interested parties should be asked to submit their bids on the basis of tariff they could offer. All these units should have dual firing system.

As a medium term policy, the efforts should be made to complete Iran-Pakistan gas pipeline project without involving India. The proposed capacity will help Pakistan in getting rid of its furnace oil import bill. Mean time gas marketing companies should be asked to revamp and expand gas transmission and distribution networks to get ready to handle additional gas supply.

The State Bank should also lower interest rates by forcing the banks to reduce their spread. Raising return on deposits can help in containing M2 and reducing interest rate on debts can also help in boosting investments. The country needs fresh investment for increasing supply to meet growing demand and producing exportable surplus.

However, all the policy decisions have to be made by the next government, which cannot be installed without consensus on some of the critical issues. Let all the key decisions be made by the assemblies, be it impeachment of Pervez Musharraf or restoration of deposed judges. The ongoing political uncertainty is having a toll on Pakistan's economy. Let is all try to make this country stronger and prosperous. Long Live Pakistan..