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Archive for November, 1999

Welfare Society

The fundamental principles of Islam requires that the State looks after the welfare of its citizens, all of whom are equal before the law, there being supposedly no elite. Those fortunate are forbidden from ostentatious display of wealth. They are admonished to bend over backwards to remain identified with those less fortunate and to share their good fortune. All that is theory, in practice there is no system of welfare in Pakistan, mostly it is lip-service in the public sector, in the private sector there is evidence of it but it is sporadic. As much as democracy as practiced in Pakistan was a sham, so are welfare schemes. State-sponsored welfare schemes were present in the communist system but these fell prey to inefficiency and corruption. Our meagre forays in this field have faced the same misfortune.

Welfare Schemes have to cater for (1) those who have no means of earning a living and (2) the senior citizens of the State. The minimum common agenda (MCA) should be to provide them with the bare necessities of shelter, medical cover and enough money for food, payment of utility bills, etc. For those employed by the State there is a system of sorts. The Defence Services are closest to an optimum caring for those retired, the civil bureaucracy has a system in place but it is not adequate enough. For the private sector, schemes were instituted during late Zulfikar Ali Bhutto’s regime but they have been overtaken by rampant corruption and gross inefficiency, the Employees Social Security Institution (ESSI), managed separately by the Federal and respective Provincial Governments, and the Employees Old Age Benefit Institution (EOBI) managed by the Federal Government.


Making the Federation Effective

The finest experiment in nationhood in its time came apart 24 years later in 1971, West Pakistan barely surviving as a truncated Pakistan. A myriad number of reasons turned this great adventure into a disaster, the major one was that the people of East Pakistan felt ignored and disparaged. During 1965 this isolation (“the defence of the East is in the West”), along with economic and political disparities and discrimination, perceived as well as real, became the bedrock for separatism. Economic reasons may have contributed heavily to bringing Pakistan down to its knees this time around, the overall political picture of inter-Provincial disharmony has assumed crisis proportions. When partners in any venture feel they are being shortchanged and their counterparts are insensitive to their needs, the process of dissolution of the union starts. In its own defence, the major partner then proceeds to blame the others for a lack of “patriotism”, “the last refuge of a scoundrel” (to quote Samuel Johnson).


A Day of Reckoning

In his speech on Oct 17, 1999 the Chief Executive (CE), Gen Pervez Musharraf set one month’s deadline for loan defaulters and tax evaders to make good their commitments. Thereafter he set in motion the process of selection of like-minded people with credibility who would help him give good governance to the country while setting a workable system in place and bringing the recalcitrants to book. The one-month deadline expires on Nov 16, 1999 and given the General’s priorities, for those who do not heed the warning, Nov 17 should rank as a “day of reckoning”, or so the masses expect.

The big defaulters have already been identified, mainly in the industrial as well as in the agriculture sectors. In many cases loan default and tax evasion coincide. To make a list may not be as hard as one can imagine, however, to make a sort of a “rogue’s gallery” with cast iron evidence that will stand the scrutiny of the process of law, given the various loopholes present and the largesse available to hire the services of good lawyers, may be more difficult. The deadline has raised inordinate hopes and aspirations of the majority of the people of Pakistan, there are certainly motivated forces at work who will attempt to derail this process on one pretext or the other. On the other hand, having suffered for over five decades at the hands of the so-called elite, the masses are hungry for blood and Nov 17 has become a psychological landmark in the public expectations that is becoming scary with regard to possible consequences on either side.


Services Sector

As an agri-based economy it is easy to understand why easy credit was available early on in Pakistan in this sector in the 50 years or so of our existence as a nation. To ease the pressure on agriculture, large-scale diversion into the manufacturing sector was carried out in the 60s and 70s, embarking on a virtual industrial revolution that spent large amounts of money on textile mills as well as a whole range of small, medium and heavy industries. On the Harvard model as applicable in Japan, exports became the key. China and the four Asian Tigers followed the same model. Maximum credit was directed primarily to support industries churning out traditional exports of cotton and cotton-based derivatives and secondly to building up non-traditional exports. Whatever gains were made in the medium and heavy industries was wiped out by the sweeping nationalisation of the early 70s by the Bhutto regime, during late Zia’s regime both industrialists and agriculturists became entrepreneurs. Loan default became a business in its own right despite the authoritarian nature of the regime, there being a lack of street credit control with the advent of controlled democracy in 1985. The years 1998, 1993 and 1997 are landmarks inasmuch as each successive political regime force-multiplied the loan default by interfering politically in the recurring process specifically and in the nationalised banking industry, both with nationalised commercial banks (NCBs) and development finance institutions (DFIs), generally. With the “Day of Redemption”, Nov 16, only a couple of days or so ago, it is time to take stock of why so much credit was showered on virtually one sector alone, with a negligible amount in comparison to the agriculture sector and almost nothing if any, to the services sector.


Half Empty, Half Full

Pakistanis are incurable optimists who are more likely to look at a half empty glass as half full. A few weeks ago our new Finance Minister articulated the same thought at a seminar in Harvard University. Great hope has been vested by the broad masses of the people of Pakistan in the military regime, a “soft” martial law without its usual teeth never before seen in this country and one daresays, in recent history. The aspirations aroused in the people is scary, the military rulers will have to rise beyond themselves to ensure that the great expectations of the masses are not frustrated. In their talent search they will have to reach out for the services of friend and perceived foe alike. In the selection of a dream team to run the country, there is unanimity of views about their competence and integrity. Twelve or so years of democratic rule had driven us into the wilderness without a compass, the incumbent process will only be successful if it takes us back to a meaningful democracy in which all the people will participate as equal partners and not simply become pawns on a giant chessboard. With the economy in such doldrums that even easy credit has no takers, primary focus should be on the economy. However public perception wants accountability in supersession of everything else, an animal urge reminiscent of the feelings of the audience of the Roman Colliseum. Since accountability indirectly will not only force-feed the economy but will also improve law and order, build up the national morale as well as investor confidence, etc accountability (or the lack of it) will be the touchstone of success (or failure) of Gen Pervez Musharraf and his “Young Turks”.


Hunting the Foxes

In his wide-ranging first ever Press Conference on Monday Nov 1, 1999, the Chief Executive (CE) of Pakistan Gen Pervez Musharraf, spelt out his aims and objectives for the nation and the priorities he has set. Without any doubt the most important issue was Accountability and how he intended to carry out a horizontal exercise at the top before a vertical one starting from top downwards. There are other problems to take care of, viz the economy, law and order, etc but accountability is the core issue. To implement his stated aim he announced the formation of National Accountability Bureau (NAB), an acronym that fits neatly with the objectives, to NAB those who have been looting the country blind.

In the words of the CE paraphrasing Winston Churchill, “never in human history has so much been plundered by so few from so many”. What remains to be seen is the will to make the powerful pay their just dues, the CE’s body language on this issue was visibly positive. About 320 families owe Rs. 200 billion as loan defaulters, only about Rs. 80-100 billion may be actually recoverable. To ensure thorough enquiry in all issues, cases against such individuals, whether it be tax, customs or excise evasion, KESC or PTC bills default etc should be clubbed together for ease of investigation and prosecution under NAB. The clout of illegal money and their move into legitimate business cannot be ignored. For example at least one cigarette manufacturer with foreign collaboration has been not only evading customs and excise duties at will but has been involved in the large scale fake manufacture of other brands. Under one head we have fake manufacture, customs, excise duties evasion, income tax default, bribing of officials to escape cynosure, etc. All this illegal money has funded other legitimate businesses, with a battery of high-powered lawyers and accountants well paid for, can he be touched? All those income and wealth tax, customs and excise department officers, in fact all government officials who were associated with such cases are collaborators and should be taken to task. A comprehensive audit is necessary. Instead of having firms to do the job, individual auditors having a good reputation should be appointed to make out a comprehensive financial picture of such defaulters, tax-evaders, etc. Direct rewards should be offered for tracing out undeclared assets of these defaulters whether at home or abroad. However, what one fears is that given all the sincerity of the CE and his “Nabbers”, entrenched bureaucracy or other motivated interest will frustrate their moves on some pretext or the other.