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Archive for May, 1988

A case for Countertrade

Countertrade is alive and well and living off the fat of the land in Pakistan — except that here it is conveniently disguised in the name of Barter, a bilateral trade involving commercial traffic between two participating sovereign nations. Barter was adopted in the later 60s in Pakistan as a convenient trade balancing mechanism with the socialist countries. In theory it is an excellent instrument when strictly applied to govern the flow of goods and commodities from Pakistan to the Barter partner country and vice-versa. In actual practice in Pakistan, except for our Barter Agreement with China, it is as bilateral as the sun appearing from the west. On the other hand, the basic premise for Countertrade is that it is non-sovereign and as such practiced mostly by Multi-national Corporations (MNCs) inasfar as goods and commodities from all over the world flow through an agreed arrangement (a Countertrade Agreement (CTA) or a Special Trading Agreement (STA) to Pakistan, financed by a basket of exports from Pakistan which can go anywhere in the world, with the possible exclusion of textiles to quota countries. That is the essential difference between Barter and Countertrade.

As a workable trade mechanism, the concept of Barter was excellent. The socialist countries possessed technology that we could not pay for with hard cash and which would have been much more expensive purchasing from the western world. At the same time by their willingness to sell their goods at a price to be paid for in the form of Pakistani goods and commodities they were affording a captive market to us, albeit at a cost, bearable and acceptable. Since an infrastructure to control the daily commercial activity was constitutionally beyond the charter of the Ministry of Commerce, the Trading Corporation of Pakistan (TCP) was created with the best of intentions, that of handling the Barter trade with the COMECON countries. Very early on, the High Priests of Corruption within the Ministries of Finance and Commerce woke up to the real world of liquid finance steeping out of their fingers and in consequence the Barter operation was taken over by them lock, stock and barrel, leaving the TCP holding an empty bag, having only the name SUKAB (Swedish Barter) and KEMIRA OY (Finnish Barter) stencilled on it as a mere formality. The substance of the trade remains in the hands of the bureaucracy in Islamabad, which under the cover of nationalisation in 1972 sanctified their dominance of the Barter trade with the COMECON countries by severing all remaining connections with the TCP. The raison d’etre gone, TCP was given a price stabilisation/import monopoly trade role. With their needs satisfied, TCP’s officials turned a blind eye without protest to the loss of the Barter trade. Such are the machinations of an errant bureaucracy determined to create financial loopholes in the system to suit their own interests.


Federal Guards

The malaise in the streets of the major city of Karachi has translated itself into bad commercial news and is well on its way to becoming an economic abyss for Pakistan. The desperate need to combat the dire straits has been repeatedly annunciated by government functionaries, most recently by Prime Minister Junejo. The Chief Minister of Sind has also taken some positive steps in the direction. All this amounts to too little, too late. Major, drastic means are necessary and the time for pontification has rapidly gone past. Making cosmetic changes in the administrative machinery and delivering dire warnings to a police force already at bay and demoralized serves no useful purpose. Instead of motivating the guardians of law and order, heedless admonitions will lead to alienating their already shaken loyalty to their duties and responsibilities.

The need is to have an intermediate force which will assist the existing police forces while maintaining its own independence and mobility of action. This force will also release the Army from Internal Security duties which they are now performing on a near continuous basis in the city of Karachi. The rapid economic decline due to loss of industrial production will develop into a vicious cycle of adversity as anarchy sets in and that is the primary reason for taking an immediate decision in this respect.


The Brink of Economic Apocalypse

The deteriorating law and order situation throughout the country is having a commensurate degenerating effect on the economy of Pakistan. As civil unrest escalates, industries will grind to a halt and commerce come to a standstill, it will set in motion a chain of events which will rapidly go out of control of any political government. Anarchy invites the imposition of martial law and in the face of civil war conditions even the general public will be resigned to such an eventuality. Martial laws cannot be used as a perennial standby solution to the country’s problems as it tends to degenerate and debilitate society while also seriously demilitarizing the military psyche.


Leave the army alone

One of the basic requirements of economic progress is the availability of a sound investment climate. Along with other necessary factors an environment conducive to attracting investment can only be created when a country enjoys peace and stability within its frontiers. One has to look only across the borders into the adjacent turbulent areas of Afghanistan, Iran and Indian Punjab (Khalistan) and see that commerce in these areas, barring the business of gun-running and heroin smuggling, has come to a virtual standstill. New investment of any kind is simply unheard of. Economic development thrives in a climate of tranquillity while industry shies away from areas of conflict because battlegrounds are not synonymous with good industrial environment. “Power flows through the barrel of a gun”, one must also accept that “Peace depends upon the power that flows through the barrel of a gun.”

Good economic progress in an era of economic retardation in this region has been possible because of the stability created by our standing Army. During a time of peace the populace has no knowledge of or conveniently forgets the horrors of war, when peace has usually been bought at a high price, with the blood sacrificed by its soldiers. During wartime we fall over ourselves to eulogise and honour our soldiers, the memory fades away quickly as surely as the setting sun. Whereas politicians very rightly have a vested interest in decrying any standing role for the Army in national politics, the sight of businessmen and industrialists climbing onto the recent bandwagon of lamb-pasting the Army is ludicrous. Less than a decade ago when among other things, our economy was in shambles and the general public generally prayed for deliverance, the “robber barons” suffering wide-scale nationalisation carried out in 1972, prayed harder than others to be rid of their tormentors. With anarchy and chaos in the offing due to continuing political upheaval, the Army’s proclamation of Martial Law in 1977 may have been greeted with sighs of relief by the general public but with undisguised glee by the former industrialists and other major businessmen. The casus belli for the public was the aversion of a likely civil war situation, the industrialists found possible hope of return of their taken over ventures. Only a privileged elite enjoyed rapport with the then regime, paper losses extending to millions, when one forgets that the loans standing against most former assets were much in excess to their respective values. Despite enjoying a good economic life, the motive of revenge never really escaped their sub-conscious, it giving no pleasure to anyone else as much as it was for this elite business coterie. Now, having lived a long decade of booming prosperity they seem to be about ready to change masters again!


Public sector Corporate – leadership – II

(This is the SECOND and CONCLUDING article in the series on the above subject).

The qualities of leadership are the same in any given environment. A person can be an officer in the Army commanding a company, a political leader from any constituency, a business executive in any firm or any other variation where a person is in a position to influence the lives and fortunes of not only his subordinates but that of the constituent unit that he is responsible for. Every leadership position is basically a responsibility thrust upon an individual to make or mar the destiny of himself and others depending upon the position and the quantum of responsibility given to the individual. It is then upto the individual to make best use of his individual qualities contributing to providing adequate leadership to the Corporate unit he is responsible for.

Given that we are not talking about the leadership provided by a dacoit to a bunch of thieves, the basic qualities of leadership are honesty and integrity, though there is such a thing as honour among thieves and as Eric Hoffer had said “Charlatanism of some degree is indispensable to effective leadership.” Thereafter depending upon the role envisaged, one can then inculcate intelligence, knowledge, imagination, initiative, courage, etc etc. None of the leadership qualities include business acumen and that is the fundamental difference between selecting an individual for merely an administrative post or as a business leader who must guide and influence his organisation to corporate profits. In the words of Peter Dreucker, “Business has only two functions — marketing and innovation.” This does not preclude the fact that from time to time you do get superb examples from the CSP cadre who have proved to be excellent business leaders other than their known administrative and organisational capabilities.