Blog Archives
A Breathing Space
A year after celebrating our 50th year as an independent country, we desperately need a breathing space. The last three months beginning May 11, the day of the Indian nuclear blasts, has been a period of successive crisis. Locked into a no-win situation we had no option in the face of blatant Indian intransigency but to react, despite the dire warnings of the west laced with incentives, on May 28 we did. Whereas the sanctions imposed against India were at best a mockery of intention, in relative terms the strict enforcement against Pakistan is a travesty of justice. We have lurched from a serious geo-political crisis to an economic meltdown but none so potent a disaster as the erosion of national unity because of the nefarious exploitation of the Kalabagh Dam issue.
Jobs and the Nation
Two mighty Superpowers confronted each other in a four decades old cold war till a scant year or so ago with enough bang in their arsenals to blow the world up many hundreds of times over. Though the former Soviet Union’s weaponry is still intact for the most part in 12 or so different hands, the only effective Head Honcho left is the USA. As the clear winner of the cold war, George Bush would be expected to be riding high in the esteem of his own electorate. In addition to the demise of the Soviet Union, President Bush had orchestrated the world campaign, barely a year or so ago, to oust Iraq from Kuwait. His spectacular successes in foreign policy initiatives have been dwarfed by the spectre of continuing recession, jobs are more important to the US public than the fate of Gorbachev, Yeltsin or Saddam Hussain. The same factor of economics that was primarily responsible for consigning the Soviet Union to oblivion is now threatening to erode his candidacy for a Second Term. If the populace seems unduly ungrateful, it only seems to confirm man’s over-riding and pragmatic concern for one’s own self-interest.
The Textile Imbroglio
Pakistan is one of the largest producers of raw cotton in the world. Over the years, a sophisticated textile industry has been established, downstream many garment industries and other textile finishing factories have come into line giving value-added benefit to the nation to complement the hard work done by our farmers in the production of raw cotton. Pakistan has developed a fine balance between the exporting of raw cotton and finished products, taken cumulatively these are the largest earners of foreign exchange for our country. Because of protectionist measures employed increasingly by the developed world, our major source of hard cash earnings is seriously threatened. The quotas allocated to us do not reflect the base of our raw cotton production and the major percentage of our population whose lives are directly dependent upon cotton’s cumulative performance in the export sector. In contrast, countries that do not produce much cotton, if any, like Taiwan, S. Korea, Hong Kong, Philippines, Thailand, etc have quotas much in excess to what they should have, given the statistical facts and figures. Garment manufacturing factories in the aforementioned countries had proliferated because of cheap labour and we ended up right down the line as compared to them with respect to textile quotas when quotas were first imposed, taking into account their then respective exports.
Walking a Tight-Rope
Universal opinion has variously labelled Orientals as excitable or patient, given their economic circumstances South Asians have much to be excited against, yet year after year they receive the bad news in their respective Annual Budgets with what can only be described as studied calm. One supposes that having braced oneself for the worst, the lowered quantum of bad news is taken conversely (or perversely) as good news. In the respect of economic circumstances, the lot of the average Pakistani is better than that of his/her less fortunate neighbours. For this dubious pleasure, credit cannot be claimed by any mortal, Divine Providence having made Pakistan self-sufficient (or almost so) in the main human-requirement areas of food, shelter and clothing. Every successive Annual Budget has managed to increasingly cramp the lifestyle of the average Pakistani but in all fairness this is much more due to external circumstances than due to domestic inadequacies. Our problem stems from a singular lack of applying imagination to the concept of Revenue gathering coupled with the necessity for wholesale reform of the system. The Federal Budget remains mostly the same, making the poor poorer and encompassing a greater number of the hapless middle class into the “poor” category, it does manage to make a small coterie of rich people much richer. The worst hit are the better-life aspirants of the wretched middle class, already bearing the awesome burden of increasing inflationary pressures on hearth and home. While life goes on and the average Pakistani learns to be stoic, the rulers must not become complacent that the streets will never resort to wide-scale protest, to quote John Dryden, “Beware the Fury of the Patient Man”, unquote.
Mid-term review of the economy
Pakistan’s economy is in a state of rapid transition from a regulated and controlled environment to a completely free and market oriented operation of economic forces. Whenever there are such drastic economic reforms as has been carried out in Pakistan, there is bound to be a period of uncertainty and we are on the “self-doubting curve” where the reformers themselves become under-confident because of the difference between projected goals and actual targets achieved. While there is reason to be careful and apprehensive, there is no need to take to panic stations.
The Present Scenario
The year 1991 saw a great boom in the stock market in Pakistan. This was a natural result of the far-reaching reforms made by the present government in opening the shackles from the economy. Among other measures, as the restrictions governing movement of foreign exchange regulations diminished, there has been a net inflow of foreign exchange into Pakistan, mostly from Pakistanis living abroad. With growing confidence in the seriousness of GoP to go further down the road to economic emancipation, money that had been domestically hoarded has also come back into the market. With bucketfuls of money being pumped into the acquisition of shares, the stock market became extremely bullish. This has been further accentuated by the wide ranging reforms in the financial market, resulting in the opening up of many financial institutions, among them Modarabas, leasing companies, private banks, etc. Every new offering in the stock market obtains a premium for a unit share, now anybody who has some money salted away (and has the time and inclination) and applies for shares in new public ventures, manages to clear a profit of between 150-200% on his/her original capital if the application is successful in the computerized drawing of lots. In a manner, it is legalized gambling.
Highway to Heaven
Mr Ghulam Murtaza Jatoi, Federal Minister for Communications, in answer to a Parliamentary Question during the Question Hour Session of the National Assembly stated that the Islamabad-Lahore portion of the Trans-Pakistan Motorway will cost Rs 23.686 billion for its 339 kilometre length, having a six lane highway with four pavements. The cost per kilometre thus works out to approximately Rs 70 million. An enterprising engineer has worked out that this would come to about Rs 280 per square foot, the cost of construction commensurate to a house being built with moderately luxurious finish and furnishings. At this rate it would certainly be many times costlier than the construction of a similar highway in USA, Japan or any one of the EEC countries, about as much as for a modern aircraft runway capable of taking the heaviest aircraft payloads e.g a fully loaded C-5A Galaxy.
The Swing of the Pendulum
The Commonwealth of Independent States (CIS) that arose out of the ashes of the former Soviet Union is itself in dire straits. While Norman Thomas held that “the alternative to the totalitarian state is the cooperative commonwealth”, the association in question is better known for its various disagreements and generally uncooperative stance towards each other, born mainly out of chaos and confusion but also the inherent suspicion between the various Republics about who is to get the best piece out of the carcass of a once powerful nation. While most of the argument should be about economic assets, contention is more pronounced about dividing the military power structure, particularly between Russia and the Ukraine.
Investment Promotion Conference
With support from an affiliate of the World Bank, Multi-lateral Investment Guarantee Agency (MIGA), the Federal Government organised a well-attended Investment Promotion Conference in Islamabad during the past week. It was incumbent upon the present regime to have an “open house” to display the willingness (and the readiness) of the present political government to change the lip-service of “encouraging” investment of yesteryears into reality. Before attempting to induce inviting foreign entrepreneurs to invest their money and time in Pakistan, the present Government had very correctly loosened the stranglehold that bureaucracy has over the body economic in Pakistan. During the past year far-reaching structural changes have been put into place and to that end a conducive economic environment is gradually taking shape. One must commend MIGA for investing time and effort in helping the Ministerial agencies concerned with making the Conference a relative success.
A Matter of Social Conscience
Profit generation is the essence of any commercial enterprise, the actual percentage varies greatly from business to business. The minimum return expected is 15%, around 25% profit is considered to be a very healthy return. A return on investment of more than 40% per annum is exorbitant, in Islam there are specific injunctions against usury and profiteering. However, that is the way of the modern world of commerce and enterprise, the making of exorbitant profit is now the done thing to survive as successful business entities.