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Archive for June, 1996

Mexico 1994, Pakistan 1996?

A confidential informal note being circulated in the World Bank seeks to compare the economic situation in Pakistan today with that availing in Mexico prior to the economy crash in 1994. To quote “Over the last three years, Pakistan’s macroeconomic performance has been disappointing. Real income per capita has hardly grown, while inflation and urban unemployment have risen. Although the country’s long-term growth potential remains favourable, prospects for sustained non-inflationary growth of per capita income are fraught with serious downside risks. The economy remains overly dependent on the cotton sector and highly vulnerable to external shocks and financial instability. Because of the unfavourable economic performance, there has been a noticeable rise in social and political pressures and loss of popularity for the current government. Concerned about potential short-term adverse impact of economic adjustment or key interest groups, the government decided in June 1995 to slow down the pace of reforms. However, this decision led to loss of credibility of government’s macroeconomic policies, emergence of serious fiscal and financial imbalances and eventually financial turbulence. Although the authorities are now trying to steer the economy back on track, and thanks to cotton’s bumper crop economic growth is forecast to accelerate, nevertheless, Pakistan’s macroeconomic/financial problem is much more serious than assumed by the authorities.” unquote. All in all, this is rather a damning indictment of Ms Benazir regime’s economic policies.


Messages, loud and clear

In a precision hit several days ago, a profound message was delivered to a recalcitrant judiciary (and supporters thereof) when former Additional Judge of Sindh High Court (SHC) Nizam Ahmad and his son Nadeem were gunned down at the gate of their PECHS home in Karachi. A vocal advocate for human rights and a crusader against land-grabbers, besides being an important member of the various Bar Councils and Associations, late Judge Nizam was the brother-in-law of Supreme Court Judge (and former Chief Justice SHC Nasir Aslam Zahid). Justice Zahid has been a symbol of the campaign for human rights as well as an independent judiciary. A “Conscientious Dissenter” to the concept of executive influence over judiciary at all levels, as Chief Justice SHC he had set far-reaching suo moto precedents and was at the epicentre of the historic March 20 Supreme Court Judgment that is the present cause of severe tussle between the ruling PPP regime and its own (mostly) appointed judiciary. The Constitution specifically desires independence of the judiciary from the executive, after years of resistance the bureaucracy (and their political mentors) had to give way in the face of a united legal profession, judges and counsel alike. From March 23, 1996, an independent judiciary has gone from strength to strength, laying off (in a latest initiative) 24 judges on Sunday June 16, 1996, who were found unsuitable to be elevated to the High Court Benches, being either not recommended by the Chief Justices of the Provincial High Courts and/or the respected Chief Justice of the Supreme Court. It may be remembered that the Chief Justice of the Supreme Court had his official car hijacked in Karachi soon after the March 20 judgment followed soon after in Lahore by the Chief Justice of the Lahore High Court, seemingly two unrelated incidents that seemed to be a sort of warning. One cannot have doubt that while (for multiple reasons in line with his principles and professional pre-occupations) Judge Nizam was already a prime potential target, the main motive “to terminate him with extreme prejudice” as well as his son was to send a clear, unambiguous message to all “conscientious dissenters” among the judiciary who have been actively militating against the influence of executive rule that for decades has vitiated the concept of justice, the signal being to either “play ball” or join the indispensables among the ever increasing population of the graveyards of Karachi. Our law enforcement agencies (LEAs) cannot be expected to find a motive, their administrative penchant is to shy away from the obvious and the influential. What one need only ask is that in addition to the brutal murder of Judge Nizam Ahmed and his son, “what is the common factor behind the killings of Special Terrorist Court Judge Junejo, Landhi Jail Warden Abdul Rahim Shaikh and Newspaper Editor Maulana Salahuddin?” While the IG Sindh Police remains intermittently busy, among other pre-occupations promoting the crass commercial interests of a particular ethnic “brother” in Karachi owning a private security agency, he seems to discreetly ignore parallel outfits not in conformity with the ethical aims and objectives of law enforcement agencies (LEAs), i.e. they clearly operate outside the ambit of the laws of the land (i.e. they have nothing official about it), see THE NATION May 30, 1996). On the other hand, the respected Chief Justice of the Supreme Court and his brother Chief Justices of the various Provincial High Courts have not been found wanting in giving a correct and suitable rejoinder to the crude message delivered to them by the murder of Judge Nizam and his son. By sending the unapproved judges home, their clear message is that they refuse to be cowed down by threats, intimidation, blackmail, verbal abuse and now murder.


Pre-Budget Expectations – The Proverbial Magic Hat

Balancing the nation’s books is more akin to Houdini trying to get out of a closed sack underwater with both hands and feet tied and chained. Pakistan’s Houdini, Mr Sartaj Aziz will spell out the economic destiny of the populace for the coming year in the National Assembly (NA) on Friday June 13 (lucky or unlucky, take your pick). Not only are we deeply in both external and internal debt, we are in dire danger of defaulting on our instalments of both Principal and Interest thereof. With revenues decreasing instead of registering an increase, with the weather hostile to obtaining a semblance of food autarky, with a corrupt revenue-collection machinery dragging its feet, with traditional aid-givers adopting a wait-and-see attitude, etc, it is a brave, selfless man indeed who would happily function as Pakistan’s Finance Minister, a thankless job in the company of thankless colleagues and a demanding people. People (Dr Mahbubul Haq in the front row) are now waiting to see whether the man chosen to be the sacrificial lamb by the Nawaz Sharif regime will fall flat on his face or pull the proverbial rabbit out of the magic hat.

Fed up with fudged statistics by the Bhutto regime, neither the World Bank (WB) or the IMF were happily disposed towards Pakistan or ready to accept Pakistani numbers with any credibility. For the record WB’s President Mr Wolfenson has recently denied Ms Benazir’s accusation that the WB was an accomplice (along with Farooq Leghari and a host of others blamed by Ms Benazir for good measure not excluding the voters who voted against her) in the sacking of her corrupt regime. IMF’s Mr Camdessus reluctantly did concede that he had been taken in by her considerable “charm” and what Mr Sartaj Aziz stated during his visit to the US was “music to their years” (a direct quote) in the sense of long-term structural reforms of the economy. The deliberate mechanism needed to correct the imbalances in the financial sector involves downsizing the administrative structure, drastically reducing the size of the public sector, bringing in private sector entrepreneurial and cost-cutting measures into effective employment in the administration, etc. As a preamble to his budget proposals, the Finance Minister does not simply signify rhetoric, he means it. Because both the WB and the IMF seem to believe this, there is every likelihood that we will have access to almost US$ 1 billion in comparatively conditionality-free External Structural Adjustment Facility (ESAF) at 0.5% interest rather than the expensive conditionality-ridden Stand-By-Arrangement (SBA) at 6% plus what we got in 1993 due to Moeen Qureshi’s generosity to the people of Pakistan. Sartaj Aziz was close to an ESAF agreement in April 1993 when Ghulam Ishaq Khan sent Mian Nawaz Sharif packing the first time around. Instead of working ourselves into a frenzy about IMF conditionalities, we should accept that some of it is plain common-sense stuff, it is only in the matter of prices of foodstuffs and other essentials that we must stiffen our backs.



Despite PM Ms Benazir Bhutto’s wide-eyed poker-faced disclaimer about corruption (what corruption?) to the David Frost question in his Breakfast Show, “Virtual Reality” is that the corruption perception index for 1996 produced by Transparency International (TI), a multi-national organization dedicated to curb corruption in international business, places Pakistan second in corrupt countries behind Nigeria, adjudged to be the most corrupt (not by far) among the 54 countries surveyed. Among the least corrupt countries, New Zealand was first i.e. at No 54. In order of rascality among the Muslim nations (other than Nigeria that preceded us) Pakistan was followed in order of demerit by Bangladesh (at No. 4), Indonesia (at 10), Uganda (at 12), Egypt (at 14), Turkey (at 22), Jordan (at 25) and Malaysia (at 29). It is scant consolation that India is not far behind us (at No. 9 position) in the corruption stakes. Should we be happy that we are more corrupt than our perennial arch-rival or hang our heads in shame that even they are less corrupt than we are? To some of us it is a matter of embarrassment, to those who have worked overtime to put us on this shameful pedestal, does it really matter?

According to the article in Financial Times (Monday June 3, 1996), TI, with Headquarters in Berlin, defines corruption as “the misuse of public power for private benefits”. It tries to assess the degree to which public officials and politicians in various countries are involved in such practices as siphoning bribes, taking illicit payments in public procurement and the embezzling of public funds. TI’s summary of findings is based on 10 international business surveys, most conducted among foreign businessmen doing business with the survey-target countries. In the past three years we have deteriorated rapidly in the corruption stakes, sliding from a low of 2.25 points out of 10 in 1995 to even low 1.00 point in 1996, being bracketed by Nigeria’s 0.69/10 and Kenya’s 2.21/10 (at No.3 position). At the reverse end of the corruption scale, New Zealand retained its LEAST CORRUPT status but fell slightly from its high of 9.55 out of 10 (1995) to 9.43/10 (1996). Even the so-called “Banana Republics” that people in (and out of) uniform are usually scornful about are considerably less corrupt than Pakistan, the closest being Colombia at 15th position with 2.73 points out of 10.


The Corrupt Have Inherited This Good Earth

The most potent symbol of government corruption in our time are the Marcoses. This family looted the Philippines and stashed money by the hundreds of millions in secret bank accounts, real-estate holdings, blue-chip investments, etc all over the world, particularly in US and Europe. The spectacle of peasants roaming around in the Malacanang Palace after the Marcos downfall, gawking among other luxuries at the 3,000 pairs of shoes owned by Imelda Marcos, still remains vivid as an example of their outrageous excess. Engaged in a drawn-out legal battle with the Philippines Government which is trying to recover the money (almost US$ 1 billion) in Swiss banks, Imelda is shamelessly holding out to retain a percentage of the illegally acquired wealth as the price for returning it without further legal contest, airing a likely story that this accumulation of wealth is because of the fabulous treasure hidden by the Japanese during World War 2 and purportedly found by late President Ferdinand Marcos. Under trial in New York a few years ago, the Steel Butterfly (as Imelda Marcos is known), dramatically collapsed in open court, playing on the sympathy of the Jury (and the public) and successfully being acquitted of alleged wrong doings. The “bad health” of this wonderful actress persisted till it was clear that many Filipinos, forgetting that blatant corruption was the reason for the Marcos ouster, voted her into office as Senator. She has since made a miraculous recovery to her boisterous self again. Throughout the last decade, despite her well-deserved reputation for corruption, Madam Marcos and her family kept on denying any wrongdoing, safe in the knowledge that if you keep lying confidently, people will begin to believe your lies. She remained in good social graces in the world’s exclusive elite social circles, no one among the rich and beautiful really giving a damn that this woman and her family were directly responsible for the poverty and present misery being endured by millions of Filipinos. Madam Marcos sends a very clear green signal to Third World leaders having qualms about looting the public till, it is socially acceptable to be corrupt, you just have to keep on denying any accusations poker-faced. We have surpassed the Marcos example in Pakistan. In fact the Marcos Syndrome (as we may like to call corruption among Third World leaders) would seem to be kindergarten stuff compared to the advanced techniques developed by us in this country.

The standard practice of making millions illegally is to get kickbacks in civil and military projects because of one’s official position. This was endemic in the number of authoritarian regimes opposed to communism in the region who were the recipients of vast amounts of direct economic and military aid from the World Bank, Asian Development Bank (ADB), etc as well as country-to-country aids and grants, involving huge deals for projects in energy, telecommunication, transportation, health, arms and equipment, etc. The sales agents of the various companies, among them many Multinationals (MNCs), were extremely active in getting their products and services sold. Since they were also particularly interested to keep on selling their products for years they also campaigned against the goods being manufactured in-country, thus serving to keep commissions recurring. Countries like Pakistan have taken four decades to develop heavy industries but even then do not produce automobiles but simply assemble them (we are on a deletion programme that never sees anything deleted). The biggest known case of kickbacks in the Philippines was the Westinghouse deal for a nuclear power station when Westinghouse was taken to task by the US Government for running afoul of US Corrupt Practices Act i.e. laws strictly eliminating bribery. Companies know how to circumvent such laws, the normal modus operandi now is to give very heavy retainers as monthly service charges to “Consultants”. The Marcoses stole away a lot of “commission” on various projects in which others acted as frontmen. On their part the companies padded the prices so as not to cut into their profits. Populist Third World leaders vow their adoring and gullible masses about their commitment to the masses while bilking their countries of billions of US dollars. Developed countries have very good intelligence agencies looking after their strategic and commercial interests but in the larger interest of their own commercial gains, these countries, normally very high on moral issues, deliberately chose to look the other way. However, siphoning commissions is now old hat, new and advanced techniques are employed by the unscrupulous, the obtaining of commissions is peanuts compared to what can be got through these other means mainly money acquired through rendering “services”.