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Archive for July, 1988

Stock Market and Yupsters

The dollar took another beating on the world currency markets as a direct result of the US trade figures for February which showed the deficit increase by over US$ 1.4 billion, reversing the trend of the past few months. The US dollar promptly bounced back buoyed by the positive trade figures for March. At the moment it is going both ways. The earlier downturn triggered a sympathetic fall in the Dow Jones Index, the gnomes on Wall Street bringing it down a sharp 100 points or so. On the other hand, the Geneva Accord on Afghanistan fetched nary a blush and served as a significant example of the prevailing perceptions of various forces to paper agreements that (1) the Russians are using the Accord as a mere propaganda ploy as a backdrop of the Reagan-Gorbachev Summit in Moscow in May 1988, having no real intention to go back and (2) the world of paper currency is increasingly getting divorced from happenings that are not real to them. There was a time when an honest to goodness “happening” on the international scene would act as a stimulant pushing share prices in either direction but the frenetic pace of panic selling/speculative buying is now linked to the vagaries of Corporate behaviour, Superpowers and Multi-nationals included. Having had their bits and chips snipped to the extent of trading within a span of 50 points up or down, computers are programmed to go into a limbo thereafter, while the market adjusts itself to real time. This fail-safe mechanism is meant to avoid a Wall Street meltdown a la Chernobyl, which almost happened on Black Monday last October when programmed computers set off a chain reaction almost leading to economic apocalypse.

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Black Money and Power

Pakistan’s economic position is not in the absolute doldrums because the buoyancy of the parallel black economy is keeping it artificially afloat. Operating independently of the country’s banking system, free from the encumbrances of any taxation, it is a tremendous market force and for some Third World countries a cornerstone for economic survival. Without the liquidity of black money fuelling consumer sales there would be a much bleaker economic picture. It is a bitter medicine without which the body economic would shudder to a halt but is a steep price to pay because it degenerates the morality of our society, weakening the fabric that binds it together.

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A Mahbubative Trade Policy

Mr Mahbubul Haq showed some of the effects of loneliness on the long distance runner in annunciating the second year of his scheduled three year trade policy. He talked Turkey, literally, mentioning the phenomenal growth in that country’s exports upto US$ 10 billion from a standing start with us 3-4 years ago, South Korea with its US$ 40 billion export figure being more of an unachievable miracle in comparison. The good doctor was honest and gracious enough to admit that his export target of US$ 4.2 billion for 1987-88, reflecting a targeted 15% increase over the previous year, actually went up 20% to US$ 4.4 billion, mainly because of international price rise in our cash cotton crop and other traditional exports, rather than any volumetric increase. Innovative to an extent he certainly was, but the jet lag of his Federal Budget presentation finally got to him and he failed to make the wide-ranging structural changes we were led to believe that he was contemplating. The changes by themselves are intelligent, will have a salutary effect on exports and will rationalise imports but he has failed, despite lip-service to the contrary, to shake the all-encompassing and suffocating bureaucratic vise, the absence of which has been the hallmark of the South Korean economic miracle.
One should not look at gift horses in the mouth and we should be happy that it is Dr Mahbubul Haq and not a political version of an economic horror story annunciating Pakistan’s trade policies. There is definite sincerity of purpose in the trade proposals and the business community is by and large comfortable with his efforts, lacking as these efforts are in any exercise in self-promotion, latent greed or any vindictiveness towards any individual or group. Chastened by poor Mr. Wattoo’s 1987 budget experience, Dr Mahbubul Haq has opted nothing so much out of the ordinary that could upset the apple-cart, opting for deliberate caution with emphasis on evolution rather than revolution as the cardinal principles of his trade policy. For those of us preaching fire and brimstone, it has been a disappointment in objective comparison because we expected the use of a surgical scalpel with greater abandon in the present autocratic circumstances when he had the chance of a lifetime.

One example of structural improvement without structural change is in recognizing that Export Promotion Bureau (EPB) was not pragmatically constituted to accomplish its mission and is being re-cast as the Export Promotion and Development Corporation (EPDC) with a government subsidy of Rs: 250 million for its initial Capital. This is a long-awaited change requested by us (THE NATION December 4, 1986, April 20, 1987 and April 27, 1987) but only in the spelling out of its charter of duties and the staffing of its personnel will any real and positive effects be apparent. It is impossible for Dr Mahbubul Haq to police all his minions, given the vast empire that he oversees, and it is necessary to give him at least three CARETAKER senior aides of his own choice, one in each Ministry, to implement the Government’s policies faithfully.

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The budget sends a message

Uneasy lies the head that presents the annual Federal Budget of a Third World country but the sips of water downed by Dr Mahbubul Haq did not signify any stage fright but the genuine thirst of a long distance runner. Burdened by the financial yoke thrust upon him almost immediately on the fall of the last Federal Cabinet, the good doctor was long on rhetoric and revelation but short on the substance of financial revolution. Budgets have their epitaphs written in the streets of Pakistan usually but this one will survive, the genuine effort for change stunning the general populace just by the sheer audacity of someone getting past the bureaucracy for once. It is rumoured that the first sketch of the proposals were made by the Federal Finance Minister in the solitude of his home (free of the machinations of recalcitrant bureaucracy) and if that is true then the very fact that change has come about leads us to the conclusion that Ministers must operate out of their homes to come up with any worthwhile suggestions.

Some of the effort is laudable indeed and if proved true then doubly praiseworthy. A significant reduction in non-developmental expenditure is seen to have been made and the supplementary grants have become subject to cabinet approval. The logic of it all is accepted by all and sundry, what happens in practice will be known by us next year around budget time. We all know now what happened to the Rs:1000 crore collected due to Iqra surcharge. It went everywhere but in the cause of education. The populace is skeptical because after all Dr Haq was not far removed from the machinations of the banking mafia, he was part and parcel of the unlamented Mr. Junejo’s cabinet as Federal Minister for Planning and Commerce. However clever Mr. Wattoo might have been, an incisive mind like the good doctor functions as a vise for machinations of the third kind and misplacing a cool Rs:1000 crore is a bit thick.

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