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Archive for July, 1996

Conscience and honour

The menace of corruption will not be scared away by the volume of rhetoric being blasted in its general direction. Given cancerous growth along with its deadly twin “nepotism”, society seems to have adjusted itself against their elimination. If the recent correspondence between the President and the Leader of the Opposition is to be believed we may yet see some high-profile moves in that direction, albeit we cannot shrug off the frustration that this initiative will most probably die a natural death in some Parliamentary Committee or the other as have many other initiatives attempted earlier. Skepticism aside, one lives in hope and why should mere mortals question the integrity of the President’s wisdom in consigning the responsibility of eradicating corruption to the National Assembly, an institution that seldom does anything substantive contrary to the wishes of vested interest, mainly its own?


Apres Yaqoob, Banking Deluge?

The political crisis in 1993 has left a residual controversy over the tenure of service of the present Governor State Bank of Pakistan (SBP). Every nation, particularly a developing one, needs a strong and independent State Bank to maintain strict monetary control, specially when the government-in-power tends to be lax with respect to fiscal discipline. It must be said that Pakistan has been repeatedly blessed with good chief executives for this most important institution and, however, abominably some of them may have performed in later life in the cockpit of public office, in their appointment as the head of SBP every individual till date has performed exceptionally well, maintaining their independence without compromising their integrity. VA Jaffery (the much vilified PM’s Adviser on Finance) may seem servile and senile in the service of the PPP regime, one could never doubt his honesty and integrity in the SBP post. Before he manipulated and manoeuvred himself out of both the Presidential office and his reputation, Ghulam Ishaq Khan was a financial bureaucrat of some substance, albeit of the arch conservative kind. The present Governor SBP, Dr Mohammad Yaqoob, carries on the tradition of above par intellectual honesty, integrity and competence of his predecessors during their respective incumbencies. It is almost as if a mantle of impeccable sobriety in keeping with their responsibilities descends upon them as soon as they occupy the SBP chair, restraining their base faculties that tend to burst forth into light in later life.

Yaqoob resigned from the IMF in 1992 and returned home, being offered the SBP job in 1993 on the retirement of the then incumbent, Mr. NH Hanafi. However political events caused quite a bit of constitutional confusion in 1993 and it was not till Moeen Qureshi as Caretaker PM had confirmed his appointment for a single five years term (increasing the length of office from three years) that Dr Yaqoob took office on 24 July 1993. The single five years term was designed to maintain independence of the Governor by removing the possibility of inducement by any Government for another term. On 12 Feb 1994, the present regime was pleased to again change the Governor’s tenure to two terms of three years each and thus the present anomaly. Should the present Governor SBP viz (1) continue for five years till 24 July 1998 (2) leave office after three years on 24 July 1996 or (3) stay in office for three years uptil 12 Feb 1997 when the last amendment came into vogue. Given an independent streak and not given to the pressure of political patronage (though one daresays very seldom publicly), a majority within the present regime will probably like to see the Governor SBP disappear into oblivion on 24 July 1996. Among those trying to bid him a not-so-fond farewell are the major aspirants for this post, prime among them the present Deputy Chairman Planning Commission, Qazi Alimullah who was bitterly disappointed when Yaqoob was named to the SBP post and stopped bestowing the then PM Mian Nawaz Sharif with the customary prayer puffs he reserves for all serving PMs, look what happened to Mian Nawaz Sharif once he was bereft of Qazi Alimullah’s holy breath!


Presidential ruminations or recriminations?

Addressing the 20th Convocation of the National Defence College (NDC), President Farooq Ahmad Khan Leghari expressed serious reservations about the taxation system of the country, to quote “a system that requires the political leadership to impose additional taxation simply to offset its own “drag” is not worthy of keeping. The tax collection machinery needs a total overhaul and the structure of taxes must be changed to achieve at least unitary elasticity. We require expansion in the tax base, plugging of loopholes, better tax administration, lowering of statutory rates, documentation of the economy and other steps to modernize the tax system. We fail to achieve deficit targets because the tax efforts get swallowed by an inefficient, corrupt or leaking system”, unquote. Brave words indeed by the Pakistani Head of State, an extremely severe indictment of the prevailing system of taxation that shows up how ineffectual successive governments, military and political, have been in dealing with this major problem. Mismanagement, maladministration and inefficiency have all been dwarfed by corruption, the result is that the entire fiscal and monetary balance of the country is under threat of disruption. Some doomsday soothsayers are even predicting a “crash” of the economy, one opines that even if we do not “crash” but “slide” we are in deep trouble, almost the entire burden will be borne by the common man.


The Unholy Nexus-Economy, Corruption and National Security

A confidential informal note about Pakistan dated May 22, 1996 being circulated in the World Bank asserts that there will be, quote “a significant shortfall in government revenues this year of around Rs 13 billion (0.6% of GDP), and financing of the budget deficit has been far in excess of target (indicating a larger fiscal deficit than targeted under the (IMF) Stand-By Arrangement (SBA). Meanwhile, the level of official reserves has been kept from falling below $1.5 billion (7.4 weeks of imports compared to 13 weeks last June) by short-term borrowing and build up of foreign currency accounts, a sudden outflow could in turn result in serious problems in the banking sector. It is critical that the government move immediately to take the necessary revenue and expenditure measures to reduce the fiscal deficit and accelerate the pace of structural reforms in the context of 1996/97 budget” unquote, far removed from the rosy picture being painted by the likes of VA Jafarey and Qazi Alimullah.

People generally fail to comprehend the full co-relation between economy, corruption and national security, an unholy nexus that needs constant monitoring by responsible functionaries, concerned citizens and a free Press. Siphoning of funds from contracts, either in form of kickbacks or by lowering of the quality of work, commissioning white elephant projects at exorbitant prices, this is the domain of interests that have only greed as a motivation. Commission agents in the field of defence purchases are only exceeded in their disservice to the nation by the manipulations of “consultants” in league with corrupt individuals in the international finance institutions. The objective of foreign manufacturers is (1) to make a sale (2) at the highest price (3) to keep on selling more equipment and spares. To achieve their objectives foreign manufacturers employ local commission agents who help in making the sale by (a) using their influence with decision makers (b) ensuring the highest price and (c) acting as conduits for illegal gratification whenever necessary. An important chain in the link is the friendly banker who arranges the transfer of these illegal funds to safe havens without attracting attention. This money laundering role was previously supposedly the domain of the now defunct BCCI, supposedly facilitating the illegality of corrupt leaders and drug barons, visibly this role has been taken over by foreign banks in Pakistan, the lead being taken by one bank of US origin. The so-called consultants lobby against any indigenous production as this would terminate the gravy train of their recurring commissions. The amount of commission depending upon the volume of sales, local agents and their functionary collaborators actively work towards this objective. To acquire information about the requirements of their potential clients as well as their competitors, these agents also do intelligence work of sorts for their Principals, which can be very dangerous as this may come to the attention of those who may or may not be in love with Pakistan. Precious foreign exchange is diverted in sectors without as high a priority as others despite alternatives being available at much less cost. Project construction for every MW of electricity is roughly less than US$ 1 million. When privatising Kot Addu we are receiving about half that amount (US$ 800 million for 1600 MW) but why are we paying almost double the amount (US$ 1.8 billion for 1200 MW) for the Ebrahim Elawan-sponsored Hub River project, adding to the compound indebtedness of the people of Pakistan? The proposed purchase of Mirage 2000-5s can be taken as a real situation to explain the ramifications to readers.