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Archive for September, 1991

A region of economic opportunities

With the loosening of the iron grip of communism in the Soviet Union, the former Soviet Republics have started asserting their rights, some have even resorted to a unilateral declaration of independence (UDI). Gorbachev has played a masterly role after his comeback in slowing the process of total disintegration of the USSR, a chaotic collapse would have led (Yugoslavia-like) to internecine conflict and anarchy. The way the nuclear weapons are dispersed, we could have had Apocalypse now! All inter-state relations are normally bound together by an economic fabric, the new States Treaty annunciated by Gorbachev and Yeltsin stresses economic union among the Republics as the cardinal principle of association with each other, leaving open the possibility of the right of secession. The Baltic Republics, already recognized as independent entities by the Soviet Union, have been assured of some form of economic association with the EEC countries. The Republics of Russia and the Ukraine are economically viable to a great extent, having established industrial development to go with their reserves of raw material and food resources. Georgia, Armenia and Azerbaijan may be in a weaker economic position but the worst affected are the 50 million people inhabiting the 1.55 million square miles of Kazakhastan and the four Central Asian Republics of Turkmenia, Uzbekistan, Tadzhikistan and Kirghizia.


National consensus

Opposition circles in Pakistan have demanded a National Government to cope with the ever worsening internal situation and the rapidly changing geo-political circumstances. The incumbent Government has laughed this suggestion off as unnecessary, unrealistic and without constitutional basis, echoing the PPP stance during its regime. The need and advisability of a National Government is debatable at the worst of times and the efficacy questionable even in the best of circumstances, there remains an overwhelming need for national consensus. Without a meeting of the minds on key economic, political and administrative issues, the proposed National Government may become a battleground of sorts, paralyzing the civil administration.

Key issues affecting the lives of most citizens of Pakistan need to be spelt out, in priority to that affecting a significant minority. The common good should take preponderance over the subjective interest of a minority, the majority taking into account the minority interest so as not to alienate them from our society. In face of the IJI Government’s overwhelming majority in the National Assembly and whole hearted support of the President, the manner the Twelfth Amendment was rammed through the National Assembly in 30 minutes flat gave an impression of weakness, an unmistakable sign of under-confidence in its own vast numbers. Nobody doubts the efficacy or need for the said legislation, the arbitrariness gives rise to doubts about how the new law will be utilised, reinforced by the perception that the intelligentsia and the masses do not have confidence in the impartiality, honesty or integrity of some elements among the law enforcement agencies. When justice becomes selective, it tends to become a crime. Subjective IJI weakness was again on display with the induction of a 50-member Federal Cabinet with about 20 Parliamentary Secretaries, something which could have been avoided. Politically it makes sense to include disparate forces within the ambit of the Government, it also allows the minority constituent groups occasion for blackmail at the slightest pretext. The 80 or so MNAs who find themselves outside the Cabinet may feel slighted and thus remain open to exploitation by the Opposition. Politics may be a game of compromise and convenience, little attempt has been made at compromise with the political forces in Opposition. In the changing geo-political circumstances, dramatic initiatives are possible in both external and internal issues if we inculcate a spirit of compromise and a genuine commitment to national unity in supersession to selfish vested interests.


Can democracy survive?

Politics and economics are irreversibly intertwined, one has no substance without the other. Given the track record of IJI in economic affairs, the Nawaz Sharif Government should be politically stable, yet it is in the area of their greatest expertise that the government is mired in trouble. The reasons can be traced back to the first years of the last martial law when a new breed of white collar criminals discovered an extremely sophisticated of making easy money from the gullible masses by establishing illegal investment companies, giving out large sums as “profit”. We are now in the third scam period of the illegal finance companies in the last decade or so, this has the potential of destabilizing this democratic government. For any country, the collapse of an elected administration is always a tragedy.

Following the controversial removal of Ms Benazir in August 1988, we expected that the purported raison d’etre for her downfall, corruption, would be exposed as promised. In the circumstances, her legal defence team has organised an effective filibuster to the Presidential References, delaying judicial conclusion to the allegations levied against her. The cooperative finance companies scandal has thus been gleefully seized by the Opposition as an effective counter-offensive mechanism and Ms Benazir has last week been on a turkey shoot of the IJI’s Government credibility through Nawaz Sharif’s political backyard, the Punjab. While this does not necessarily countenance alleged misdemeanours, it serves to put the whole democratic process into disrepute. Luminaries of the Opposition have also been “mentioned in despatches”. This may be a case of individual greed of the unscrupulous, taking advantage of the trappings of power or there was collaboration by those in power in the misdemeanour, the former is probably closer to the truth than the latter but there is a fundamental erosion to the credibility of the political hierarchy. There is need for immediate damage control, if there is a cancer in the body politic then it must be removed before it spreads uncontrollably.


Private banks, finally!

The Government of Pakistan (GoP) has finally released a list of private banks approved by them. Over the last 15 years, we have been thrice beset by major financial scandals because we lacked the will and intent to formally commission the private banking industry and bring it within the ambit of government regulations as annunciated and implemented by the State Bank of Pakistan. This vaccuum was tailor-made for exploitation by the unscrupulous (and the un-Godly) and it has been, repeatedly.

Money scams operate on the principle that the mass of people want a quick return on their investments and that human greed tends to snowball as it goes along. The spurious investment companies that proliferated in 1979-80 based their activities on rosy promises made to the public of high interest payments, some even as much as 4-5% per month, thus dangling the prospect of doubling of the original stake in 2 years or even less. As Confucius is rumoured to have said, given such bait, fish bite! Using the old “Pyramid” technique perfected in the US many decades ago, the investment companies gave out exorbitant “profit” to the earlier investors from the funds deposited by the new investors, thus spreading their “fame” at the grass roots level, drawing in more of the gullible (“suckers” in their vocabulary). The investment companies also bought into areas such as real estate, consumer industries, etc with secondary emphasis on acquiring other lucrative ventures. These were long-term measures but to ensure a continuous supply of investors they had to acquire or be synonymous with prestigious projects while giving away exorbitant interest, this undercut their profitability factor. Because of the large funds being dished out as interest in increasing frequency, the pyramid was bound to collapse and it did. The first sign of trouble in any banking institution comes when it fails to honour its liability to any customer, whether it be outright refusal of or simply restricting the outward flow of funds, interest or capital. Even the hint of such a rumour and it spreads like a virus, depositors rush to take their money out. This creates a pressure of its own and the whole balloon bursts as the limited cash available cannot go on paying out regular monthly profits unless new cash generates liquidity, capital being tied up in movable or immovable assets. Almost 100% of the investment companies that proliferated in the two great scam periods of 1979-80 and 1985-87 had wilful intentions of fraud. As such they had diverted the hapless depositor’s funds to finance the purchase of properties in their own name or secreted the funds abroad.