Policy Pakistan

An effort towards catalysing policy debate

Is our growth inclusive?

The projection of economic growth as something evil that benefits only the rich is mistaken. But equally fallacious is taking the GDP number for a sacrosanct symbol of sure-fire prosperity for all. All praise is due to the government’s economic team for various improvements in the macro-economy: 5% growth in first quarter, about 10% appreciation in the Rupee within 3 months, and excellent performance of the stock market – all reflect recovery. Yet how these gains are shared with the neediest of the needy remains to be seen – and only this should be taken as an encompassing yardstick of success.

 

Historically, Pakistan’s economic policy has never been pro-poor. In the words of Stephan Klasen, ‘Pro-poor growth will require growth that is focused on sectors where poor people are active (or could become active) and regions where poor people live…’ Leaving Zulfiqar Ali Bhutto’s 70s aside (who launched into an over-charged, rather self-defeating assault on poverty) poverty reduction was no government’s priority. Admittedly, PPP-governments were relatively more focused in this respect, but their lacklustre economic performance and unimpressive governance hit the poor from another window, namely, overall stagnation of incomes.

 

Yet our amoral approach to economics has hardly changed. The present government is living up to the impression it is known for – being industrialists’ government. According to a State Bank’s report, industry and services grew by 0.7 and 1.2 percentage points more than their respective targets in Q1 FY2014. But the agriculture sector missed its target by 1.3 percentage points and its growth was 0.2 percentage points less than even the corresponding quarter last year.

 

Was this apparent industrial bias simply an irregularity? Not really. This season – after the first quarter – farmers got the squeeze from sugar mills, where the official price for sugarcane was perceived as being unfairly low – same as last year. In addition, the sugar mills also made deductions of around 1000kg per trolley on pretext of poor quality cane – which farmers find indeed a novel way to pay less for their cane. Hardly was any farmer exception to this general rule of katoti or deduction, since the cane was abundant and the buyer monosponic. The sugar industry – as always – was allowed to act as the single buyer. The wheat support price, which was the farmers’ last hope for compensation this year was also not revised. While the previous government had been revising the prices upwards every year, this government came with a sharp change of policy.

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This echoes a recurring shortcoming in the South Asian approach to economic development where agriculture and industrialisation were treated as if they were mutually exclusive. Growth in India, to state another example, did not ameliorate the state of farmers the way Chinese growth did, where growth and poverty reduction both were rapid.

 

East Asian countries, like Japan, South Korea, and Taiwan engaged in aggressive export-oriented industrialisation, but with an equally high-spirited redistribution of resources. Agricultural policy complemented the industrial policy. Agrarian reforms included fair and stable prices, subsidised credit and technical assistance from the government, and redistributive and tenurial land reforms. These measures ensured better deal for the farmers and steady growth of agriculture.

 

For the industry, in turn, the agrarian reforms secured a smooth supply of economical raw materials, but also a bigger domestic market for industrial products. As new buyers, who had graduated out of poverty, kept becoming part of the markets for comforts and luxuries, domestic demand for the manufactures increased. The resulting win/win situation, had other spillover effects as in better health and education.

 

There is no reason why this pattern of inter-sectoral complementarities cannot be emulated in Pakistan. Agriculture employs 45 per cent of the total labour force here. The rampant poverty which is especially concentrated in the rural areas makes the case for such pro-poor growth even stronger.

 

The recent multidimensional poverty report by Naveed and Ali (2012) reveals about a 3rd of Pakistan’s population remains poor, 21 per cent being under severe stress. But, ‘severe poverty in rural population is 4 times higher than in urban population’. In addition, while only 18 per cent of urban households are poor, 46 per cent rural ones live in poverty.

 

The policymakers need to strike a balance between the interests of the bottom 20% and the top 20. To think that supporting the rich industrialist class would bring growth on its own is an illusion that has failed us miserably in the past 66 years. Growth cannot be sustained with crime and violence. Crime and violence will be there as long as there is poverty. Agriculture is the golden goose that can eat away the poverty bug and keep laying the gold eggs of industrial growth. Nurture the golden goose, don’t kill her, my dear industrialist!

Shady Business

(Newspost, The News International – December 08, 2013)

When Ishaq Dar took charge of the country’s finances, people were happy to see a home-grown finance minister. The business class was excited to see a business tycoon assuming premiership. The 2013/14 budget disappointed many, but made the business community happy – and the KSE expressed this exuberance.

Worryingly, that optimism is now dwindling. Right from the start, the government seemed determined at targeting a domestically-financed recovery. This is reflected in lowering corporate tax rate, slashing policy rate, increment of the center’s share of developmental expenditure, and lately, the pace of government borrowing. But the recently announced investment policy to turn black money white speaks of the frustration this ambitious policy-mix has met – as per your editorial, ‘Amnesty scheme’ (Dec 4). The supposedly well-meaning but resource-starved government seems ready to go to all extents.

Shady business will not help the already struggling image of the country. It is recommended that foreign assistance from any sources be arranged on an immediate basis. This would help restore international investors’ confidence. At home, serious economic policies need to be pursued instead of desperate economic schemes, tax amnesties, and maniacal unplanned seigniorage.

IMF’s happy, but the government needs to plan ahead

(An earlier version of this post appeared in the daily Dawn)

That the Fund facility is on track is not that merry a news. Economists tell us that the government is taking the right steps. Yet, it cannot be lulled by the recent note of satisfaction issued by its benefactor. Why so?

IMF lures the bad boys of the world economy into one of its programmes and encourages them to behave. Both live through mutual dependence, just like banks and the greedy. One needs to lend money the other one is coveting for. Yet, if the contract goes ‘off-track’, the deal stands suspended. And remember who we are talking about? IMF and the bad boys.

Out of the paper, into the real world, things are not that simple. IMF needs to appreciate its role in making a programme successful. In only 7 out of 20 IMF-programmes in Pakistan could the pre-agreed amount be drawn. Most of these were suspended before completion. Needless to say, the absence of political will of the ruling parties resulted in poor success rate.

Yet from an institutional perspective, the IMF’s irresponsible lending in the first place, followed by its inability to make the governments accountable at earlier stages of the programme is a compelling explanation. In 1994-97 period alone, Pakistan government entered 6 IMF-programmes: 2 Programmes every year. All failed. But the IMF was generous enough to keep lending for one after another.

This brings us to an inherent problem IMF-designed adjustment programmes. For the Fund, the incentive to term a programme ‘off-track’ is least in the beginning, as early derailment would reflect irresponsible lending. The result is poor programme compliance goes unpunished initially, only to strike back later when the programme is altogether suspended.

How impeccable is the design of the on-going IMF-programme and how much pressure the IMF is putting on the government to pursue the ‘right’ policies remains beyond the eyeshot of common man. But the signs are mixed. For one, it seems too cheery for the Fund to issue note of satisfaction with foreign reserves crippling, rupee depreciating, & foreign portfolio investment falling. One may surmise that the medium-term outlook of the Pakistani economy must be encouraging, and that must be the basis for IMF’s optimism. But it is not. On the contrary, the IMF has revised its forecasts for GDP growth and the current account downwards, for Pakistan as well as globally.

Lastly, it cannot be overemphasised that the government is being a little too optimistic in expecting mere fiscal consolidation to get the wheel of the economy rolling. Appease Taliban or launch a full-fledged assault, it does not matter to investors. What does is a clear vision and an articulated strategy to create a supportive, safe, and thriving business environment over the years, where property rights and contracts would be enforced. If the government keeps delaying critical decisions in the political arena, all we get at the end of an even ‘successful’ IMF programme will be another mountain of debt.

Access denied, but why?

In a recent article published in Dawn, Chris Lockyear of Doctors without Borders expresses concern over not being allowed access to quake-hit areas. He is right in arguing that the National Disaster Management Authority (NDMA) or the military may not be as good at handling such emergencies as Médecins Sans Frontières (MSF), especially when it comes down to health-related issues. However, the on-ground situation has to be conceived fully in order to understand Pakistani government’s view.

As he has mentioned, the MSF needs “to be guaranteed a basic level of safety before going in.” This – in a stronghold of insurgents – is simply not possible. The security situation in Awaran is not comparable to that in Kashmir or even Ziarat. Army has itself been targeted there. The chief minister’s helicopter was attacked with rockets. If safety could be ensured, Army personnel would have ensured it for themselves and for other state-agencies already.

Besides, it is highly unlikely that militants concern themselves with debates regarding MSF’s impartiality. They would rather view them as lucrative targets for gaining international attention.

In the given situation, perhaps it would be best for the MSF to help the government with its technical expertise, training and other resources from back end. For its part, the Pakistani government should pave the way for that.

Are Imran Khan’s peace efforts misplaced?

(Access the shorter version here in The News)

Recently, Imran Khan proposed the government to allow the Pakistani Taliban (TTP) to open an office like the Afghan Taliban’s in Qatar. Moreover, to pave the road for smooth negotiations, he suggested that the government should immediately declare a ceasefire. Needless to say, these were big statements to make. However, the way he was assailed by analysts was, at least, equally questionable. Those who disagreed with Mr Khan have been at a loss at suggesting any alternative strategies to counter the menace.

For one thing, we – the Pakistanis – are not having a very merry time anyway. The security forces have been on the offensive for about a decade now but the security situation has only worsened. Though, the forces have been diligently working to bring about peace but the desired results have not shown despite elimination of many key figures from Talibans’ ranks and apparently triumphant battles in different places.

Whether the Pakistani government authorises the forces to launch a new offensive or proceeds with the negotiations, either way it is quite uncertain as to which way the balance will swing. Instability may continue with negotiations – but the same applies to war as well. Alternatively, a new all-out offensive can culminate in lasting peace. But so can winning even a few of the main TTP factions to your side through negotiations. In short, there are no clear and easy answers.

Had progress been showing up in the prevailing war, Imran Khan’s emphasis on talks could have been reasonably questioned. But in the current circumstances, giving peace a chance seems like the only viable option. Differences about the timing, scope, frame and nature of talks should not bar negotiations from proceeding.

The war option will, anyway, remain.

Striking Syria: illegitimate, illegal, witless and stupid

The US history is chequered with instances where the United States overreacted to a situation, dragging the world into an era of instability. Now, as then, it is extending a questionable legitimacy to anyone willing to flout law. One wonders how an action may be ‘illegal but legitimate’, and how to determine where to put legality over ethics (or legitimacy) and vice versa.

Of course, there is a compelling case to bring the Syrian regime to books if its crime’s proven. But bypassing the United Nations Security Council – and following the illegal channel – will only lend weight to the notion of a world where legitimacy is, at best, an arbitrary concept.

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In the first place, there are serious questions about how the US can even justify an aggressive response against the Syrian regime. Many have asked how the use of chemical weapons is different from other forms of artillery. To them, killing a thousand civilians sporadically is not very different from killing a thousand together.

The US drone strikes are estimated to have killed around 4000 civilians in Pakistan, Yemen and Somalia, according to the London-based Bureau of Investigative Journalism – about 3 times the super-accurate US figure of 1,429 that perished in the Syrian attack. But even the 4000 figure is peanuts compared with the number of civilian casualties from US aggression in Afghanistan, Iraq and Pakistan, estimated at 137,000, according to Brown University’s ‘Costs of War’ project.

Some proponents of the US intervention, however, argue that the nature of pain brought by the chemical attack is different than that brought by the use of conventional weapons. Anyone who has watched the footages of those gassed in the Syrian attack would not need to be convinced on this one. Yet, it is difficult to see how the pain from the use of Sarin – the toxic gas allegedly used in the attack – is greater than the bomb that deprived Rukia of her arm and 5 children, or a missile that deprived an ice-cream vendor like AssadUllah of his leg for the rest of his life. Rukia and AssadUllah represent a norm rather than exception in the Afghan War.

Yet another instance of Obama’s hypocrisy is the nerve to talk about human rights alongside monstrosities of the US in the Guantanamo Bay. There are detainees there locked up without charge, even their genitals are not safe – having to lend them to the US guards for ‘search’ if they were to see their counsels. They are force-fed in the most deplorable ways through tubes thrust into their nostrils when they refuse to eat in protest. Abu Ghraib prison in Iraq and Bagram Air Base in Afghanistan have served as other hot spots for US military’s transgressions.

Failure to meaningfully condemn Israeli occupation of Palestine and continuous extension of illegal settlements, inability to call the Egypt coup a coup despite massacre and political victimisation of the Muslim Brotherhood, and welcoming of Myanmar’s President in the US while the Muslims there – especially Rohingya – face the 969 movement to identify and exclude them out of the Myanmar mainstream society are some of the failures of the US on the diplomatic front in upholding basic rights.

Against this backdrop, the eagerness of Obama to reduce the Syrian regime to tatters because it allegedly killed 1,429 people is difficult to understand. Not only that, it is all ready to flout the international law yet again. In a characteristically arrogant US tone, Secretary of State Kerry was quick to declare that the US would not wait for the report of the UN fact-finding mission on Syrian chemical attacks before it strikes. A few days later, he has come up with the claim that US has its own evidence which has proved that the rebel-area in the suburbs of Damascus was indeed attacked by Assad’s regime with chemical attack. Yet, as of now, this ‘evidence’ remains to be shared, and questions about its reliability are already arising.

The US needs to be mindful of the potential repercussions of ignoring international law. Arguably, what has come to be known as ‘terrorism’ is largely a by-product of US foreign policy. When it ignores law, it lends a similar ‘legitimacy’ to anyone willing to make judgements on personal morals: whether they spring from a religious, ethnic or an expansionist mindset. Not only does this reinforce the acrimony against the US in the dissident groups, it lends credence to the hypothesis about power stemming from guns rather than intellect, breeding a new class of violent militants.

The atrocities inflicted upon the Syrian opposition by the Assad regime should not be ignored. However, an international consensus needs to be built on the nature and extent of the pressure to undermine the regime. The US should be wary of acting unilaterally and making the world yet more insecure by internationalising yet another conflict. Ironically, all that racket to flout human rights itself. If the UN fails agree on a plan for intervention, the Syrians should be left alone. Don’t bomb them to salvation!

“The Development Set”

This beautiful poem – by Ross Coggins – aptly captures the profligate approach of international development agencies…

The Development Set

Excuse me, friends, I must catch my jet –
I’m off to join the Development Set;
My bags are packed, and I’ve had all my shots,
I have travellers’ cheques and pills for the trots.

The Development Set is bright and noble,
Our thoughts are deep and our vision global;
Although we move with the better classes,
Our thoughts are always with the masses.

In Sheraton hotels in scattered nations,
We damn multinational corporations;
Injustice seems so easy to protest,
In such seething hotbeds of social rest.

We discuss malnutrition over steaks
And plan hunger talks during coffee breaks.
Whether Asian floods or African drought,
We face each issue with an open mouth.

We bring in consultants whose
circumlocution
Raises difficulties for every solution –
Thus guaranteeing continued good eating
By showing the need for another meeting.

The language of the Development Set,
Stretches the English alphabet;
We use swell words like ‘epigenetic’
‘Micro’, ‘Macro’ and ‘logarithmetic’.

Development Set homes are extremely chic,
Full of carvings, curios and draped with batik.
Eye-level photographs subtly assure
That your host is at home with the rich and the poor.

Enough of these verses – on with the mission!
Our task is as broad as the human condition!
Just pray to God the biblical promise is true:
The poor ye shall always have with you.

by Ross Coggins

(“Adult Education and Development”, 1976)

Judicial Paranoia

An article by Saroop Ijaz about the latest histrionics of the-one-who-must-not-be-named. Worth a read.

Contempt of the people!

Sisi’s Fall from Grace

Even though the ouster of Morsi may have represented the Egyptian people’s will, General Sisi’s actions are diluting any legitimacy he may have drawn from the gatherings of masses and getting Al-Azhar, Coptic Church, and the parliamentary Opposition on board. Instead, his hawkish approach reflects his inability to see things from a political lens.

Right from the start, he has been taking all the wrong steps. First, in a grossly impolitic move, the elected President was abducted and his disappearance continues to date. Even though the crime of his forced ouster could have been veiled by the will of the other half of Egypt – that was on the roads – his detention echoes the US‘s not-to-be-spoken word, coup d’etat, very loudly.

As if that were not enough to disgruntle the Morsi supporters, the interim setup declared that the deposed president will be tried on a range of grounds. Previously, their excuse for his disappearance had been ‘his own safety.’ Senior leaders of the Brotherhood were detained and their assets frozen. That was a way of telling the Brotherhood to end the protests, or else, get blacklisted again.

And now the 9 letter convenient connotation of ‘terrorism’ has finally been used by Sisi, along with his intentions of beefing security up. This means Egypt’s military may be instrumentalised to launch a full-fledged crackdown on not just the Muslim Brotherhood but democracy’s supporters there, on the pretext of controlling terrorism. Hosni Mubarak did the same in 2005, but the Brotherhood managed a majority in 2012 elections anyway.

It seems that General Sisi is preoccupied by the might of guns, probably his ‘pacifist-of-the-last-resort.’ He should be mindful of the dynamic and inflammable political landscape he is operating in. Use of brute force may not only result in a backlash in the form of lawlessness but may even avalanche into a civil war.

Rather than issuing provocative and nonsensical deadlines to the Brotherhood, Sisi should free Morsi and other Brotherhood leaders first, and then offer them with poltical alternatives, if any. But, as of now, he seems to be putting the cart before the horse. The sooner he figures that out, the better it will be for Egypt. The Brotherhood is more organised than ever and oppressing them this time around will not be a cakewalk.

Provinces, the Centre and the NFC

(A slightly modified version of the article was published in The News on July 18, 2013)

In his article ‘Safeguarding the IMF programme‘ (July 15), Dr Ashfaque H Khan stressed the need for making the Federal Board of Revenue’s revenue target less wishful for striking a realistic deal with the provinces. That is, not to expect surpluses from the provinces unless the centre achieves the promised revenues. If there is a stalemate, and the provinces fail to agree with the centre on the requisite provincial surplus targets, the expected IMF programme may be in jeopardy.

It is difficult, however, to see the IMF agreeing on a lower revenue target for the federal government. From the IMF’s point of view, a revised revenue target might have the opposite effect: the will of the federal government for overhauling resource mobilisation may be seen to have dampened. By that line of argument, a reduced revenue target will result in even lesser revenues, with no actual effect on provinces hitting their fiscal targets.

Perhaps a parliamentary review of the anomalies in the current NFC Award is the only option the government has, the importance of which is strongly echoed in Dr Ashfaque’s article. As for the short term, it is hoped that the provinces and the centre both act responsibly and don’t get too shaky even before the programme starts. After all, a few slippages are allowed even in ‘successful’ IMF programmes.

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