WHAT IS THE PULSE OF THE BUSINESS COMMUNITY ON LFO? WHAT IS THEIR GUT FEELING WHERE PAKISTAN IS HEADED FOR?
The LFO issue should have been among the main items in the agenda of the businessmen and the trade associations. However, except for a statement here and there, there has been no concrete airing of the business community's views on this contentious subject.
Last month, SITE Association of Industry did issue a press release in which it urged the two parties to resolve it on an immediate basis. It had stated that Pakistan was among the top three countries in economic development and the LFO deadlock was becoming a serious deterrent. The continuing limbo would seriously affect business commitments, industrial investments, and confidence in the economy. Alas, the committee was not able to break the deadlock and there is utter confusion in the country.
Recent events seem ominous to the business community. The arrest of Opposition members of the Punjab Assembly and their subsequent ouster from Assembly sessions on Speaker's orders, the demolition of Bait-ul-Hamza that is the citadel of MQM (Haqiqi), the filing of a case pleading for the disqualification of 65 members since their religious degrees were not in conformity with the requirements under election rules, the passage of the Shariat Bill in the NWFP Assembly, the strong-arm tactics of certain elements supported by MMA who ripped off or defaced billboards depicting women, the activities of the "mind squad" who want to purge the nation of certain English words and works, and the vociferous demands emanating from all Opposition meetings and speeches that the President must stay as the President or as the Chief of Army Staff have all created doubts and uncertainty.
The immediate concern is the upcoming Federal Budget that is to be presented on June 07, 2003 by the Finance Minister, Senator Shaukat Aziz, in the National Assembly. Nevertheless, the news now reaching the business community is that it may be delayed by 10-12 days or it may be announced on the electronic media. There is a feeling rampant among the businessmen that the Opposition might be blocked from entering Parliament on that fateful day and this could be a repeat of the recent events in Lahore. Another view is that the court may rule that the 65 legislators stand disqualified. Conversely, the court may rule them qualified and the government may petition for a status quo against the court order. This would, automatically keep the 65 out and the budget session could proceed with a minimum number of Opposition members in attendance. The budget could be approved by 2/3 majority since the Opposition ranks would be depleted.
A large number of businessmen are apprehensive that the Assemblies may be either suspended or dissolved and the pre-election scenario might be re-enacted again, this time more forcefully. The conventional wisdom is that this would be beneficial to MMA because it has pulpit power since all mosques and imambargahs would be activated as focal points of rabble-rousing. This would be further compounded by the vitriolic statements by MMA that the government wrongly supported the coalition forces in Iraq because no WMD were found by the conquerors. The MMA leadership would project their contention that they were right and the government was weak-kneed and playing second fiddle to the Americans.
They further fear that this could lead to a breakdown in law and order, curfews, mass arrests, and closure of businesses and industries. They also feel that PML (Q) is not sincere and Jamali lacks the power to lead. They also feel that the government is playing into the hands of Sharif and Bhutto, and that Shahbaz Sharif and Asif Ali Zardari would soon be projected as national heroes if the consequences for the Presidency got rough.
At the same time, some aver that "third forces" have become active once again and they are ensuring that things go out of the hands of the Government as well as the Opposition. They give a lot of credence to the recent events enumerated above. All these activities happening in tandem fuel further suspicion that something hot is cooking.
There is also some talk that a meeting of National Security Council might be held very soon and the decisions of NSC might be formidable. There is this view floating around that right now there is a "lull before the storm" and things would move fast if "off-the-record" parleys between the government, the opposition, and sensitive forces, do not come up with a workable solution. Some are of the opinion that Maulana Fazlur Rehman is the most vulnerable and may succumb to "hard talk" and that this may result in a split in MMA.
The general view is that the President would not succumb to the demands that he shed his uniform nor would he accept the notion that the NSC should not function in the manner enshrined in the LFO. The business community is also perturbed that the LFO gives more powers and force to NAB and that this could be detrimental to the interests of the business community in more ways than one.
The FPCCI President has been advised by an industrialist to issue a policy statement on behalf of the business community and to hold a Press Conference as early as possible on the need to resolve the present imbroglio.
The rising feeling among the business community is that the present political set-up is fragile, weak, and confusing. The same tired old horses are either in the assemblies or they are holding the reins of the younger brood. Nothing much has changed except that the faces of many are fresh and there are more women and more clergy. They are of the opinion that the pre-election scenario was more favorable for Pakistan and that the world powers must be told that it would take more than a few years to bring any kind of a democratic order in the country. The rise in the popularity graph of MMA, inspite of its recent activities, has to be emphasized to the Western governments who clamor for a full dose of democracy here. At the same time, the country's economy is moving in a progressive mode and thus it needs a smoother highway and not roadblocks. Otherwise, poverty would increase, and frustration of the people would be very difficult to control.
The consensus is that confusion would continue to prevail for some time, no matter what!
=======================
May 31, 2003
Saturday, May 7, 2011
PAKISTAN’S PRIVATIZATION PROGRAM
(Presented at the Advanced Executive Management Program on Privatization
at Washington D.C., USA, June 29-July 12, 1991)
PREAMBLE:
In over a hundred countries around the world, the policy makers, capitalists, pseudo-capitalists, and non-capitalists are all talking about PRIVATIZATION. This has become the buzzword of the 1990’s. Moving in a hurried fashion, the governments are reversing the trend under which the state encroached brutally on industries and grabbed them up voraciously. Today, privatization is the top item on their economic agenda. It has become not only a “fashionable” policy but also imperative in the messed up economics of countless countries.
START OF PROGRAM:
Privatization has also come to Pakistan. Prime Minister, Muhammad Nawaz Sharif, a scion of an industrialized family, whose government came into power in November 1990, has religiously adopted the policy of privatization. The bold venture undertaken by the Prime Minister is commendable if the background is examined pragmatically. The nationalization policy of the government of Zulfiquar Ali Bhutto alongwith the already monopolistic stranglehold of the public sector corporations culminated into a scenario of a systematic abuse of the once well managed corporations. This resulted in colossal monetary losses, infiltration of a heavy labor force in these companies, non-chalant emphasis on cost reduction, efficiency increase, and quality improvement, and above all, highly neglected managerial, administrative, and financial controls, which totally negated the very essence of public control over private enterprise. In Pakistan, these corporations followed the dictates of whichever government was in power and in dong so, they operationally turned into the proverbial white elephants.
The public sector corporations in Pakistan hold assets of more than |Rs 700 billion (US$ 29 billion) that is equal to Pakistan’s GDP. These public sector corporations have a share of 40% of the total fixed investment in the country and contribute 6.7% of the economy’s value addition. However, the post-tax return on equity has been around the 8% figure, much lower than the 20% in the private sector. A large percentage of Pakistan’s budget deficit, which is currently 7.4% of the GDP, is financed thru the issuance of government debt to the non-bank public at an interest rate of upto 15%. If the government is borrowing at 15% and the public sector corporations are only getting an 8% return on equity, no wonder Pakistan’s budgetary situation is in hot soup. Hence the logical solution: Privatization.
Furthermore, Pakistan is heavily burdened with external debt and its servicing. The total estimated commitments of foreign loans plus actual received by Pakistan aggregate US$ 43.3 billion. Of this, US$ 32.1 billion has been disbursed. Pakistan has, today, a liability of over US$ 16 billion. This envisages an annual repayment of over US$ 1.4 billion. On the domestic front, public debt is around Rs. 900 billion (US$ 37 billion). The domestic debt servicing will consume 53% of the estimated revenue receipts of Rs. 153 billion (US$ 6.25 billion) for 1991-92. The burden would decrease if government removes a large chunk of public sector corporations thru: Privatization.
The significant factors that generally contributed towards the lack of the needed performances by public sector companies can best be summarized as follows:
• The prevailing political instability which resulted in inconsistency and a myopic attitude towards formulation of long term strategies and directions.
• A vigorous dependence on adhocism.
• An insolent corporation syndrome.
• A conspiratorial vacuum in the process of accountability.
• An obsession towards the privilege of power, both by bureaucrats and politicians.
• A perpetual adherence to shifting the blame coupled with lack of concern by management.
• An on-going battle between professional management and bureaucratic controllers resulting in frustration and lack of operational efficiency.
• A lackadaisical approach towards initiatives and innovation.
• An impassive disregard towards improving the abysmally low productivity.
An ardent belief on personal right and benefits rather than emphasis on duties and obligations.
All these factors called for creating the economic environment for deliverance from this malaise that is possible thru: Privatization.
WHAT HAS BEEN DONE SO FAR:
The Prime Minister, while making the historic announcement of Privatization told the nation that “We can no longer afford to live like ostriches. The job of the government is to formulate policies. T is not its job to run industry, commerce, and hotels”. The privatization program envisaged the handing over of 115 government-owned enterprises. In the last week of November 1990, the government appointed Senator Lt. Gen. Saeed Qadir to head the Privatization Commission. He came across a study done by foreign consultants that had recommended disinvestment of seven companies. By December 03, 1990, General Qadir had his proposals on the Prime Minister’s desk and by early 1991, Muslim Commercial Bank Ltd., on of the five nationalized commercial banks was handed over to a consortium of industrialists.
The government has a list of companies that are to be handed over to the private sector. It includes 14 in Chemicals and Ceramics, 1 in Steel, 7 in Fertilizers, 12 in the Automobile sector, 11 in Engineering, 16 Roti Plants (bread-making), 14 in Cement, 3 in Energy, 24 in Edible Oil, and 8 in Miscellaneous. There are, of course, the Banks, Development Finance Institutions, the Communications sector, and Newspapers, etc. that are also on the “Shedding List”.
As mentioned above, the government has already handed over Muslim Commercial Bank to the private sector. It has also given up a Roti plant, Balochistan Wheels, Al-Ghazi Tractors, United Industries Limited, etc. Bids have been invited for Allied Bank Ltd as well as other industries. The policy makers recently held a briefing session for over 70 representatives of companies interested in buying the Pakistan Telecommunication Corporation. The PTC is a 40 year old behemoth having 1.18 million telephones, 4300 long distance public call offices, 5000 telex connections, 2 International Gateway Exchanges with 1900 circuits, and substantial holding in two manufacturing facilities. At present, there is a backlog of 750,000 telephone applications, plus there is an imperative need to upgrade the present archaic facilities.
The privatization of MCB got off to a bumpy start. The initial time period given was too short and full of ambiguities. Nevertheless, industrialists responded with enthusiasm. The SITE ASSOCIATION OF INDUSTRY, the largest industrial association in Pakistan representing over 1800 industries, considering the previously announced but unimplemented privatization policy of former Prime Minister Benazir Bhutto and the carefree attitude of the caretaker Prime Minister Ghulam Mustafa Jatoi, came out with a proposal that the bank should be handed over to a consortium rather than one family, the price should not be less than Rs 55 instead of the reserve price of Rs 26 and, above all, the bank MUST be privatized at any cost. This stance paid off and the actual result proved right the Association's contention.
The SITE Association was also apprehensive that the bureaucracy would magnify the anti-privatization posture of the labor unions and certain opposition parties, and thwart Premier Sharif's program. The Association publicly warned that "hidden hands are out to destroy the privatization program." The Association also called for a rapid announcement of more companies to be privatized. Its fears were proven correct when efforts were made to sabotage the MCB deal. However, the planned transfer went on smoothly.
In the case of Allied Bank, its employees have proposed an ESOP (Employees Stock Ownership Plan) for ABL. This idea was mooted by one of its Directors and has caught on. Preliminary reports show that 7500 ABL employees have endorsed this idea and have set up the Allied Management Group to put into operation their bid for ABL. They have also pledged to freeze their wages for two years. They have also shown their desire to buy out all 100% shares of ABL. In this case too, the SITE Association welcomed the move by saying in its press release that if the bank is handed over to the employees, "the nation will witness how successfully the bank can be managed by employee-owners who will not only raise productivity and efficiency, but will also keep the bank free from bureaucratic and political influence." This approach will also initiate a broad-based ownership and take into account any fear of retrenchment of "surplus labor", the major hindrance in rapid privatization.
Naturally, there will be opponents of privatization. Take for example the pronouncements of the Leader of the Opposition, Benazir Bhutto. While in office as Prime Minister, she talked a lot about privatization and, in fact, Muslim Commercial Bank Ltd was first put on sale during her tenure. Unfortunately, she is doing a full reversal lately. She has bitterly criticized the privatization program of the Sharif government claiming that it was designed to benefit the rich industrialists only with little thought given to the consequent usurpation of the rights of labor. This one-dimensional view is not only ill advised and highly irregular, but the effects of this tirade could hurt the privatization process by giving workers unnecessary fuel for adopting a provocative posture.
NEXT STEPS PRESENTLY PLANNED:
The government has also modified its stand and has advocated atleast 10% ownership by the workers/employees. However, the workers of public sector corporations have rejected this offer. The prevailing concept that once the industries are privatized there will be a huge unemployed workforce sounds too hollow to be taken at face value. The recent example of MCB also belies this point. The management has not laid off any worker. According to Mr. Hussein Lawai, President of MCB, the first thing he did on taking over was to instill confidence in the employees. Being a professional banker and a model of success, he stressed productivity and controlled any abuse of privileges. Promotions are being made on merit and not on recommendations or sycophancy. The present union leadership of the public sector corporations avowedly practices the notion that one should have the cake and eat it too. The unions, in collusion with the incompetent management, have been largely responsible for the pathetic environment in the public sector. The government is aware of this and has therefore left the question of final decision on "surplus labor" on the prospective buyers of these corporations.
On the other hand, the government has not clearly defined the privatization process. The Privatization Commission is a recommendatory body. It invites bids, evaluates them, suggests the sale price, the methodology for disposal, and works closely with the Prime Minister. There is no well-defined legal framework. No “Privatization Law” has been enacted to detail the procedures. There has been no public announcement on criteria for pre-qualification, no publicity on the evaluation of corporations by recognized auditors. No scientific process has been conceived. This is a significant bottleneck. Thee has been no report about the ate of “sick” industries and whether the government will turn off the financial tap and let them whither away or whether the government will dispose them off at “bargain” prices.
There has also been no clear-cut directive by the government with regard to the right of previous owners. A number of industries who lost their enterprises to nationalization have formed an Affectees Group Their main demand is the restoration of their management control over these enterprises. Their contention is that “selling units to the highest bidder to balance the budget or meet the short-term financial needs of the government will mean buying short-term gain with the long-term national interests. It will mean pitting the original owners against moneyed groups who may be interested in the same.” This group has not been able to convince the Prime Minister to treat their taken-over industries as a special category in the privatization process and give them first refusal rights. The issue gained momentum when the original owners of Muslim Commercial Bank were sidelined and a group of eight upstart industrialists was preferred, thus creating much bitterness.
OBJECTIVES PURSUED:
The government has initiated a process where, as a first step, corporations like Water and Power Development Authority (WAPDA), Oil and Gas Development Corporation (OGDC), Pakistan Telecommunication Corporation (PTCL), Civil Aviation Authority (CAA), etc, are being encouraged to resort to more and more self-financing. Secondly, a very important step has been taken to open up the financial sector for the private enterprises. Thirdly, 22 new shipping companies have been given licenses to operate in the private sector. Fourthly, the Aga Khan sponsored company has been allowed to directly compete with the national flag carrier, PIA.
The objective of the government is to spur economic growth thru privatization. The burden of huge losses on the national exchequer has to end. The government is striving to mobilize resources for implementing its varied programs to bring about a significant improvement in the quality of life of its citizens. Privatization will usher in a wide spread network of social work programs like the "Tameer-e-Watan" ("Building the Nation") program which is a major component of the present government's election manifesto. The financial pressure due to the budgetary constraints can be reduced thru infusion of additional resources from the sale of these corporations. There are also the conditionalities of IMF to deregulate, disinvest, and denationalize the economy on broad-based private entrepreneurship.
OVERALL RESULTS:
The privatization policy of Prime Minister Nawaz Sharif has been widely acclaimed by the industrial community and economic experts. The transfer of MCB and a couple of other corporations displayed the seriousness of the program. The opening up of the communications and financial sector to private enterprise has renewed confidence in the industrial and business community. The bullish trend in the Karachi Stock Exchange is a significant sign of this confidence.
There is every possibility that the government advertisement companies calling for bids for most of the public sector corporations will elicit a positive response from prospective buyers. It is highly probable that in the next few months there will be more transfers to the private sector.
The problems presently encountered were initial hostile reaction by the worker force. This was evident in the MCB case. The leaders of the unions of various banks have always maintained a high profile and have been vociferous in their objections to privatization. However, pragmatic thinking on the part of government, the members of the unions, and private sector resulted in a conducive working atmosphere at MCB. This could be the harbinger for future labor-related imbroglios. The government also had to settle certain legal wrangles that would have put a monkey-wrench in the privatization process.
It is now to be seen how much liberal the government is with "glasnost" in coming out with detailed information on units to be privatized. There has to be a free flow of data thru the press, radio, and TV so that the citizens of Pakistan can comprehend the disaster wrought upon the economy of Pakistan by those who have criminally abused the assets of the nation. This may create a backlash by workers and bureaucrats. However, a "White Paper" on this must be released and made public. It is hoped that it may then create an awareness in the citizens that, after all said and done, privatization is one efficient panacea for the economic ills faced by Pakistan today.
===============================================
at Washington D.C., USA, June 29-July 12, 1991)
PREAMBLE:
In over a hundred countries around the world, the policy makers, capitalists, pseudo-capitalists, and non-capitalists are all talking about PRIVATIZATION. This has become the buzzword of the 1990’s. Moving in a hurried fashion, the governments are reversing the trend under which the state encroached brutally on industries and grabbed them up voraciously. Today, privatization is the top item on their economic agenda. It has become not only a “fashionable” policy but also imperative in the messed up economics of countless countries.
START OF PROGRAM:
Privatization has also come to Pakistan. Prime Minister, Muhammad Nawaz Sharif, a scion of an industrialized family, whose government came into power in November 1990, has religiously adopted the policy of privatization. The bold venture undertaken by the Prime Minister is commendable if the background is examined pragmatically. The nationalization policy of the government of Zulfiquar Ali Bhutto alongwith the already monopolistic stranglehold of the public sector corporations culminated into a scenario of a systematic abuse of the once well managed corporations. This resulted in colossal monetary losses, infiltration of a heavy labor force in these companies, non-chalant emphasis on cost reduction, efficiency increase, and quality improvement, and above all, highly neglected managerial, administrative, and financial controls, which totally negated the very essence of public control over private enterprise. In Pakistan, these corporations followed the dictates of whichever government was in power and in dong so, they operationally turned into the proverbial white elephants.
The public sector corporations in Pakistan hold assets of more than |Rs 700 billion (US$ 29 billion) that is equal to Pakistan’s GDP. These public sector corporations have a share of 40% of the total fixed investment in the country and contribute 6.7% of the economy’s value addition. However, the post-tax return on equity has been around the 8% figure, much lower than the 20% in the private sector. A large percentage of Pakistan’s budget deficit, which is currently 7.4% of the GDP, is financed thru the issuance of government debt to the non-bank public at an interest rate of upto 15%. If the government is borrowing at 15% and the public sector corporations are only getting an 8% return on equity, no wonder Pakistan’s budgetary situation is in hot soup. Hence the logical solution: Privatization.
Furthermore, Pakistan is heavily burdened with external debt and its servicing. The total estimated commitments of foreign loans plus actual received by Pakistan aggregate US$ 43.3 billion. Of this, US$ 32.1 billion has been disbursed. Pakistan has, today, a liability of over US$ 16 billion. This envisages an annual repayment of over US$ 1.4 billion. On the domestic front, public debt is around Rs. 900 billion (US$ 37 billion). The domestic debt servicing will consume 53% of the estimated revenue receipts of Rs. 153 billion (US$ 6.25 billion) for 1991-92. The burden would decrease if government removes a large chunk of public sector corporations thru: Privatization.
The significant factors that generally contributed towards the lack of the needed performances by public sector companies can best be summarized as follows:
• The prevailing political instability which resulted in inconsistency and a myopic attitude towards formulation of long term strategies and directions.
• A vigorous dependence on adhocism.
• An insolent corporation syndrome.
• A conspiratorial vacuum in the process of accountability.
• An obsession towards the privilege of power, both by bureaucrats and politicians.
• A perpetual adherence to shifting the blame coupled with lack of concern by management.
• An on-going battle between professional management and bureaucratic controllers resulting in frustration and lack of operational efficiency.
• A lackadaisical approach towards initiatives and innovation.
• An impassive disregard towards improving the abysmally low productivity.
An ardent belief on personal right and benefits rather than emphasis on duties and obligations.
All these factors called for creating the economic environment for deliverance from this malaise that is possible thru: Privatization.
WHAT HAS BEEN DONE SO FAR:
The Prime Minister, while making the historic announcement of Privatization told the nation that “We can no longer afford to live like ostriches. The job of the government is to formulate policies. T is not its job to run industry, commerce, and hotels”. The privatization program envisaged the handing over of 115 government-owned enterprises. In the last week of November 1990, the government appointed Senator Lt. Gen. Saeed Qadir to head the Privatization Commission. He came across a study done by foreign consultants that had recommended disinvestment of seven companies. By December 03, 1990, General Qadir had his proposals on the Prime Minister’s desk and by early 1991, Muslim Commercial Bank Ltd., on of the five nationalized commercial banks was handed over to a consortium of industrialists.
The government has a list of companies that are to be handed over to the private sector. It includes 14 in Chemicals and Ceramics, 1 in Steel, 7 in Fertilizers, 12 in the Automobile sector, 11 in Engineering, 16 Roti Plants (bread-making), 14 in Cement, 3 in Energy, 24 in Edible Oil, and 8 in Miscellaneous. There are, of course, the Banks, Development Finance Institutions, the Communications sector, and Newspapers, etc. that are also on the “Shedding List”.
As mentioned above, the government has already handed over Muslim Commercial Bank to the private sector. It has also given up a Roti plant, Balochistan Wheels, Al-Ghazi Tractors, United Industries Limited, etc. Bids have been invited for Allied Bank Ltd as well as other industries. The policy makers recently held a briefing session for over 70 representatives of companies interested in buying the Pakistan Telecommunication Corporation. The PTC is a 40 year old behemoth having 1.18 million telephones, 4300 long distance public call offices, 5000 telex connections, 2 International Gateway Exchanges with 1900 circuits, and substantial holding in two manufacturing facilities. At present, there is a backlog of 750,000 telephone applications, plus there is an imperative need to upgrade the present archaic facilities.
The privatization of MCB got off to a bumpy start. The initial time period given was too short and full of ambiguities. Nevertheless, industrialists responded with enthusiasm. The SITE ASSOCIATION OF INDUSTRY, the largest industrial association in Pakistan representing over 1800 industries, considering the previously announced but unimplemented privatization policy of former Prime Minister Benazir Bhutto and the carefree attitude of the caretaker Prime Minister Ghulam Mustafa Jatoi, came out with a proposal that the bank should be handed over to a consortium rather than one family, the price should not be less than Rs 55 instead of the reserve price of Rs 26 and, above all, the bank MUST be privatized at any cost. This stance paid off and the actual result proved right the Association's contention.
The SITE Association was also apprehensive that the bureaucracy would magnify the anti-privatization posture of the labor unions and certain opposition parties, and thwart Premier Sharif's program. The Association publicly warned that "hidden hands are out to destroy the privatization program." The Association also called for a rapid announcement of more companies to be privatized. Its fears were proven correct when efforts were made to sabotage the MCB deal. However, the planned transfer went on smoothly.
In the case of Allied Bank, its employees have proposed an ESOP (Employees Stock Ownership Plan) for ABL. This idea was mooted by one of its Directors and has caught on. Preliminary reports show that 7500 ABL employees have endorsed this idea and have set up the Allied Management Group to put into operation their bid for ABL. They have also pledged to freeze their wages for two years. They have also shown their desire to buy out all 100% shares of ABL. In this case too, the SITE Association welcomed the move by saying in its press release that if the bank is handed over to the employees, "the nation will witness how successfully the bank can be managed by employee-owners who will not only raise productivity and efficiency, but will also keep the bank free from bureaucratic and political influence." This approach will also initiate a broad-based ownership and take into account any fear of retrenchment of "surplus labor", the major hindrance in rapid privatization.
Naturally, there will be opponents of privatization. Take for example the pronouncements of the Leader of the Opposition, Benazir Bhutto. While in office as Prime Minister, she talked a lot about privatization and, in fact, Muslim Commercial Bank Ltd was first put on sale during her tenure. Unfortunately, she is doing a full reversal lately. She has bitterly criticized the privatization program of the Sharif government claiming that it was designed to benefit the rich industrialists only with little thought given to the consequent usurpation of the rights of labor. This one-dimensional view is not only ill advised and highly irregular, but the effects of this tirade could hurt the privatization process by giving workers unnecessary fuel for adopting a provocative posture.
NEXT STEPS PRESENTLY PLANNED:
The government has also modified its stand and has advocated atleast 10% ownership by the workers/employees. However, the workers of public sector corporations have rejected this offer. The prevailing concept that once the industries are privatized there will be a huge unemployed workforce sounds too hollow to be taken at face value. The recent example of MCB also belies this point. The management has not laid off any worker. According to Mr. Hussein Lawai, President of MCB, the first thing he did on taking over was to instill confidence in the employees. Being a professional banker and a model of success, he stressed productivity and controlled any abuse of privileges. Promotions are being made on merit and not on recommendations or sycophancy. The present union leadership of the public sector corporations avowedly practices the notion that one should have the cake and eat it too. The unions, in collusion with the incompetent management, have been largely responsible for the pathetic environment in the public sector. The government is aware of this and has therefore left the question of final decision on "surplus labor" on the prospective buyers of these corporations.
On the other hand, the government has not clearly defined the privatization process. The Privatization Commission is a recommendatory body. It invites bids, evaluates them, suggests the sale price, the methodology for disposal, and works closely with the Prime Minister. There is no well-defined legal framework. No “Privatization Law” has been enacted to detail the procedures. There has been no public announcement on criteria for pre-qualification, no publicity on the evaluation of corporations by recognized auditors. No scientific process has been conceived. This is a significant bottleneck. Thee has been no report about the ate of “sick” industries and whether the government will turn off the financial tap and let them whither away or whether the government will dispose them off at “bargain” prices.
There has also been no clear-cut directive by the government with regard to the right of previous owners. A number of industries who lost their enterprises to nationalization have formed an Affectees Group Their main demand is the restoration of their management control over these enterprises. Their contention is that “selling units to the highest bidder to balance the budget or meet the short-term financial needs of the government will mean buying short-term gain with the long-term national interests. It will mean pitting the original owners against moneyed groups who may be interested in the same.” This group has not been able to convince the Prime Minister to treat their taken-over industries as a special category in the privatization process and give them first refusal rights. The issue gained momentum when the original owners of Muslim Commercial Bank were sidelined and a group of eight upstart industrialists was preferred, thus creating much bitterness.
OBJECTIVES PURSUED:
The government has initiated a process where, as a first step, corporations like Water and Power Development Authority (WAPDA), Oil and Gas Development Corporation (OGDC), Pakistan Telecommunication Corporation (PTCL), Civil Aviation Authority (CAA), etc, are being encouraged to resort to more and more self-financing. Secondly, a very important step has been taken to open up the financial sector for the private enterprises. Thirdly, 22 new shipping companies have been given licenses to operate in the private sector. Fourthly, the Aga Khan sponsored company has been allowed to directly compete with the national flag carrier, PIA.
The objective of the government is to spur economic growth thru privatization. The burden of huge losses on the national exchequer has to end. The government is striving to mobilize resources for implementing its varied programs to bring about a significant improvement in the quality of life of its citizens. Privatization will usher in a wide spread network of social work programs like the "Tameer-e-Watan" ("Building the Nation") program which is a major component of the present government's election manifesto. The financial pressure due to the budgetary constraints can be reduced thru infusion of additional resources from the sale of these corporations. There are also the conditionalities of IMF to deregulate, disinvest, and denationalize the economy on broad-based private entrepreneurship.
OVERALL RESULTS:
The privatization policy of Prime Minister Nawaz Sharif has been widely acclaimed by the industrial community and economic experts. The transfer of MCB and a couple of other corporations displayed the seriousness of the program. The opening up of the communications and financial sector to private enterprise has renewed confidence in the industrial and business community. The bullish trend in the Karachi Stock Exchange is a significant sign of this confidence.
There is every possibility that the government advertisement companies calling for bids for most of the public sector corporations will elicit a positive response from prospective buyers. It is highly probable that in the next few months there will be more transfers to the private sector.
The problems presently encountered were initial hostile reaction by the worker force. This was evident in the MCB case. The leaders of the unions of various banks have always maintained a high profile and have been vociferous in their objections to privatization. However, pragmatic thinking on the part of government, the members of the unions, and private sector resulted in a conducive working atmosphere at MCB. This could be the harbinger for future labor-related imbroglios. The government also had to settle certain legal wrangles that would have put a monkey-wrench in the privatization process.
It is now to be seen how much liberal the government is with "glasnost" in coming out with detailed information on units to be privatized. There has to be a free flow of data thru the press, radio, and TV so that the citizens of Pakistan can comprehend the disaster wrought upon the economy of Pakistan by those who have criminally abused the assets of the nation. This may create a backlash by workers and bureaucrats. However, a "White Paper" on this must be released and made public. It is hoped that it may then create an awareness in the citizens that, after all said and done, privatization is one efficient panacea for the economic ills faced by Pakistan today.
===============================================
PAKISTAN MUST GRANT MFN STATUS TO INDIA
THE BUS TRIP:
On February 20, 1999, the Prime Minister of Pakistan, Muhammad Nawaz Sharif, alongwith thousands of excited countrymen, waited anxiously at the Wagah Border for the arrival of a bus from across the border. As the vehicle emerged into view, an enthusiastic roar welcomed it. The bus stopped and as the door opened, a smiling distinguished personality stepped down. The Prime Minister of India, Shri Atal Bihari Vajpayee, was on Pakistany soil after 21 years. The two leaders warmly embraced and gleefully shook hands. Cameras clicked and buzzed; roses showered in abundance; anthems played with gusto by the band; 21 guns salute and a guard of honor, normally a ritual, but this time with sincere purpose; a sense of elation all around.
Shri Vajpayee in his speech stated: “I bring the goodwill and hopes of my fellow Indians, who seek abiding peace and harmony with Pakistan. I am conscious that, this is a defining moment in South Asian history, and I hope we will be able to rise to the challenge.” Mr Sharif in his remarks emphasized that “I have a vision for South Asia. I believe that countries, small and large, can live in harmony and work together for their mutual prosperity.”
In a joint statement issued at the end of the historic visit in which the Lahore Declaration and a Memorandum of Understanding were signed, the two leaders agreed, inter alia, that “the two sides shall undertake consultations on WTO related issues with a view to coordinating their respective positions.” The paramount issue related to WTO is of course, the Most Favored Nation Clause which has been a matter of intense debate ever since the Marrakesh Agreement came into force from January 01, 1995. Both Pakistan and India are prime signatories to WTO and they are bound to respect the agreement.
TRADE BRINGS FRIENDSHIP:
After the signing of the agreement, there was an increase in the movement of businessmen and industrialists across the border. The anticipated liberalization of the trade regime, especially after the “Bus Diplomacy”, had brought about this upsurge. The two Prime Ministers in Lahore had approved the establishment of the Indo-Pakistan Chamber of Commerce and Industry. The representatives of FPCCI and FICCI inked the agreement in an impressive ceremony in New Delhi. The business leaders hoped that once economic ties are established and become effective, then it would certainly put pressure on the political hierarchy to resolve the other contentious issues. The business leaders hoped that the Chamber would open a gateway for more bilateral trade. The business leaders hoped that if both countries play a greater, substantial role in free trade, they must adopt a more pragmatic approach to achieve long-term benefits and gains for their populace.
In March 1999, the 65-member delegation of Federation of Indian Export Organizations visited Pakistan and made an overwhelming impression among the Pakistany business and industrial community. The delegation members created the much-desired goodwill and made useful long-term business contacts. Their sojourn to Karachi, Lahore, and Islamabad spurred organizations, such as SITE ASSOCIATION OF INDUSTRY, to endeavor to carve out a niche in the Indo-Pak trade regime for their members. However, the Kargil adventure and the resultant fall-out did put a damper on the momentum of liberalization of trade.
After a hiatus of two years, the subcontinent is witnessing some flurry of activity. The much-hyped tour of the Indian delegation recently has sparked new hopes of liberalization of trade. A few months back, a high-level textile delegation arrived with offers of trade and friendship. The news on the political front seem encouraging, especially Vajpayee’s well-drafted letter inviting the Chief Executive to fly over to New Delhi for a tête-à-tête. The much-desired prayer is that maybe, just maybe, pragmatic sense would prevail, and the walls of hatred, distrust, and venomous propaganda would crumble like the Berlin Wall.
IS PROFITABLE TRADE POSSIBLE:
There is a plethora of possibilities for trade between the two countries. One very important area is software development. The Indian success story in computerland is a source of inspiration for other developing nations. Pakistan has excellent human resources that need proper guidance, encouragement, and opportunities to imprint their mark on the global information technology highway. The Pakistany software houses are looking for joint ventures and agreements with their counterparts in Bangalore. There is already cooperation and business going on between the software wizards on both sides of the Line of Control, although this is being done without the State Bank of Pakistan or even Riaz Naqvi of CBR being any wiser.
The textile manufacturers in Pakistan are interested in buying raw material, dyes and chemicals, machinery, and finished goods. They are keen to introduce their fabrics, textile made-ups, and expertise for the vast Indian market. There are many businessmen looking for mutually beneficial opportunities in plastics, packaging, automobile parts, electrical equipment, and other products.
The liberalization of trade will also reduce the undocumented trade that is of dangerous proportions and that has not benefited the Treasury thru duties and taxes. The exclusion of many items on the official list has compelled buyers to import Indian goods thru third country channels. It is time that smuggling be curbed and use of third countries as conduits be discouraged by promoting a negative list of importable goods rather than a discriminatory and cumbersome positive list.
The recent negative response given by the Pakistany policy makers to the question of granting Most Favored Nation status to India was hasty and gave an inauspicious twist to improving trade relations. The hackneyed and myopic attitude of economic planners is again evident from this pronunciation. The continued fear of a backlash from militant organizations and the vested interests, such as smugglers, corrupt border officials, and unscrupulous financiers, has again prevailed and the business community would have to depend on external sources to bring about Indian goods into the country. The decision by India to grant MFN status to Pakistan was hailed as a pragmatic approach. Pakistan has yet to cross the hurdles that have forced the government hierarchy to refrain from reciprocating to India in this matter. The MFN concept has been misunderstood by those who have strong reservations about it and who have been vociferous in their opposition to any notion of granting MFN status to India.
THE SACROSANCT CLAUSE:
What is MFN? The Most Favored Nation Clause stipulates that “with respect to custom duties and charges of any kind imposed on, or in connection with, importation or exportation, or imposed on the international transfer of payments for import or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with the importation and exportation, any advantage, favor, privilege or immunity granted by any contracting party to any product originating in, or destined for, any other country shall be accorded immediately and conditionally to the like product originating in, or destined for, the territories for all contracting parties.”
MFN BROUHAHA:
The four-year old controversy over MFN status to India has generated intense debate in many sectors. The arguments are in an emotional mode and those not in favor of MFN status have been significantly influenced by religious, parochial, and ethnic forces. There have been powerful objections based on the notion that granting this status is tantamount to cuddling with the enemy. The successive governments have resorted to all kinds of approaches to determine the ramifications of this clause but they have not successfully educated those who may have misguided conceptions of the clause. In fact, the nomenclature, “Most Favored Nation”, has very disturbing connotations for those who hold India responsible for the prevailing tension in the region.
The anti-MFN lobby is of the belief that liberalization of trade with India will open a floodgate of cheap Indian goods and that non-tariff products will play havoc with the local industrial scene. They fear that local industry will be gradually eliminated if Indian goods are available in abundance. They also subscribe to the theory that more trade means less emphasis on Kashmir. They also contend that influential elements in the political field who have strong anti-Pakistan bias will ensure that Pakistany goods do not find a consumer base in the Indian marketplace. There is a feeling that the monetary policy of India will make things difficult for Pakistan, such as if Indian Rupee is subject to devaluation, the Pakistany Rupee will have to be marked down accordingly. This, of course, does not hold ground because the Indian Rupee is performing better than its counterpart on the other side. Moreover, India has a sizeable Foreign Exchange Reserve, while the financial managers here devise new ways to show to the world how much money is there in the government’s kitty. The anti-MFN lobby counter with the argument that since India has formidable engineering, computers, petro-chemicals, and heavy metal industries, etc, it would be difficult for the Pakistany enterprises to compete on an equal footing. The concept of two religions also is a motivating force for the anti-MFN lobby. They also refer to the intensive campaign on Kashmir launched by the government, not only within the country but also among the Islamic nations. They state that on the one hand, the government is highlighting the Kashmir cause and on the other hand, there are no qualms about granting preferential trade privileges. They do not appreciate the idea of a negative trade balance as they feel that the Indian importers will not reciprocate in the same spirit. Moreover, since poverty is more rampant in India, they assert that the Indian industry will take away jobs from the Pakistany manufacturing units. They are also averse to the idea of a cultural invasion that will follow once trade avenue is widened. Alas, they may not know that Pakistany companies are advertising heavily on Indian satellite television, especially during mega-popular Indian programs such as Kon Banega Crorepati. Moreover, thanx to Indian TV, the Pakistany viewers know the names and designations of more Indian politicians than they know of members of the “suspended” assemblies.
THE RATIONALE FOR GRANT OF MFN:
January 2005 will soon bring the full force of the WTO conditionalities while Pakistan is yet not ready for the real impact of globalization and free trade. Pakistan must come out of the cocoon with gusto. The managers and policy makers visualizing and running the economic show are still confused and dilatory by nature. There are talks and presentations of visions and strategies galore. There are new ideas being drummed up thru so-called task forces but then are relegated to the proverbial bureaucratic dustbin. There are fabulous statements emanating from the various ministries that loudly inform the denizens that the world is craving for the “Made in Pakistan” label but when the truth comes out these “bombs” are sham duds.
There is now an imperative need to do some practical, honest-to-goodness re-engineering in the trade scenario. The nation’s planners must look inward towards regional trade, especially among the SAARC countries. This bloc must shed intra-bloc imbroglios and must ensure and work for the successful implementation of SAPTA. Pakistan is ready to sign the Free Trade Agreement with Sri Lanka and this may be a harbinger of similar agreements with other SAARC countries. Then why draw curtains on meaningful trade with India?
The case for granting MFN status is quite clear. The opportunity that was missed in middle of May 2001 may yet surface with the yatra of General Pervez Musharraf. The Pakistany strongman is pivotally placed to bring about the realization of the dreams of people of India and Pakistan. His agenda should also include trade liberalization. Trade and industry can profitably survive and progress where there is peace and where resources are spent on development rather than on arms build-up. Today, Pakistany businessmen feel that they are in an abyss and that they are finding themselves in a straitjacket. A bright outcome of the Musharraf-Vajpayee talks can bring about an upsurge in business and industrial activity. Any positive innocuous news can zoom up the KSE index with analysts prancing about in an ebullient mood. Businessmen want a peaceful sub-continent. The General can provide as well lead the country on that avenue. The opportunity is knocking loudly.
Pakistan does not recognize Taiwan; yet there is a beeline of Pakistany traders arriving daily at Taipei Airport. This is one solid case of doing business with those whom Pakistan’s “time-tested” friend does not recognize or accept. Here, trade took precedence over political compulsions. Then why not unshackle the Indo-Pak trade regime?
Pakistan’s law enforcers conveniently close their eyes when nearly US$ 2 billion worth of Indian goods enter the borders of Pakistan. From Darjeeling tea to Pan Parag concoction to Ujala detergent to saris to Chiragh Din shirts to equipment for eye hospitals to computer software to textile machinery to Madhuri Dixit’s movies, Pakistany consumers can get anything Indian they want from the open market. All GST-free, import duty-free, and hassle-free. Then why this adamant decision to throttle two-way trade thru documented modes. This must surely be to protect vested interests that are taking advantage of the anti-Indian hysteria conjured up by certain organizations.
Another important point is that do the Indian policy makers really care whether Pakistan grants MFN status to them? In fact, an erstwhile Indian High Commissioner very categorically stated in Karachi that they do not give two hoots whether Pakistan does it or not because the two-way trade with Pakistan is a low, low percentage of overall Indian trade figures.
The liberalization of trade could bring about an economic revolution in the SAARC countries. The trade barriers being initiated by USA and Europe would hurt Pakistan seriously since it would be a long journey for domestic companies towards proper certification of ISO-9000, ISO-14000, SA-8000, Child Labor elimination, Freedom of Association, and other conditions of global trade. Again, the question arises: Are Pakistany companies ready for Post-2004? Therefore, it is important that trade between SAARC countries takes a monumental leap or EPB’s strategy of US$ 14 billion exports by 2005 and US$ 20 billion by 2010 would be another pipe dream.
Pakistan must at all costs talk about regional peace, regional trade, and regional interaction. The country must take the lead to bring about an enabling environment to achieve these objectives. All efforts must be made to increase economic activities because deliverance only lies thru massive industrialization and commercial activities. The policy to club all polemical issues between Pakistan and India and demanding their resolution first has not worked but, in the process, has resulted in sacrificing profitable economic contacts and damaging the one chance to stimulate economic activity in the present recessionary scene.
Pakistany and Indian leadership must stop this ego-trip and blatant propaganda. The leaders must put the welfare of people paramount. The hierarchy must work for the prosperity of the region. Only thru trade and industry could this roadmap be achieved. The destiny of millions depends on how the two leaders weave their discussions. As the bard rightly mused:
Bain-ul-Najoom kay faasalay kum ho chukay hain bahut
Bain-ul-Quloob kay leay idraq cha yi ay
=======================
May 28-2001
On February 20, 1999, the Prime Minister of Pakistan, Muhammad Nawaz Sharif, alongwith thousands of excited countrymen, waited anxiously at the Wagah Border for the arrival of a bus from across the border. As the vehicle emerged into view, an enthusiastic roar welcomed it. The bus stopped and as the door opened, a smiling distinguished personality stepped down. The Prime Minister of India, Shri Atal Bihari Vajpayee, was on Pakistany soil after 21 years. The two leaders warmly embraced and gleefully shook hands. Cameras clicked and buzzed; roses showered in abundance; anthems played with gusto by the band; 21 guns salute and a guard of honor, normally a ritual, but this time with sincere purpose; a sense of elation all around.
Shri Vajpayee in his speech stated: “I bring the goodwill and hopes of my fellow Indians, who seek abiding peace and harmony with Pakistan. I am conscious that, this is a defining moment in South Asian history, and I hope we will be able to rise to the challenge.” Mr Sharif in his remarks emphasized that “I have a vision for South Asia. I believe that countries, small and large, can live in harmony and work together for their mutual prosperity.”
In a joint statement issued at the end of the historic visit in which the Lahore Declaration and a Memorandum of Understanding were signed, the two leaders agreed, inter alia, that “the two sides shall undertake consultations on WTO related issues with a view to coordinating their respective positions.” The paramount issue related to WTO is of course, the Most Favored Nation Clause which has been a matter of intense debate ever since the Marrakesh Agreement came into force from January 01, 1995. Both Pakistan and India are prime signatories to WTO and they are bound to respect the agreement.
TRADE BRINGS FRIENDSHIP:
After the signing of the agreement, there was an increase in the movement of businessmen and industrialists across the border. The anticipated liberalization of the trade regime, especially after the “Bus Diplomacy”, had brought about this upsurge. The two Prime Ministers in Lahore had approved the establishment of the Indo-Pakistan Chamber of Commerce and Industry. The representatives of FPCCI and FICCI inked the agreement in an impressive ceremony in New Delhi. The business leaders hoped that once economic ties are established and become effective, then it would certainly put pressure on the political hierarchy to resolve the other contentious issues. The business leaders hoped that the Chamber would open a gateway for more bilateral trade. The business leaders hoped that if both countries play a greater, substantial role in free trade, they must adopt a more pragmatic approach to achieve long-term benefits and gains for their populace.
In March 1999, the 65-member delegation of Federation of Indian Export Organizations visited Pakistan and made an overwhelming impression among the Pakistany business and industrial community. The delegation members created the much-desired goodwill and made useful long-term business contacts. Their sojourn to Karachi, Lahore, and Islamabad spurred organizations, such as SITE ASSOCIATION OF INDUSTRY, to endeavor to carve out a niche in the Indo-Pak trade regime for their members. However, the Kargil adventure and the resultant fall-out did put a damper on the momentum of liberalization of trade.
After a hiatus of two years, the subcontinent is witnessing some flurry of activity. The much-hyped tour of the Indian delegation recently has sparked new hopes of liberalization of trade. A few months back, a high-level textile delegation arrived with offers of trade and friendship. The news on the political front seem encouraging, especially Vajpayee’s well-drafted letter inviting the Chief Executive to fly over to New Delhi for a tête-à-tête. The much-desired prayer is that maybe, just maybe, pragmatic sense would prevail, and the walls of hatred, distrust, and venomous propaganda would crumble like the Berlin Wall.
IS PROFITABLE TRADE POSSIBLE:
There is a plethora of possibilities for trade between the two countries. One very important area is software development. The Indian success story in computerland is a source of inspiration for other developing nations. Pakistan has excellent human resources that need proper guidance, encouragement, and opportunities to imprint their mark on the global information technology highway. The Pakistany software houses are looking for joint ventures and agreements with their counterparts in Bangalore. There is already cooperation and business going on between the software wizards on both sides of the Line of Control, although this is being done without the State Bank of Pakistan or even Riaz Naqvi of CBR being any wiser.
The textile manufacturers in Pakistan are interested in buying raw material, dyes and chemicals, machinery, and finished goods. They are keen to introduce their fabrics, textile made-ups, and expertise for the vast Indian market. There are many businessmen looking for mutually beneficial opportunities in plastics, packaging, automobile parts, electrical equipment, and other products.
The liberalization of trade will also reduce the undocumented trade that is of dangerous proportions and that has not benefited the Treasury thru duties and taxes. The exclusion of many items on the official list has compelled buyers to import Indian goods thru third country channels. It is time that smuggling be curbed and use of third countries as conduits be discouraged by promoting a negative list of importable goods rather than a discriminatory and cumbersome positive list.
The recent negative response given by the Pakistany policy makers to the question of granting Most Favored Nation status to India was hasty and gave an inauspicious twist to improving trade relations. The hackneyed and myopic attitude of economic planners is again evident from this pronunciation. The continued fear of a backlash from militant organizations and the vested interests, such as smugglers, corrupt border officials, and unscrupulous financiers, has again prevailed and the business community would have to depend on external sources to bring about Indian goods into the country. The decision by India to grant MFN status to Pakistan was hailed as a pragmatic approach. Pakistan has yet to cross the hurdles that have forced the government hierarchy to refrain from reciprocating to India in this matter. The MFN concept has been misunderstood by those who have strong reservations about it and who have been vociferous in their opposition to any notion of granting MFN status to India.
THE SACROSANCT CLAUSE:
What is MFN? The Most Favored Nation Clause stipulates that “with respect to custom duties and charges of any kind imposed on, or in connection with, importation or exportation, or imposed on the international transfer of payments for import or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with the importation and exportation, any advantage, favor, privilege or immunity granted by any contracting party to any product originating in, or destined for, any other country shall be accorded immediately and conditionally to the like product originating in, or destined for, the territories for all contracting parties.”
MFN BROUHAHA:
The four-year old controversy over MFN status to India has generated intense debate in many sectors. The arguments are in an emotional mode and those not in favor of MFN status have been significantly influenced by religious, parochial, and ethnic forces. There have been powerful objections based on the notion that granting this status is tantamount to cuddling with the enemy. The successive governments have resorted to all kinds of approaches to determine the ramifications of this clause but they have not successfully educated those who may have misguided conceptions of the clause. In fact, the nomenclature, “Most Favored Nation”, has very disturbing connotations for those who hold India responsible for the prevailing tension in the region.
The anti-MFN lobby is of the belief that liberalization of trade with India will open a floodgate of cheap Indian goods and that non-tariff products will play havoc with the local industrial scene. They fear that local industry will be gradually eliminated if Indian goods are available in abundance. They also subscribe to the theory that more trade means less emphasis on Kashmir. They also contend that influential elements in the political field who have strong anti-Pakistan bias will ensure that Pakistany goods do not find a consumer base in the Indian marketplace. There is a feeling that the monetary policy of India will make things difficult for Pakistan, such as if Indian Rupee is subject to devaluation, the Pakistany Rupee will have to be marked down accordingly. This, of course, does not hold ground because the Indian Rupee is performing better than its counterpart on the other side. Moreover, India has a sizeable Foreign Exchange Reserve, while the financial managers here devise new ways to show to the world how much money is there in the government’s kitty. The anti-MFN lobby counter with the argument that since India has formidable engineering, computers, petro-chemicals, and heavy metal industries, etc, it would be difficult for the Pakistany enterprises to compete on an equal footing. The concept of two religions also is a motivating force for the anti-MFN lobby. They also refer to the intensive campaign on Kashmir launched by the government, not only within the country but also among the Islamic nations. They state that on the one hand, the government is highlighting the Kashmir cause and on the other hand, there are no qualms about granting preferential trade privileges. They do not appreciate the idea of a negative trade balance as they feel that the Indian importers will not reciprocate in the same spirit. Moreover, since poverty is more rampant in India, they assert that the Indian industry will take away jobs from the Pakistany manufacturing units. They are also averse to the idea of a cultural invasion that will follow once trade avenue is widened. Alas, they may not know that Pakistany companies are advertising heavily on Indian satellite television, especially during mega-popular Indian programs such as Kon Banega Crorepati. Moreover, thanx to Indian TV, the Pakistany viewers know the names and designations of more Indian politicians than they know of members of the “suspended” assemblies.
THE RATIONALE FOR GRANT OF MFN:
January 2005 will soon bring the full force of the WTO conditionalities while Pakistan is yet not ready for the real impact of globalization and free trade. Pakistan must come out of the cocoon with gusto. The managers and policy makers visualizing and running the economic show are still confused and dilatory by nature. There are talks and presentations of visions and strategies galore. There are new ideas being drummed up thru so-called task forces but then are relegated to the proverbial bureaucratic dustbin. There are fabulous statements emanating from the various ministries that loudly inform the denizens that the world is craving for the “Made in Pakistan” label but when the truth comes out these “bombs” are sham duds.
There is now an imperative need to do some practical, honest-to-goodness re-engineering in the trade scenario. The nation’s planners must look inward towards regional trade, especially among the SAARC countries. This bloc must shed intra-bloc imbroglios and must ensure and work for the successful implementation of SAPTA. Pakistan is ready to sign the Free Trade Agreement with Sri Lanka and this may be a harbinger of similar agreements with other SAARC countries. Then why draw curtains on meaningful trade with India?
The case for granting MFN status is quite clear. The opportunity that was missed in middle of May 2001 may yet surface with the yatra of General Pervez Musharraf. The Pakistany strongman is pivotally placed to bring about the realization of the dreams of people of India and Pakistan. His agenda should also include trade liberalization. Trade and industry can profitably survive and progress where there is peace and where resources are spent on development rather than on arms build-up. Today, Pakistany businessmen feel that they are in an abyss and that they are finding themselves in a straitjacket. A bright outcome of the Musharraf-Vajpayee talks can bring about an upsurge in business and industrial activity. Any positive innocuous news can zoom up the KSE index with analysts prancing about in an ebullient mood. Businessmen want a peaceful sub-continent. The General can provide as well lead the country on that avenue. The opportunity is knocking loudly.
Pakistan does not recognize Taiwan; yet there is a beeline of Pakistany traders arriving daily at Taipei Airport. This is one solid case of doing business with those whom Pakistan’s “time-tested” friend does not recognize or accept. Here, trade took precedence over political compulsions. Then why not unshackle the Indo-Pak trade regime?
Pakistan’s law enforcers conveniently close their eyes when nearly US$ 2 billion worth of Indian goods enter the borders of Pakistan. From Darjeeling tea to Pan Parag concoction to Ujala detergent to saris to Chiragh Din shirts to equipment for eye hospitals to computer software to textile machinery to Madhuri Dixit’s movies, Pakistany consumers can get anything Indian they want from the open market. All GST-free, import duty-free, and hassle-free. Then why this adamant decision to throttle two-way trade thru documented modes. This must surely be to protect vested interests that are taking advantage of the anti-Indian hysteria conjured up by certain organizations.
Another important point is that do the Indian policy makers really care whether Pakistan grants MFN status to them? In fact, an erstwhile Indian High Commissioner very categorically stated in Karachi that they do not give two hoots whether Pakistan does it or not because the two-way trade with Pakistan is a low, low percentage of overall Indian trade figures.
The liberalization of trade could bring about an economic revolution in the SAARC countries. The trade barriers being initiated by USA and Europe would hurt Pakistan seriously since it would be a long journey for domestic companies towards proper certification of ISO-9000, ISO-14000, SA-8000, Child Labor elimination, Freedom of Association, and other conditions of global trade. Again, the question arises: Are Pakistany companies ready for Post-2004? Therefore, it is important that trade between SAARC countries takes a monumental leap or EPB’s strategy of US$ 14 billion exports by 2005 and US$ 20 billion by 2010 would be another pipe dream.
Pakistan must at all costs talk about regional peace, regional trade, and regional interaction. The country must take the lead to bring about an enabling environment to achieve these objectives. All efforts must be made to increase economic activities because deliverance only lies thru massive industrialization and commercial activities. The policy to club all polemical issues between Pakistan and India and demanding their resolution first has not worked but, in the process, has resulted in sacrificing profitable economic contacts and damaging the one chance to stimulate economic activity in the present recessionary scene.
Pakistany and Indian leadership must stop this ego-trip and blatant propaganda. The leaders must put the welfare of people paramount. The hierarchy must work for the prosperity of the region. Only thru trade and industry could this roadmap be achieved. The destiny of millions depends on how the two leaders weave their discussions. As the bard rightly mused:
Bain-ul-Najoom kay faasalay kum ho chukay hain bahut
Bain-ul-Quloob kay leay idraq cha yi ay
=======================
May 28-2001
Comments on Trade Policy 2006-07
The Trade Policy 2006-07 announced by Commerce Minister Humayun Akhter Khan on July 17, 2006 had a different composition than those policies announced in previous years. The main thrust of the policy has been on a long-term vision, a sort of charting a new course towards attaining the US$ 20 billion by 2008. It is hoped that unlike the previous years, the vision is transformed into action and there is rapid implementation.
The latest trade policy is a “non-textile policy” since ECC had already announced the textile package on Saturday. However the new policy has addressed those non-traditional sectors that should, if well-focused, bring in precious foreign exchange. Pakistan has not fully exploited sectors such as gem and jewelry, fruits, horticulture, ethnic-based products, footwear, fisheries, and many service sectors. A dedicated and concerted effort is required in creating exportable products that can create a niche in new markets abroad and enhance foreign exchange earnings.
One views with skepticism the export target of US$ 18.60 billion as it would not be achieved if it is dependant on textiles since the textile-related sector is likely to remain under pressure for one more year owing to domestic and global problems. The textile package has been rejected by the apparel and knitting sectors and this is bad news. The policy also does not address the situation arising out of substantial increases in international oil prices. Pakistan does not have a defined strategy to adapt to the impact of oil prices. Ad-hocism still prevails.
The warehousing policy definitely needs re-designing as well as sincere realization. The businessmen are sanguine the Minister would devote his concentration on this very essential tool in our export march. Pakistan has not been successful in this respect. Today, the customer wants goods on demand and immediately. Pakistan is losing crucial orders because of lack of seriousness on the part of the government officials in getting this marketing tool in action.
The industries and service sector applaud the decision of the Commerce Minister to remove all obstacles in the import of used and second-hand machinery because in many cases the industrialists were not able to outlay precious financial resources on the latest machinery.
The Trade Organizations Ordinance 1961 has finally been noticed by the ministry. This obsolete and ineffective statute has been misused by many over the years and has resulted in bogus and paper organizations, infightings in associations and chambers, and has created many a rivalry among the business community. However, it would have been worthwhile if MoC had done its homework and the amendments would have been announced in the policy. The way things are going, it seems a long shot whether MoC would be able to prepare draft legislation soon.
To boost up the dismal export figures, the MoC has for the first time included defense sales and service revenue as exports. Thus US$ 275 million in defense related sales and US$ 392 in service sector revenues were added to rake up the export figures to US$ 16.46 billion. The question then arises whether imports of defense equipment and payments to a host of foreign consultants would also constitute part of the import bill? If these are included then the trade deficit would go over the moon.
About three years ago, the Minister had announced the formation of the Export Facilitation Committee at the Ministerial level where four Ministers would be in this Committee and that it would be the forum that would resolve many problems faced by the exporters. Sri Lanka has a nine-member committee and I had proposed to an erstwhile Commerce Minister that this should be emulated in Pakistan. It is hoped that this Committee would finally start functioning.
In the Trade Policy 2003-04, the Minister had also announced that six Regional Trade Commissioners would be appointed to enhance exports. Unfortunately this scheme fell prey to bureaucratic wrangling and has probably been shelved. A good scheme blatantly waylaid.
A vision becomes a pipe-dream if not implemented. A vision becomes attractive to others who then adopt it for their own good. A vision becomes reality when there is peace, stability, and a sense of direction. Pakistan’s trade regime is at a crucial crossroads. The government and the business community must move forward and swim against the tide and not wait for any boat to rescue them. This is the recipe for success.
Chalta rahe jo aabla pai ke bawajood
Manzil ka mushtaiq wahi sehra narvad hai
============
July 18-2006
The latest trade policy is a “non-textile policy” since ECC had already announced the textile package on Saturday. However the new policy has addressed those non-traditional sectors that should, if well-focused, bring in precious foreign exchange. Pakistan has not fully exploited sectors such as gem and jewelry, fruits, horticulture, ethnic-based products, footwear, fisheries, and many service sectors. A dedicated and concerted effort is required in creating exportable products that can create a niche in new markets abroad and enhance foreign exchange earnings.
One views with skepticism the export target of US$ 18.60 billion as it would not be achieved if it is dependant on textiles since the textile-related sector is likely to remain under pressure for one more year owing to domestic and global problems. The textile package has been rejected by the apparel and knitting sectors and this is bad news. The policy also does not address the situation arising out of substantial increases in international oil prices. Pakistan does not have a defined strategy to adapt to the impact of oil prices. Ad-hocism still prevails.
The warehousing policy definitely needs re-designing as well as sincere realization. The businessmen are sanguine the Minister would devote his concentration on this very essential tool in our export march. Pakistan has not been successful in this respect. Today, the customer wants goods on demand and immediately. Pakistan is losing crucial orders because of lack of seriousness on the part of the government officials in getting this marketing tool in action.
The industries and service sector applaud the decision of the Commerce Minister to remove all obstacles in the import of used and second-hand machinery because in many cases the industrialists were not able to outlay precious financial resources on the latest machinery.
The Trade Organizations Ordinance 1961 has finally been noticed by the ministry. This obsolete and ineffective statute has been misused by many over the years and has resulted in bogus and paper organizations, infightings in associations and chambers, and has created many a rivalry among the business community. However, it would have been worthwhile if MoC had done its homework and the amendments would have been announced in the policy. The way things are going, it seems a long shot whether MoC would be able to prepare draft legislation soon.
To boost up the dismal export figures, the MoC has for the first time included defense sales and service revenue as exports. Thus US$ 275 million in defense related sales and US$ 392 in service sector revenues were added to rake up the export figures to US$ 16.46 billion. The question then arises whether imports of defense equipment and payments to a host of foreign consultants would also constitute part of the import bill? If these are included then the trade deficit would go over the moon.
About three years ago, the Minister had announced the formation of the Export Facilitation Committee at the Ministerial level where four Ministers would be in this Committee and that it would be the forum that would resolve many problems faced by the exporters. Sri Lanka has a nine-member committee and I had proposed to an erstwhile Commerce Minister that this should be emulated in Pakistan. It is hoped that this Committee would finally start functioning.
In the Trade Policy 2003-04, the Minister had also announced that six Regional Trade Commissioners would be appointed to enhance exports. Unfortunately this scheme fell prey to bureaucratic wrangling and has probably been shelved. A good scheme blatantly waylaid.
A vision becomes a pipe-dream if not implemented. A vision becomes attractive to others who then adopt it for their own good. A vision becomes reality when there is peace, stability, and a sense of direction. Pakistan’s trade regime is at a crucial crossroads. The government and the business community must move forward and swim against the tide and not wait for any boat to rescue them. This is the recipe for success.
Chalta rahe jo aabla pai ke bawajood
Manzil ka mushtaiq wahi sehra narvad hai
============
July 18-2006
INDUSTRIALIZATION CAN ELIMINATE CHILD LABOR
Pakistan has mostly been getting the short end of the stick whenever the issue of Child Labor crops up. Notwithstanding the fact that India, Turkey, and a host of other Asian and African countries have a huge pool of economically active children, the vigilant global eyes have generally focused on Pakistan. From the carpet manufacturing, then the brick kilns, then advancing to the soccer ball industry, then moving to the surgical goods makers, right up to the auto garages, the agricultural community, and even down to the domestic home scene, there is news of Child Labor being extensively used everywhere.
A study done in 1996, and which is still being widely quoted and highlighted in press, at seminars, and in official documents, loudly proclaimed that there are 3.3 million economically active children out of a total children population of 40 million. Though it may seem a pretty low number compared to the NGO-conjured up figure of over 20 million, the fact remains that it is still a substantial and depressing statistic.
The primary focus of the three social partners, i.e. government, employers, and workers, with strong cooperation and support of the ILO-IPEC, has been to eliminate Child Labor wherever prevalent. In this connection, many high-profile projects have been launched and implemented. So much so, even President Bill Clinton applauded the Pakistani program to eliminate Child Labor from the soccer ball industry.
However, the blatant fact remains that all the relevant programs are going to address only a small fraction of the whole problem. The surgical instruments program will initially cater to only 500 of the estimated 7700 children. The EU sponsored program recently inaugurated in Sindh will target only 1080. The SITE Public School in SITE, Karachi, will provide quality education to a little over 100 Child Labor. Many NGOs are striving to rehabilitate working children and their efforts will only eliminate a few thousand. At the same time, the deteriorating economic conditions, the lack of employment opportunities due to a drastic slowdown in new industrial investment, the subjugation of the industrial and business community through excessive bureaucratic controls, the external flight of precious capital, the stringent emphasis on trade barriers, the indecisiveness of policy makers, the non-chalant attitude towards human capital development, the non-availability of basic infrastructure, the lack of progressive vision of the agriculturists, the pathetic educational scenario, etc, are and will be major obstructions in ensuring whether viable and workable alternatives are available. Therefore, the imperative need arises for a fundamental revamping of the entire program for the elimination of Child Labor in Pakistan.
There is a need to create the right awareness atmosphere especially in those areas that are susceptible to Child Labor. The stress should be more on preventing the entrance of new children as Child Labor. The present policy of trying to remove already working children from the workplace and then groping around for an income substitution alternative for the family of the displaced child has not been that effective. It has more often created resentment and has also resulted in families and employers resorting to a hide-and-seek game to distract those who are out to check whether there are children working or not. The poverty alleviation programs and other grandiose schemes have not done any favors for those families whose children work to bring home some of the bread. The emphasis should be more on providing basic education facilities so that the children are not deprived of this fundamental right. More importantly, the focus should be on revolutionary changes in the governmental policies to induce an investor-friendly environment that will spur up monumental economic activity.
Unfortunately, the national policies look impressive on paper. These game plans and feasibility reports are normally made to instill a false sense of achievement in the minds of the rulers and these exercises are carried out by the bureaucracy to divert the attention of those (political/others) who rule from Islamabad. The National Education Policy envisages 90% literacy rate by 2005. To do that, the country needs another 250,000 primary school teachers, 37,000 middle school teachers, and 30,000 high school tutors. Ghost schools, ghost teachers, and ghost students are "found aplenty" all over the nation. The new millennium has commenced. Is Pakistan anywhere on the way to a true mission of universal education achievement?
The population scene is getting out of hand. 11,000 children are born EVERY DAY in Pakistan and not all of them with a silver spoon in their mouths. The parents of so many will have to decide whether to send their children to school or to work. The importers of Pakistani goods will want their purchases at cheaper rates. Manufacturers will invariably resort to farming out contracts to small industries in the unorganized sector that employ children to trim the cost. The tillers will compel the family kids to work on the fields to bring in the extra buck to sustain the household. The auto workshop "mistry" will depend on the "chota" to go under the car and do the dirty task. Buildings and bungalows will continue to be built with bricks purchased by the mason from kilns that use bonded Child Labour. And yet, nary a soul will talk about child abuse . . . . . . physical, moral, or sexual.
The most practical solution is job creation. It is through employment opportunities that there can be meaningful poverty alleviation. It is through the turning of the wheels of industry that the adults will get a chance to work and earn enough to feed their kith and kin. It is through an enlightened industrial policy that more work places can be created so that the industrialist is always on the lookout for new workers. It is through heightened industrial activity that the workers will get more pay, more benefits, and more advantages. It is through solid industrial progress that the foreign buyers will get quality products, will offer a premium price, and will come back for more goods produced under the "Made in Pakistan" logo. More importantly, only through industrialization and industrial prosperity can the menace of Child Labor be really eliminated.
Therefore, the solution to the eradication of Child Labor in Pakistan is that in the short term, the concentration should be on preventing the entry of new children in the economic activities of the country. At the same time, the government's approach should be to earmark substantial funds, initially 6 to 7% of the total development budget, towards providing universal education as well as funding teachers training. The private sector should be motivated to designate some portion of their capital towards supporting educational ventures of community-based organizations or NGOs. The most significant policy decision is to dedicate the country's efforts towards massive industrialization. Recently, the government announced that it would save Rupees TEN billion due to reduction in the domestic interest rate. The Chief Executive also announced that the Armed Forces will "give" Rupees SEVEN billion to the Treasury. The Amnesty Scheme may also net in billions for the government. Thus it is high time that most of these funds are channelized towards drastically improving the infrastructure of industrial estates that is so essentially required to make the industrial environment conducive. Furthermore, a laissez-faire attitude by the bureaucracy towards the industrialists will be so much instrumental in boosting the industrial investment in the country.
There is a need for a very substantial increase in opportunities to set up micro and small scale industries all over the country, and especially in the areas that are in close proximity to rural towns and villages. Of course, this will require a tremendous amount of willpower on the part of the government, the workers, and more importantly the small-scale entrepreneurs to set up industrial bases in remote areas. However, this is essential because it would be easier and convenient to induce the residents of these areas to set up or work in cottage industries. The policy makers should emphasize the establishment of labor intensive industries as these can achieve the desired objectives, i.e. jobs, cash, and prosperity. Pakistan can get an edge if those industries are set that can effectively capitalize on the available expertise of craftsmen, artisans, and other talented people.
There are so many capable persons who can create a host of machines and processes but who are still working on rudimentary equipment. These experts can be given facilities to improve their products thru financing of new equipment and provision of the required infrastructure. The government is establishing the Micro Credit Bank to provide loans with the ultimate aim to alleviate poverty thru the setting up of micro and small scale industries. Another viable way to introduce a large number of small industries is to set up industrial cooperatives in small industrial estates. These cooperatives can be set up for one single type of industry, for example, cloth weaving units, carpet weaving, garments, handicrafts, etc., and thru these cooperatives, the small entrepreneurs can band together for their common interest. These cooperatives can also provide auxiliary employment opportunities to accountants, security guards, van operators, housing sector workers such as masons, carpenters, painters, and there would also be a possibility for electricians, welders, lathe-operators, etc., to sell their expertise. Most significantly, these will create thousands of well-needed jobs. The target is, of course, to obtain jobs for adults so that the children go to school, play, and are not forced to earn for their families.
Child Labor can thus be eliminated in a relatively shorter timeframe if the road map provided above is assiduously adhered to. Child Labor must be eradicated at all cost. Child Labor means that the very soul of the nation has been ravished and that the petite hands and innocent minds have been ravaged for economic or personal gains. Faiz Ahmed Faiz, the poet par excellence so vividly put it:
Jub kabhi bikta hai bazaar mein mazdoor ka gost
Shahraho pe gharibon ka lahu behta hai
Aag si seenay mein reh reh kay ubalti hai na puch
Apnay dil per mujhe kaboo he nahin rehta
************************************************
March 19, 2000
A study done in 1996, and which is still being widely quoted and highlighted in press, at seminars, and in official documents, loudly proclaimed that there are 3.3 million economically active children out of a total children population of 40 million. Though it may seem a pretty low number compared to the NGO-conjured up figure of over 20 million, the fact remains that it is still a substantial and depressing statistic.
The primary focus of the three social partners, i.e. government, employers, and workers, with strong cooperation and support of the ILO-IPEC, has been to eliminate Child Labor wherever prevalent. In this connection, many high-profile projects have been launched and implemented. So much so, even President Bill Clinton applauded the Pakistani program to eliminate Child Labor from the soccer ball industry.
However, the blatant fact remains that all the relevant programs are going to address only a small fraction of the whole problem. The surgical instruments program will initially cater to only 500 of the estimated 7700 children. The EU sponsored program recently inaugurated in Sindh will target only 1080. The SITE Public School in SITE, Karachi, will provide quality education to a little over 100 Child Labor. Many NGOs are striving to rehabilitate working children and their efforts will only eliminate a few thousand. At the same time, the deteriorating economic conditions, the lack of employment opportunities due to a drastic slowdown in new industrial investment, the subjugation of the industrial and business community through excessive bureaucratic controls, the external flight of precious capital, the stringent emphasis on trade barriers, the indecisiveness of policy makers, the non-chalant attitude towards human capital development, the non-availability of basic infrastructure, the lack of progressive vision of the agriculturists, the pathetic educational scenario, etc, are and will be major obstructions in ensuring whether viable and workable alternatives are available. Therefore, the imperative need arises for a fundamental revamping of the entire program for the elimination of Child Labor in Pakistan.
There is a need to create the right awareness atmosphere especially in those areas that are susceptible to Child Labor. The stress should be more on preventing the entrance of new children as Child Labor. The present policy of trying to remove already working children from the workplace and then groping around for an income substitution alternative for the family of the displaced child has not been that effective. It has more often created resentment and has also resulted in families and employers resorting to a hide-and-seek game to distract those who are out to check whether there are children working or not. The poverty alleviation programs and other grandiose schemes have not done any favors for those families whose children work to bring home some of the bread. The emphasis should be more on providing basic education facilities so that the children are not deprived of this fundamental right. More importantly, the focus should be on revolutionary changes in the governmental policies to induce an investor-friendly environment that will spur up monumental economic activity.
Unfortunately, the national policies look impressive on paper. These game plans and feasibility reports are normally made to instill a false sense of achievement in the minds of the rulers and these exercises are carried out by the bureaucracy to divert the attention of those (political/others) who rule from Islamabad. The National Education Policy envisages 90% literacy rate by 2005. To do that, the country needs another 250,000 primary school teachers, 37,000 middle school teachers, and 30,000 high school tutors. Ghost schools, ghost teachers, and ghost students are "found aplenty" all over the nation. The new millennium has commenced. Is Pakistan anywhere on the way to a true mission of universal education achievement?
The population scene is getting out of hand. 11,000 children are born EVERY DAY in Pakistan and not all of them with a silver spoon in their mouths. The parents of so many will have to decide whether to send their children to school or to work. The importers of Pakistani goods will want their purchases at cheaper rates. Manufacturers will invariably resort to farming out contracts to small industries in the unorganized sector that employ children to trim the cost. The tillers will compel the family kids to work on the fields to bring in the extra buck to sustain the household. The auto workshop "mistry" will depend on the "chota" to go under the car and do the dirty task. Buildings and bungalows will continue to be built with bricks purchased by the mason from kilns that use bonded Child Labour. And yet, nary a soul will talk about child abuse . . . . . . physical, moral, or sexual.
The most practical solution is job creation. It is through employment opportunities that there can be meaningful poverty alleviation. It is through the turning of the wheels of industry that the adults will get a chance to work and earn enough to feed their kith and kin. It is through an enlightened industrial policy that more work places can be created so that the industrialist is always on the lookout for new workers. It is through heightened industrial activity that the workers will get more pay, more benefits, and more advantages. It is through solid industrial progress that the foreign buyers will get quality products, will offer a premium price, and will come back for more goods produced under the "Made in Pakistan" logo. More importantly, only through industrialization and industrial prosperity can the menace of Child Labor be really eliminated.
Therefore, the solution to the eradication of Child Labor in Pakistan is that in the short term, the concentration should be on preventing the entry of new children in the economic activities of the country. At the same time, the government's approach should be to earmark substantial funds, initially 6 to 7% of the total development budget, towards providing universal education as well as funding teachers training. The private sector should be motivated to designate some portion of their capital towards supporting educational ventures of community-based organizations or NGOs. The most significant policy decision is to dedicate the country's efforts towards massive industrialization. Recently, the government announced that it would save Rupees TEN billion due to reduction in the domestic interest rate. The Chief Executive also announced that the Armed Forces will "give" Rupees SEVEN billion to the Treasury. The Amnesty Scheme may also net in billions for the government. Thus it is high time that most of these funds are channelized towards drastically improving the infrastructure of industrial estates that is so essentially required to make the industrial environment conducive. Furthermore, a laissez-faire attitude by the bureaucracy towards the industrialists will be so much instrumental in boosting the industrial investment in the country.
There is a need for a very substantial increase in opportunities to set up micro and small scale industries all over the country, and especially in the areas that are in close proximity to rural towns and villages. Of course, this will require a tremendous amount of willpower on the part of the government, the workers, and more importantly the small-scale entrepreneurs to set up industrial bases in remote areas. However, this is essential because it would be easier and convenient to induce the residents of these areas to set up or work in cottage industries. The policy makers should emphasize the establishment of labor intensive industries as these can achieve the desired objectives, i.e. jobs, cash, and prosperity. Pakistan can get an edge if those industries are set that can effectively capitalize on the available expertise of craftsmen, artisans, and other talented people.
There are so many capable persons who can create a host of machines and processes but who are still working on rudimentary equipment. These experts can be given facilities to improve their products thru financing of new equipment and provision of the required infrastructure. The government is establishing the Micro Credit Bank to provide loans with the ultimate aim to alleviate poverty thru the setting up of micro and small scale industries. Another viable way to introduce a large number of small industries is to set up industrial cooperatives in small industrial estates. These cooperatives can be set up for one single type of industry, for example, cloth weaving units, carpet weaving, garments, handicrafts, etc., and thru these cooperatives, the small entrepreneurs can band together for their common interest. These cooperatives can also provide auxiliary employment opportunities to accountants, security guards, van operators, housing sector workers such as masons, carpenters, painters, and there would also be a possibility for electricians, welders, lathe-operators, etc., to sell their expertise. Most significantly, these will create thousands of well-needed jobs. The target is, of course, to obtain jobs for adults so that the children go to school, play, and are not forced to earn for their families.
Child Labor can thus be eliminated in a relatively shorter timeframe if the road map provided above is assiduously adhered to. Child Labor must be eradicated at all cost. Child Labor means that the very soul of the nation has been ravished and that the petite hands and innocent minds have been ravaged for economic or personal gains. Faiz Ahmed Faiz, the poet par excellence so vividly put it:
Jub kabhi bikta hai bazaar mein mazdoor ka gost
Shahraho pe gharibon ka lahu behta hai
Aag si seenay mein reh reh kay ubalti hai na puch
Apnay dil per mujhe kaboo he nahin rehta
************************************************
March 19, 2000
TUTOR WANTED : SMUGGLER OR KHEPIA
I am an industrialist manufacturing fabrics and apparel for the domestic market. Over the years, due to diligent quality control, extensive research, and aggressive marketing, the company products have established a superior status in the market. Moreover, the present situation is such that some of our products have become benchmarks with which the competitors’ products are usually compared. However, our biggest competitor has always been smuggled cloth.
The smuggled cloth used to be brought in by petty couriers, known as Khepias. They would go on a joyride to Bangkok, courtesy the financiers, and on return would bring in the cloth. Gradually, this became big business and pretty soon, the organized sector of the smugglers entered this field. Now, the cloth comes in containers, in full view of the controlling authorities, in total defiance of the laws of the land, and in complete contempt for the industrialization process of the nation. The cloth is openly sold in wholesale markets, in fancy retail outlets, and to apparel manufacturers who make garments out of foreign material. At the same time, there is also a lot of inflow of apparel smuggled in from alien shores. Thailand, Dubai, Indonesia, and even India, are major suppliers of foreign cloth and garments to Pakistan.
What is more pathetic is that inspite of the hurried decision of the Government to reduce the import duty on fabrics to 35% without taking into consideration the reduction of duty on imported yarn, there is more emphasis on smuggling of the fabrics rather than importing thru official channels. In this way, the cost difference between the smuggled fabrics and the locally produced goods is attractive enough for the proliferation of smuggled goods. The input cost for local fabrics is high because of atleast 84% front-loading on imported yarn, exorbitant rates of utilities, escalating labor rates, dwindling value of the Rupee, abnormal increase in "invisible expenses" (Translation: bribes, speed money, extortion), and the general inflationary trends.
Meanwhile, the government spurred on by the IMF mandarins is resolutely determined to impose General Sales Tax on the manufacturers of textiles and garments. Without going into an extensive exercise, without looking at the bottlenecks and hurdles, and without ascertaining the expected outcome, the CBR has been ordered to JUST DO IT. There is no streamlined mechanism to plug in the loopholes, there is no sound and fool-proof method of coordinating the adjustments and modifications, and there is no established system of inducing the suppliers to provide documentation for the inputs into the product.
Furthermore, the industrialists will become prisoners of the discretionary, arbitrary, and coercive powers of the concerned officers. There will be frequent squabbles with the sales tax staff, there will be continued visitations by all kinds of agencies who will keep on demanding information which the sales tax Collectorate will already have, and there will be so much discomfiture and dejection that the industrialists will be forced to cower and grovel into succumbing to the eventual and highly popular "muk-muka".
The organized sector in fabrics and garments will not only then face the scourge of smuggled products, or wrestle with the lower cost products from the tax-free and hidden unorganized industries, or grapple with the ever-increasing input cost, but now they will have to digest the mandates of the sales tax Collectorate. Another nine-headed monster will be let loose resulting in an environment, which will be a scene out of a horror movie.
All this will, in the long run, spell disaster for the local industry. The manufacturers will be in a tremendous bind both financially and spiritually because they will be unable to survive in this expected scenario. Why would a consumer pay more in the shape of sales tax for ready-made garments, when custom-made would seem cheaper? Why would the retailer handle goods that cost him more, that are elaborately documented, and that are difficult to market because of the discount culture prevalent in the domestic market? Why would the manufacturer go around hawking his goods, which are subject to sales tax, when he also has to bear the added financial cost because the retailers are very lethargic in discharging their account liabilities promptly. (More often, the retailers seldom pay before six months.)
Therefore, I, as an industrialist manufacturing both fabrics and apparel, have to do some clear-headed thinking ASAP. I also am not a defeatist. Let me make that unequivocal. However, what should I do to survive? Well, in the doomsday scenario drawn above, there is scant chance of survival. It will be extremely difficult to fight a bear with both my hands tied behind my back. It seems that the final curtain will soon fall and the audience will slowly walk away. Years of dedication and devotion, using all efforts and skills, may go to rot. All because of a haphazard system envisioned by those who have no idea how to run an industry.
In my case, I take this opportunity to request the hordes of smugglers and khepias to please contact me thru this publication immediately. I need training in how to smuggle goods into the country, both overtly and in any other manner. I need information on how to circumvent the watchful eyes of the defenders of the borders. I need tutoring in the intricacies of this business and how to do it and remain scot-free. The smuggling regime is a very lucrative venture. I want a part of it. Sounds much better than an industry.
I can assure my teachers that I will be a really good student. I can start work anytime after June 12, 1996, when the jovial Makhdoom presents the budget to 207 bigwigs who would not know what he is talking about, and where the Treasury members, rather then listening to the Minister, would be watching the Prime Minister and whenever she would applaud, they would do like-wise in a sycophantic way. I can also pledge that I will not betray their identity nor will I intrude on their established territories. I will ensure that I carve out a niche for my very own.
I am sanguine that in the not too future, I will be better off than those of my counterparts in the industry who would be still trying to make their units viable. I would like to caution them, however, that once I get into the smuggling field, I will make life hell for them. That’s how it is gonna be! They’ll, of course, gradually follow my course as they have been doing so all these years, because I’m after all a trailblazer in my field. They know that too.
================
July 06-2002
The smuggled cloth used to be brought in by petty couriers, known as Khepias. They would go on a joyride to Bangkok, courtesy the financiers, and on return would bring in the cloth. Gradually, this became big business and pretty soon, the organized sector of the smugglers entered this field. Now, the cloth comes in containers, in full view of the controlling authorities, in total defiance of the laws of the land, and in complete contempt for the industrialization process of the nation. The cloth is openly sold in wholesale markets, in fancy retail outlets, and to apparel manufacturers who make garments out of foreign material. At the same time, there is also a lot of inflow of apparel smuggled in from alien shores. Thailand, Dubai, Indonesia, and even India, are major suppliers of foreign cloth and garments to Pakistan.
What is more pathetic is that inspite of the hurried decision of the Government to reduce the import duty on fabrics to 35% without taking into consideration the reduction of duty on imported yarn, there is more emphasis on smuggling of the fabrics rather than importing thru official channels. In this way, the cost difference between the smuggled fabrics and the locally produced goods is attractive enough for the proliferation of smuggled goods. The input cost for local fabrics is high because of atleast 84% front-loading on imported yarn, exorbitant rates of utilities, escalating labor rates, dwindling value of the Rupee, abnormal increase in "invisible expenses" (Translation: bribes, speed money, extortion), and the general inflationary trends.
Meanwhile, the government spurred on by the IMF mandarins is resolutely determined to impose General Sales Tax on the manufacturers of textiles and garments. Without going into an extensive exercise, without looking at the bottlenecks and hurdles, and without ascertaining the expected outcome, the CBR has been ordered to JUST DO IT. There is no streamlined mechanism to plug in the loopholes, there is no sound and fool-proof method of coordinating the adjustments and modifications, and there is no established system of inducing the suppliers to provide documentation for the inputs into the product.
Furthermore, the industrialists will become prisoners of the discretionary, arbitrary, and coercive powers of the concerned officers. There will be frequent squabbles with the sales tax staff, there will be continued visitations by all kinds of agencies who will keep on demanding information which the sales tax Collectorate will already have, and there will be so much discomfiture and dejection that the industrialists will be forced to cower and grovel into succumbing to the eventual and highly popular "muk-muka".
The organized sector in fabrics and garments will not only then face the scourge of smuggled products, or wrestle with the lower cost products from the tax-free and hidden unorganized industries, or grapple with the ever-increasing input cost, but now they will have to digest the mandates of the sales tax Collectorate. Another nine-headed monster will be let loose resulting in an environment, which will be a scene out of a horror movie.
All this will, in the long run, spell disaster for the local industry. The manufacturers will be in a tremendous bind both financially and spiritually because they will be unable to survive in this expected scenario. Why would a consumer pay more in the shape of sales tax for ready-made garments, when custom-made would seem cheaper? Why would the retailer handle goods that cost him more, that are elaborately documented, and that are difficult to market because of the discount culture prevalent in the domestic market? Why would the manufacturer go around hawking his goods, which are subject to sales tax, when he also has to bear the added financial cost because the retailers are very lethargic in discharging their account liabilities promptly. (More often, the retailers seldom pay before six months.)
Therefore, I, as an industrialist manufacturing both fabrics and apparel, have to do some clear-headed thinking ASAP. I also am not a defeatist. Let me make that unequivocal. However, what should I do to survive? Well, in the doomsday scenario drawn above, there is scant chance of survival. It will be extremely difficult to fight a bear with both my hands tied behind my back. It seems that the final curtain will soon fall and the audience will slowly walk away. Years of dedication and devotion, using all efforts and skills, may go to rot. All because of a haphazard system envisioned by those who have no idea how to run an industry.
In my case, I take this opportunity to request the hordes of smugglers and khepias to please contact me thru this publication immediately. I need training in how to smuggle goods into the country, both overtly and in any other manner. I need information on how to circumvent the watchful eyes of the defenders of the borders. I need tutoring in the intricacies of this business and how to do it and remain scot-free. The smuggling regime is a very lucrative venture. I want a part of it. Sounds much better than an industry.
I can assure my teachers that I will be a really good student. I can start work anytime after June 12, 1996, when the jovial Makhdoom presents the budget to 207 bigwigs who would not know what he is talking about, and where the Treasury members, rather then listening to the Minister, would be watching the Prime Minister and whenever she would applaud, they would do like-wise in a sycophantic way. I can also pledge that I will not betray their identity nor will I intrude on their established territories. I will ensure that I carve out a niche for my very own.
I am sanguine that in the not too future, I will be better off than those of my counterparts in the industry who would be still trying to make their units viable. I would like to caution them, however, that once I get into the smuggling field, I will make life hell for them. That’s how it is gonna be! They’ll, of course, gradually follow my course as they have been doing so all these years, because I’m after all a trailblazer in my field. They know that too.
================
July 06-2002
DON’T TRAUMATIZE THE BUYERS OF THE TRAUMA CENTER
PRIVATIZATION. The demise of the Cold War syndrome, the “glasnost” in the economic policies of developing countries, and the trend towards restructuring of the government’s role in economic activities brought into fore the concept of Privatization. The reality dawned on those countries that had a centralized base of authority that indulging in activities that should be the domain of the private sector, where entrepreneurship is more prominent, was now proving counter-productive. The state-owned enterprises (SOE) had outlived their purposes, and their performance had resulted in a strain on governmental resources, in dwindling productivity, in bloated and worthless human resources, in destruction of the system of merit, and in fostering nepotism, corruption, and profligacy.
PRIVATIZATION: The buzzword of the 1990’s has become a sacred item on the Pakistany government’s economic agenda. Benazir Bhutto initiated the trend but was not able to put it into action. The Nawaz Sharif administration went on this route in a hurried fashion and discarded a lot of SOEs. This syndrome continued in the next two governments headed by both Bhutto and Sharif.
The past few months have seen the privatization process picking up steam with the government determined to divest enterprises that have nothing to do with running the government. Over Rs. 100 billion are squandered away by SOEs every year. However, privatization is being done cautiously and pragmatically. In fact, taking cue from the Privatization Commission in Islamabad, the Sindh Privatization Commission (SPC) is also bent upon energizing the divestiture process and reversing the trend under which the state indulged in activities not commensurate with what it should normally do.
Keeping this factor in mind, the SPC invited tenders for the incomplete Karachi Trauma Center (KTC). The Sindh government under the dynamic leadership of Governor Muhammadmian Soomro rightly decided that it would be a tall order to complete the project, to put it into operation, and to fund it on a continuous basis. No wonder, after twelve long years, the edifice presents a forlorn look and is a manifestation of good planning gone to waste. Meantime, countless bomb blasts, major accidents, and other tragic happenings made people wonder whether this City of Lights would ever have a trauma center to cater to these calamities.
Finally, on March 30, 2002, the SPC called in bids for the KTC. Hamdard Foundation put in a bid for Rupees 70 million while Baqai Foundation offered to purchase it for Rs. 30 million. The Memon Health and Education Foundation (MHEF) came up with a Rs. 51 million bid. Chairman of SPC, Nasir Ali Shah Bukhari, while rejecting the bids informed the bidders that independent surveyors had assessed its real value at Rs. 92 million and thus it would be necessary to have an open auction to spiral up the bid prices. In this process, MHEF jacked up its offer to Rs. 100 million that turned up to be the highest offer for KTC. The SPC Chairman declared that the bid surpassed the assessed price and thus he congratulated MHEF office-bearers for their generous bid. It is hoped that the Sindh Cabinet would soon give its acceptance to the bid.
The word privatization is anathema to many in the government who see their perks and privileges disappear when the enterprise is privatized. The workers too at times do not appreciate if there are private sector owners because their freedom to have their own set of rules becomes restricted. The losers in the bidding process, at times, become disturbed when they see a good thing going out of their control. Alas, this is happening to KTC also. There has been a concerted press campaign being conducted to discredit the buyers, i.e. the Memons, and to thwart the privatization of this center. "An emergency sell-off" written by Arif Jamshaid and published in The News on Sunday on May 12, 2002, is a case in point.
Mr. Jamshaid has tried to present just one side of the divestiture without taking the point of view of the buyers or the SPC or even those who would be utilizing the facilities of this center. The article is divided into two parts; one talks about the KTC and the other part is a detailed outlook of what senior citizens need to survive in this country. The portion on KTC is full of inaccuracies while the write-up on senior citizens has nothing whatsoever to do with the KTC and its facilities. It is then simply deduced that the writer has been prodded into writing an article presenting biased one-sided rumblings. He should have heeded the advice of St. Augustine who stated, "Hear the other side".
Mr. Jamshaid should have informed his readers about the people behind the MHEF. Is it a group of land grabbers? Is it a group of smugglers, or bank defaulters, or political pygmies? No sir. This Foundation has some of the leading Memon personalities who are either managing huge conglomerates, providing employment to thousands, and contributing billions to the Treasury, or are well known professionals who have a formidable client base, or those social workers who are managing welfare hospitals that are examples of excellence in healthcare. The Executive Board consists of Memon luminaries as Mr. Peer Muhammad Diwan, the Chairman of the Gatron Group of Industries, whose annual sales is in billions and who spends more time in public and social welfare activities rather than running his own business empire. There is Haji Sharif Bilwani of the Gani & Tayyab Group who is an icon in the cloth and yarn market and is the President of the Bantva Jamaat. (Edhi, Razak Dawood, the Dada family, the Adam family, the Balagamwala family, etc are from this Bantva Jamaat). Then the Directors of the Al-Karam Textile Group, the famous Chartered Accountant, Yusuf Adil, industrialists Alimuhammad Tabba, Ejaz Saya, Zubair Amin Motiwala and Hanif Godil from England, and of course, Mr. Pirmuhammad Kalia, who oversees the Patel Hospital and is a leading social worker of the community.
What is the MHEF? It is a Foundation set up by Memon philanthropists with the view to providing quality medical and health facilities to people at pocket-book friendly rates and even to provide it gratis out of the proposed endowment fund to be set up exclusively for KTC. The Foundation would not be asking for funds from the government as this would not be a private-public partnership where the government provides the funds and the sponsors enjoy the icing. The MHEF would not make the KTC a commercial venture but it would be a non-profit, welfare-oriented, and accessible-to-all endeavor. It is envisaged that Nurses Training and Medical Educational facilities would also be set up to prepare a Human Resource base for further enhancement of medical facilities.
The Memons are already successfully running many quality-oriented health facilities where the poor and needy are catered and where free treatment is routinely provided to all those who need it. Bantva Anis Hospital, Patel Hospital, Jamal Noor Hospital, Memon Hospital, etc come to mind and are testimony to the altruism of the Memon community. The space is limited, otherwise there is a long list of what the Memons are doing for the welfare of the people in this country. Who has ambulances, Edhi, or the government? The MHEF has people who are experienced in running welfare hospitals and they are at a vantage position to efficiently manage this enterprise too. If only Mr. Jamshaid had bothered to find out the facts about the community he is accusing of usurping the KTC.
Fasilay-e-shehr Mein Paidaa Key-ay Hain Sub Darr Mein Nay
Kisi Bhi Bab-e-Riyat Se Mein Nahin Ayah
Mr. Jamshaid has already concluded that the Memons would sub-divide the plot and sell off 9.48 acres out of the 11.48 acres of the complex. Fantastic. This is the hackneyed argument always put up by opponents of the privatization process that the buyers would sell off property. For the convenience of the writer, it is pertinent to point out that MHEF has agreed to buy an incomplete KTC for Rs 100 million. The Memons have pledged to pump in another Rs 450-500 million to build it, to provide the equipment, and to set it in motion. Is the Sindh government ready to do that? Does this pledge not offset the accusation that the Memons would, as soon as they got possession, sell the measly 9.48 acres? Is Mr. Jamshaid really on the level? The MHEF has proposed to add to the already available land because they plan to expand the KTC, not to shrink it and make a fast killing.
Mr. Jamshaid states that the Nazim-e-Ala, Mr. Niamatullah Khan has opposed privatization of KTC. Here again, the writer is way off mark. A month ago, while speaking at a Bantva Jamaat Dinner in honor of Mr. Pirmuhammad Kalia, the Nazim-e-Ala categorically stated that though he is against privatization, he is all for any such privatization that is in the interest of the people, and while warmly lauding the efforts of MHEF in this regard, complimented the Foundation for taking such a bold step. Mr. Jamshaid can go to the office of the City Father and verify it himself. Mr. Jamshaid needs to be current in his outlook or he would make himself a laughingstock at the Karachi Press Club.
With apologies to Dr Shershah Syed, the esteemed Secretary General of PMA, wouldn't it have been more appropriate if he had asked himself the simple question: Since the project was in doldrums for the last 12 years, since the Sindh government was not serious about putting in more money to complete the project, and since the PMA itself did not take the initiative to provide funds and expertise to this project, why shouldn't private sector philanthropists do it for the good of the populace? Opposing the project for the sake of opposition is not justified. Has the good doctor himself talked to MHEF? Does he know the background of the MHEF? How can he then unilaterally assume that it is an "absurd decision" to privatize KTC because the private party would be minting money. How callous and apathetic can one get without ascertaining the facts and just making venomous statements. The sad fact is that he, himself, says that "the city's hospitals cannot handle major disasters and there is an immediate need to strengthen the emergency centers and burns ward at those institutions." Suppose the bomb that killed the French would have exploded at around noon time rather than the early morning hours? What have been the figures of dead and injured? It sends shivers up the spine just to even think about it. Are Civil or Jinnah Hospitals equipped to handle a calamity of this magnitude? Dr. Shershah and Mr. Jamshaid should contemplate this in the privacy of their offices and they would then understand that the KTC is a must and thanx to the Memons, it would be in operation within a couple of years.
Governor Soomro and the Sindh Cabinet members are sincerely urged to grant approval to the sale of KTC to the MHEF on an imperative basis. Every minute delayed is a loss to the nation. The citizens' lives are paramount, and facilities such as the KTC are crucial in these harrowing times. The heartless rabble-rousers, the ill-informed writers, the unfamiliar doctors, and the avaricious government officials, are rather more self-centered and do not appreciate that the lives of the citizens should be improved. Thus, they all got together to kick dust so that the KTC lies listless as a reminder of governmental nonchalance and neglect, the citizens remain deprived of basic facilities, and the trauma center buyers are traumatized. Then vested interests would take over and the story would be repeated all over again at the privatization of another enterprise.
Dushman Bhi Toh Such Poochoh Toh Mohsin Hain Hamaray
In Sub Ki Badolat He Toh Izzat Hai Hamari
=======================================
May 13, 2002
PRIVATIZATION: The buzzword of the 1990’s has become a sacred item on the Pakistany government’s economic agenda. Benazir Bhutto initiated the trend but was not able to put it into action. The Nawaz Sharif administration went on this route in a hurried fashion and discarded a lot of SOEs. This syndrome continued in the next two governments headed by both Bhutto and Sharif.
The past few months have seen the privatization process picking up steam with the government determined to divest enterprises that have nothing to do with running the government. Over Rs. 100 billion are squandered away by SOEs every year. However, privatization is being done cautiously and pragmatically. In fact, taking cue from the Privatization Commission in Islamabad, the Sindh Privatization Commission (SPC) is also bent upon energizing the divestiture process and reversing the trend under which the state indulged in activities not commensurate with what it should normally do.
Keeping this factor in mind, the SPC invited tenders for the incomplete Karachi Trauma Center (KTC). The Sindh government under the dynamic leadership of Governor Muhammadmian Soomro rightly decided that it would be a tall order to complete the project, to put it into operation, and to fund it on a continuous basis. No wonder, after twelve long years, the edifice presents a forlorn look and is a manifestation of good planning gone to waste. Meantime, countless bomb blasts, major accidents, and other tragic happenings made people wonder whether this City of Lights would ever have a trauma center to cater to these calamities.
Finally, on March 30, 2002, the SPC called in bids for the KTC. Hamdard Foundation put in a bid for Rupees 70 million while Baqai Foundation offered to purchase it for Rs. 30 million. The Memon Health and Education Foundation (MHEF) came up with a Rs. 51 million bid. Chairman of SPC, Nasir Ali Shah Bukhari, while rejecting the bids informed the bidders that independent surveyors had assessed its real value at Rs. 92 million and thus it would be necessary to have an open auction to spiral up the bid prices. In this process, MHEF jacked up its offer to Rs. 100 million that turned up to be the highest offer for KTC. The SPC Chairman declared that the bid surpassed the assessed price and thus he congratulated MHEF office-bearers for their generous bid. It is hoped that the Sindh Cabinet would soon give its acceptance to the bid.
The word privatization is anathema to many in the government who see their perks and privileges disappear when the enterprise is privatized. The workers too at times do not appreciate if there are private sector owners because their freedom to have their own set of rules becomes restricted. The losers in the bidding process, at times, become disturbed when they see a good thing going out of their control. Alas, this is happening to KTC also. There has been a concerted press campaign being conducted to discredit the buyers, i.e. the Memons, and to thwart the privatization of this center. "An emergency sell-off" written by Arif Jamshaid and published in The News on Sunday on May 12, 2002, is a case in point.
Mr. Jamshaid has tried to present just one side of the divestiture without taking the point of view of the buyers or the SPC or even those who would be utilizing the facilities of this center. The article is divided into two parts; one talks about the KTC and the other part is a detailed outlook of what senior citizens need to survive in this country. The portion on KTC is full of inaccuracies while the write-up on senior citizens has nothing whatsoever to do with the KTC and its facilities. It is then simply deduced that the writer has been prodded into writing an article presenting biased one-sided rumblings. He should have heeded the advice of St. Augustine who stated, "Hear the other side".
Mr. Jamshaid should have informed his readers about the people behind the MHEF. Is it a group of land grabbers? Is it a group of smugglers, or bank defaulters, or political pygmies? No sir. This Foundation has some of the leading Memon personalities who are either managing huge conglomerates, providing employment to thousands, and contributing billions to the Treasury, or are well known professionals who have a formidable client base, or those social workers who are managing welfare hospitals that are examples of excellence in healthcare. The Executive Board consists of Memon luminaries as Mr. Peer Muhammad Diwan, the Chairman of the Gatron Group of Industries, whose annual sales is in billions and who spends more time in public and social welfare activities rather than running his own business empire. There is Haji Sharif Bilwani of the Gani & Tayyab Group who is an icon in the cloth and yarn market and is the President of the Bantva Jamaat. (Edhi, Razak Dawood, the Dada family, the Adam family, the Balagamwala family, etc are from this Bantva Jamaat). Then the Directors of the Al-Karam Textile Group, the famous Chartered Accountant, Yusuf Adil, industrialists Alimuhammad Tabba, Ejaz Saya, Zubair Amin Motiwala and Hanif Godil from England, and of course, Mr. Pirmuhammad Kalia, who oversees the Patel Hospital and is a leading social worker of the community.
What is the MHEF? It is a Foundation set up by Memon philanthropists with the view to providing quality medical and health facilities to people at pocket-book friendly rates and even to provide it gratis out of the proposed endowment fund to be set up exclusively for KTC. The Foundation would not be asking for funds from the government as this would not be a private-public partnership where the government provides the funds and the sponsors enjoy the icing. The MHEF would not make the KTC a commercial venture but it would be a non-profit, welfare-oriented, and accessible-to-all endeavor. It is envisaged that Nurses Training and Medical Educational facilities would also be set up to prepare a Human Resource base for further enhancement of medical facilities.
The Memons are already successfully running many quality-oriented health facilities where the poor and needy are catered and where free treatment is routinely provided to all those who need it. Bantva Anis Hospital, Patel Hospital, Jamal Noor Hospital, Memon Hospital, etc come to mind and are testimony to the altruism of the Memon community. The space is limited, otherwise there is a long list of what the Memons are doing for the welfare of the people in this country. Who has ambulances, Edhi, or the government? The MHEF has people who are experienced in running welfare hospitals and they are at a vantage position to efficiently manage this enterprise too. If only Mr. Jamshaid had bothered to find out the facts about the community he is accusing of usurping the KTC.
Fasilay-e-shehr Mein Paidaa Key-ay Hain Sub Darr Mein Nay
Kisi Bhi Bab-e-Riyat Se Mein Nahin Ayah
Mr. Jamshaid has already concluded that the Memons would sub-divide the plot and sell off 9.48 acres out of the 11.48 acres of the complex. Fantastic. This is the hackneyed argument always put up by opponents of the privatization process that the buyers would sell off property. For the convenience of the writer, it is pertinent to point out that MHEF has agreed to buy an incomplete KTC for Rs 100 million. The Memons have pledged to pump in another Rs 450-500 million to build it, to provide the equipment, and to set it in motion. Is the Sindh government ready to do that? Does this pledge not offset the accusation that the Memons would, as soon as they got possession, sell the measly 9.48 acres? Is Mr. Jamshaid really on the level? The MHEF has proposed to add to the already available land because they plan to expand the KTC, not to shrink it and make a fast killing.
Mr. Jamshaid states that the Nazim-e-Ala, Mr. Niamatullah Khan has opposed privatization of KTC. Here again, the writer is way off mark. A month ago, while speaking at a Bantva Jamaat Dinner in honor of Mr. Pirmuhammad Kalia, the Nazim-e-Ala categorically stated that though he is against privatization, he is all for any such privatization that is in the interest of the people, and while warmly lauding the efforts of MHEF in this regard, complimented the Foundation for taking such a bold step. Mr. Jamshaid can go to the office of the City Father and verify it himself. Mr. Jamshaid needs to be current in his outlook or he would make himself a laughingstock at the Karachi Press Club.
With apologies to Dr Shershah Syed, the esteemed Secretary General of PMA, wouldn't it have been more appropriate if he had asked himself the simple question: Since the project was in doldrums for the last 12 years, since the Sindh government was not serious about putting in more money to complete the project, and since the PMA itself did not take the initiative to provide funds and expertise to this project, why shouldn't private sector philanthropists do it for the good of the populace? Opposing the project for the sake of opposition is not justified. Has the good doctor himself talked to MHEF? Does he know the background of the MHEF? How can he then unilaterally assume that it is an "absurd decision" to privatize KTC because the private party would be minting money. How callous and apathetic can one get without ascertaining the facts and just making venomous statements. The sad fact is that he, himself, says that "the city's hospitals cannot handle major disasters and there is an immediate need to strengthen the emergency centers and burns ward at those institutions." Suppose the bomb that killed the French would have exploded at around noon time rather than the early morning hours? What have been the figures of dead and injured? It sends shivers up the spine just to even think about it. Are Civil or Jinnah Hospitals equipped to handle a calamity of this magnitude? Dr. Shershah and Mr. Jamshaid should contemplate this in the privacy of their offices and they would then understand that the KTC is a must and thanx to the Memons, it would be in operation within a couple of years.
Governor Soomro and the Sindh Cabinet members are sincerely urged to grant approval to the sale of KTC to the MHEF on an imperative basis. Every minute delayed is a loss to the nation. The citizens' lives are paramount, and facilities such as the KTC are crucial in these harrowing times. The heartless rabble-rousers, the ill-informed writers, the unfamiliar doctors, and the avaricious government officials, are rather more self-centered and do not appreciate that the lives of the citizens should be improved. Thus, they all got together to kick dust so that the KTC lies listless as a reminder of governmental nonchalance and neglect, the citizens remain deprived of basic facilities, and the trauma center buyers are traumatized. Then vested interests would take over and the story would be repeated all over again at the privatization of another enterprise.
Dushman Bhi Toh Such Poochoh Toh Mohsin Hain Hamaray
In Sub Ki Badolat He Toh Izzat Hai Hamari
=======================================
May 13, 2002
Pakistan’s traditional security challenges and response
PAKISTAN is on the global radar nearly every day. The world leaders, the universal media, and the international analysts and think-tanks have their daily dose of news and views from Pakistan. The country has never been so embroiled in safeguarding its sovereignty and its security than in these intense and severe times.
EXTERNAL THREATS:
• GLOBAL WAR ON TERROR:
PAKISTAN has, over the past some years, become the flashpoint as well as the most important country in the Global War on Terror. The Al-Qaeda obsession, the fear of Pakistan's strategic assets falling into the hands of militants and extremists, the Western penchant for containing political Islam, the ever-increasing thirst for Middle Eastern oil, the fascination with mineral resources in Afghanistan, the domineering and influencing China factor, and the fixated concern for the safety and defense of Israel, have all resulted into an ominous scenario for the Islamic countries, with the paramount brunt being borne by Pakistan.
• MUSLIM BATTLEGROUND:
PAKISTAN has, directly or thru outside influence, become one of those Muslim countries that is now a battleground where the armed forces of various countries have joined as a coalition to achieve the American great game objectives enumerated above. The oft-repeated American mantra of "Do More" has created a deep chasm between the Washington's flawed Af-Pak policy and the pragmatism of the High Command in Rawalpindi.
• GEO-POLITICAL LOCATION:
PAKISTAN is in an unenviable geo-politically strategic location and is the sole Islamic nuclear power. It also borders China, India, Iran, and Afghanistan and thus any vibrations from these countries are strongly experienced within the borders of this nation. Pakistan's international commitments to the Coalition Forces has put a disastrous dent in the already-strapped financial resources of the country, although since 2002, the United States has pumped in over US$ 10 billion in security-related support and nearly US$ 4 billion in economic support.
• PROXY WAR:
PAKISTAN has also, for many decades, become involved in a proxy war between the two major sects of Islam. This has primarily been supported by Saudi Arabia and Iran thru financial resources, thru ideological guidance, and thru tapping of the myopic approach of the clergy of both the sects in Pakistan. This has also intensified with the rise of militancy and extremism that has played havoc with the peaceful internal environment of Pakistan.
• INDIAN INTERFERENCE:
PAKISTAN has also been embroiled in the never-ending militaristic, propagandistic, and diplomatic onslaught by the traditional nemesis India. The non-resolution of the Kashmir issue and the atrocities committed in the Valley by the Indian armed forces, New Delhi's skewed mindset for blaming Pakistan for every event or problem faced by India even if these are concoctions or perpetrated by third forces, the blatant interference in Balochistan by Indian-supported militants, and the demonic influence of India in instigating Kabul against Pakistan have played a disastrous toll on the resources of Pakistan.
WAY FORWARD:
PAKISTAN policymakers have to juggle various options in order to maintain its relationship with the Coalition Forces and at the same time, address the concerns of citizens who see Pakistan being a pawn in what a former American National Security Advisor, Zbigniew Brzezinski, referred to as "The Grand Chessboard". At the present moment, there is an exploding anti-American sentiment and its negative consequences are directed towards the political and at times the military hierarchy. The army is the last bastion of assurance for the people and thus this must be further consolidated and strengthened. This requires that a proper approach should be initiated by the GHQ in which the denizens of Pakistan are taken into confidence and the ground realities are presented thru a correct media approach. It is imperative that the population be mobilized, it is important that the country's strategic assets must be modernized and deployed within a given time frame, the nation's political elements must have the stamina and critical mass to generate diplomatic and moral support for the armed forces, and more importantly, trade and industry must provide the needed back-up thru mobilization of financial resources, thru international image building, and thru private–public partnerships in areas crucial for the military to become a potent power. The Ministry of Foreign Affairs needs to be pro-active in economic diplomacy, in promoting a soft image of the country, and being aggressive in public international relations. This rethinking is essential in the countering the negative implications of external threats as well as removing the perception that Pakistan is subservient to Washington's dictates.
INTERNAL THREATS:
• ISSUES:
PAKISTAN also suffers from the ignominy of being in a quagmire of internal problems that either are fallout from the effects of the external threats or are also self-created or self-generated due to non-resolution or diffidence to these issues in the past. These threats are as follows:
• ECONOMIC FRAGILITY:
PAKISTAN has witnessed a severe economic downturn over the past couple of years. The nation has seen inflation inching towards the 20% mark while the State Bank of Pakistan is religiously increasing the discount rate in every Monetary Policy announcement. The unemployment lines are increasing daily while industrial investment has stagnated. Non-performing bank loans have breached the Rs 500 billion threshold, while the government keeps obtaining loans from commercial banks and the State Bank of Pakistan. The foreign exchange reserves are positive and at an all-time high, but at the same time, the external debt is over US$ 57 billion and growing. IMF has blocked the release of the next Tranche citing the inability of the government to undertake taxation reforms, specifically Reformed General Sales Tax (RGST).
• NATIONAL NON-INTEGRATION:
PAKISTAN is currently facing the negative ramifications from various actions taken or ignored by successive governments especially in trying to achieve national integration. The hard stand taken by the Musharraf government in the Kalabagh Dam issue pitched Punjab against the three smaller Provinces. The Akber Bugti episode alienated a significant percentage of Balochis resulting in the influence of the Balochistan Liberation Army which itself became fodder for Indian and other countries' manipulations and machinations. The renaming of NWFP as KPK brought Pakhtuns and non-Pakhtuns at loggerheads and the issue continues to create heartburns. Even the disastrous Lal Masjid imbroglio created rifts within the country. Recently, the exercise to amend the Law of Blasphemy has further vitiated the already traumatized nation. Punjab’s Governor became a fatal victim due to his vociferous views on this law. The obsession of various political parties to use the parochial card also aggravates the delicate environment. While PML (N) uses the Punjab Card, the PPP depends on flashing the Sindh Card to achieve desired objectives. Of course, the Raymond Davis problem is another gigantic headache for the government and other political parties.
• SECTARIAN DIVERGENCE:
PAKISTAN also suffers from the menace of sectarian divide. The Sunni-Shia issue is exploited by inimical forces to create a disturbing law and order situation in the country. The Deobandi and Barelvi routinely fight over ideology and rituals and this has been intensified by suicide attacks on shrines and mosques. Ahmadis, Christians, and Hindus also face threats to their lives, property, and places of worship. Hindu families prefer migration to India rather than living in perpetual fear. Theocracy has managed to exert control over many aspects of daily lives of citizens. Unrestrained leeway is accorded to rabble-rousers who cash in on the misguided sentiments of people and use this to further their own agenda. The misuse of the Madrassahs has eroded the sanctity of these important learning institutions
• ETHNIC POLARIZATION:
PAKISTAN is also facing suffocation due to ethnic distrust or ethnic hegemony. The emergence of ethnic-based political parties has further intensified this polarization. The country is still trying to figure out how many ethnic nationalities are dominant in the country. Turf wars between the land mafia or the drug mafia or even criminals are portrayed as ethnic clashes and this tainted colorization destroys civic peace and harmony. Karachi is a perennial hostage to the conflict created by the two major ethnic groups, each with its own vituperative agenda and blatant disregard for the consequences.
• POLITICAL STABILITY:
PAKISTAN is endowed with juvenile politicians who are still unsure whether they have grown out of the influence of military rule since they still harbor the draconian tendencies and wield the proverbial machete on real or perceived political enemies. The concept of a democratic order is espoused ad nauseam and every action or statement against them is defined as an anti-democracy offensive. Opposition for the sake of opposition is the norm and the advent of talk shows on electronic media has further stoked up this instability and this infighting. Moral as well as material corruption has generally been the hallmark of a political government and this has ensued into a situation where institutions are brought to the precipice of disaster and where the country's resources, whether these are financial, human, natural, infrastructure, or strategic are ravaged, plundered, and brazenly exploited.
WAY FORWARD:
PAKISTAN is a country that in the past six decades has been subject to five or six wars, that has seen devastation due to floods and earthquakes, that has never reconciled to the fact that all its residents are Pakistanis firsts, that has seen political experimentation that has always boomeranged diabolically on the experimenters, and in the process, brought pain and sorrow to the citizens. What is imperative is a sincere effort to achieve reconciliation and integration that would usher in progress and prosperity, and would open new avenues of economic support and improvement in the quality of life for the citizens. What is essential is that intellectuals and social activists must ensure that people are motivated towards achieving a better and livable Pakistan rather than developing an apathetic mindset that gradually erodes every sense of nationalistic participation.
PAKISTAN has the largest percentage of youth in the world. 60% of the population is under 25 years of age. At this moment, the present, as well as the future, looks bleak for them. This negativism leads to resignation and that in turn impels them to drift towards anti-state elements who then use these young people as human cannonballs. The passion and energy of the youth have to be harnessed in a positive mode thru a visionary process that can be possible only when the policymakers themselves become immune to narrow-mindedness and parochial biases. The Armed Forces can play a prominent role in this respect. ISPR can initiate and finance motivational programs that can ignite the fire of patriotism, national integration, and challenges in the youth of today. The business community can contribute towards the development of the youth by supporting programs for entrepreneurship, for skills development, and for venture capitalism. The reason why focus should be on the youth is very logical. Nationalism and patriotism are forgotten words today. The youth of Pakistan must be steered on to the right path as they hold the key to the future prosperity of this motherland. Chinese President Hu Jintao, in his speech to the Chinese Parliament stated, "Let's build a harmonious society in which the no-holds barred economic growth will be replaced with a more socially responsible form of development, with increased spending on education, healthcare and rural infrastructure".
==================
February 16-2011
EXTERNAL THREATS:
• GLOBAL WAR ON TERROR:
PAKISTAN has, over the past some years, become the flashpoint as well as the most important country in the Global War on Terror. The Al-Qaeda obsession, the fear of Pakistan's strategic assets falling into the hands of militants and extremists, the Western penchant for containing political Islam, the ever-increasing thirst for Middle Eastern oil, the fascination with mineral resources in Afghanistan, the domineering and influencing China factor, and the fixated concern for the safety and defense of Israel, have all resulted into an ominous scenario for the Islamic countries, with the paramount brunt being borne by Pakistan.
• MUSLIM BATTLEGROUND:
PAKISTAN has, directly or thru outside influence, become one of those Muslim countries that is now a battleground where the armed forces of various countries have joined as a coalition to achieve the American great game objectives enumerated above. The oft-repeated American mantra of "Do More" has created a deep chasm between the Washington's flawed Af-Pak policy and the pragmatism of the High Command in Rawalpindi.
• GEO-POLITICAL LOCATION:
PAKISTAN is in an unenviable geo-politically strategic location and is the sole Islamic nuclear power. It also borders China, India, Iran, and Afghanistan and thus any vibrations from these countries are strongly experienced within the borders of this nation. Pakistan's international commitments to the Coalition Forces has put a disastrous dent in the already-strapped financial resources of the country, although since 2002, the United States has pumped in over US$ 10 billion in security-related support and nearly US$ 4 billion in economic support.
• PROXY WAR:
PAKISTAN has also, for many decades, become involved in a proxy war between the two major sects of Islam. This has primarily been supported by Saudi Arabia and Iran thru financial resources, thru ideological guidance, and thru tapping of the myopic approach of the clergy of both the sects in Pakistan. This has also intensified with the rise of militancy and extremism that has played havoc with the peaceful internal environment of Pakistan.
• INDIAN INTERFERENCE:
PAKISTAN has also been embroiled in the never-ending militaristic, propagandistic, and diplomatic onslaught by the traditional nemesis India. The non-resolution of the Kashmir issue and the atrocities committed in the Valley by the Indian armed forces, New Delhi's skewed mindset for blaming Pakistan for every event or problem faced by India even if these are concoctions or perpetrated by third forces, the blatant interference in Balochistan by Indian-supported militants, and the demonic influence of India in instigating Kabul against Pakistan have played a disastrous toll on the resources of Pakistan.
WAY FORWARD:
PAKISTAN policymakers have to juggle various options in order to maintain its relationship with the Coalition Forces and at the same time, address the concerns of citizens who see Pakistan being a pawn in what a former American National Security Advisor, Zbigniew Brzezinski, referred to as "The Grand Chessboard". At the present moment, there is an exploding anti-American sentiment and its negative consequences are directed towards the political and at times the military hierarchy. The army is the last bastion of assurance for the people and thus this must be further consolidated and strengthened. This requires that a proper approach should be initiated by the GHQ in which the denizens of Pakistan are taken into confidence and the ground realities are presented thru a correct media approach. It is imperative that the population be mobilized, it is important that the country's strategic assets must be modernized and deployed within a given time frame, the nation's political elements must have the stamina and critical mass to generate diplomatic and moral support for the armed forces, and more importantly, trade and industry must provide the needed back-up thru mobilization of financial resources, thru international image building, and thru private–public partnerships in areas crucial for the military to become a potent power. The Ministry of Foreign Affairs needs to be pro-active in economic diplomacy, in promoting a soft image of the country, and being aggressive in public international relations. This rethinking is essential in the countering the negative implications of external threats as well as removing the perception that Pakistan is subservient to Washington's dictates.
INTERNAL THREATS:
• ISSUES:
PAKISTAN also suffers from the ignominy of being in a quagmire of internal problems that either are fallout from the effects of the external threats or are also self-created or self-generated due to non-resolution or diffidence to these issues in the past. These threats are as follows:
• ECONOMIC FRAGILITY:
PAKISTAN has witnessed a severe economic downturn over the past couple of years. The nation has seen inflation inching towards the 20% mark while the State Bank of Pakistan is religiously increasing the discount rate in every Monetary Policy announcement. The unemployment lines are increasing daily while industrial investment has stagnated. Non-performing bank loans have breached the Rs 500 billion threshold, while the government keeps obtaining loans from commercial banks and the State Bank of Pakistan. The foreign exchange reserves are positive and at an all-time high, but at the same time, the external debt is over US$ 57 billion and growing. IMF has blocked the release of the next Tranche citing the inability of the government to undertake taxation reforms, specifically Reformed General Sales Tax (RGST).
• NATIONAL NON-INTEGRATION:
PAKISTAN is currently facing the negative ramifications from various actions taken or ignored by successive governments especially in trying to achieve national integration. The hard stand taken by the Musharraf government in the Kalabagh Dam issue pitched Punjab against the three smaller Provinces. The Akber Bugti episode alienated a significant percentage of Balochis resulting in the influence of the Balochistan Liberation Army which itself became fodder for Indian and other countries' manipulations and machinations. The renaming of NWFP as KPK brought Pakhtuns and non-Pakhtuns at loggerheads and the issue continues to create heartburns. Even the disastrous Lal Masjid imbroglio created rifts within the country. Recently, the exercise to amend the Law of Blasphemy has further vitiated the already traumatized nation. Punjab’s Governor became a fatal victim due to his vociferous views on this law. The obsession of various political parties to use the parochial card also aggravates the delicate environment. While PML (N) uses the Punjab Card, the PPP depends on flashing the Sindh Card to achieve desired objectives. Of course, the Raymond Davis problem is another gigantic headache for the government and other political parties.
• SECTARIAN DIVERGENCE:
PAKISTAN also suffers from the menace of sectarian divide. The Sunni-Shia issue is exploited by inimical forces to create a disturbing law and order situation in the country. The Deobandi and Barelvi routinely fight over ideology and rituals and this has been intensified by suicide attacks on shrines and mosques. Ahmadis, Christians, and Hindus also face threats to their lives, property, and places of worship. Hindu families prefer migration to India rather than living in perpetual fear. Theocracy has managed to exert control over many aspects of daily lives of citizens. Unrestrained leeway is accorded to rabble-rousers who cash in on the misguided sentiments of people and use this to further their own agenda. The misuse of the Madrassahs has eroded the sanctity of these important learning institutions
• ETHNIC POLARIZATION:
PAKISTAN is also facing suffocation due to ethnic distrust or ethnic hegemony. The emergence of ethnic-based political parties has further intensified this polarization. The country is still trying to figure out how many ethnic nationalities are dominant in the country. Turf wars between the land mafia or the drug mafia or even criminals are portrayed as ethnic clashes and this tainted colorization destroys civic peace and harmony. Karachi is a perennial hostage to the conflict created by the two major ethnic groups, each with its own vituperative agenda and blatant disregard for the consequences.
• POLITICAL STABILITY:
PAKISTAN is endowed with juvenile politicians who are still unsure whether they have grown out of the influence of military rule since they still harbor the draconian tendencies and wield the proverbial machete on real or perceived political enemies. The concept of a democratic order is espoused ad nauseam and every action or statement against them is defined as an anti-democracy offensive. Opposition for the sake of opposition is the norm and the advent of talk shows on electronic media has further stoked up this instability and this infighting. Moral as well as material corruption has generally been the hallmark of a political government and this has ensued into a situation where institutions are brought to the precipice of disaster and where the country's resources, whether these are financial, human, natural, infrastructure, or strategic are ravaged, plundered, and brazenly exploited.
WAY FORWARD:
PAKISTAN is a country that in the past six decades has been subject to five or six wars, that has seen devastation due to floods and earthquakes, that has never reconciled to the fact that all its residents are Pakistanis firsts, that has seen political experimentation that has always boomeranged diabolically on the experimenters, and in the process, brought pain and sorrow to the citizens. What is imperative is a sincere effort to achieve reconciliation and integration that would usher in progress and prosperity, and would open new avenues of economic support and improvement in the quality of life for the citizens. What is essential is that intellectuals and social activists must ensure that people are motivated towards achieving a better and livable Pakistan rather than developing an apathetic mindset that gradually erodes every sense of nationalistic participation.
PAKISTAN has the largest percentage of youth in the world. 60% of the population is under 25 years of age. At this moment, the present, as well as the future, looks bleak for them. This negativism leads to resignation and that in turn impels them to drift towards anti-state elements who then use these young people as human cannonballs. The passion and energy of the youth have to be harnessed in a positive mode thru a visionary process that can be possible only when the policymakers themselves become immune to narrow-mindedness and parochial biases. The Armed Forces can play a prominent role in this respect. ISPR can initiate and finance motivational programs that can ignite the fire of patriotism, national integration, and challenges in the youth of today. The business community can contribute towards the development of the youth by supporting programs for entrepreneurship, for skills development, and for venture capitalism. The reason why focus should be on the youth is very logical. Nationalism and patriotism are forgotten words today. The youth of Pakistan must be steered on to the right path as they hold the key to the future prosperity of this motherland. Chinese President Hu Jintao, in his speech to the Chinese Parliament stated, "Let's build a harmonious society in which the no-holds barred economic growth will be replaced with a more socially responsible form of development, with increased spending on education, healthcare and rural infrastructure".
==================
February 16-2011
The Untouchables
Justice ® Hazik-ul-Khairi, in his presentation at the seminar on “Role of society in eradicating corruption” organized by National Accountability Bureau (Sindh) recently in Karachi, lamented the unbridled power of people with influence and those he termed as various Mafias. In a speech laced with examples of his personal efforts in resolving assorted issues as Provincial Ombudsman (Sindh), he very boldly stated that these are forceful and tough entities and they can get away with just about everything.
The Hon’ble jurist mentioned the supremacy of the owners of illegal jewelry factories spread in apartments and small stores in Karachi’s Saddar area. These sweatshops emit lethal elements in the atmosphere resulting in an abnormal increase in asthma and tuberculosis incidents, especially among children dwelling around these factories. He talked about mini Mafia groups at the old Sabzi Mandi (fruit and vegetable market) and disclosed that it was a Herculean task to get them out and relocate on the Super Highway. Thankfully, this old market is now a fabulous 19-acre park courtesy Pakistan Army.
The ex-Ombudsman also talked about the power of private school owners who do not care to register nor give two hoots to the Education Department regarding the fixation of school fees and other charges. He also said that many public places have been encroached by various sects who build mosques in a haphazard mode. Moreover, he said that even police officers maliciously erect makeshift police stations wherever they want. Of course, the actual owners of the property run from here to there frantically trying to get the law-enforcers to obey the law and vacate their properties.
To add to what Justice Khairi elaborated in his inspiring talk, one must not forget the power of the Tanker Mafia. The neglect of Karachi by policymakers nestled in the cozy offices of Islamabad, especially in the matter of water, has made these water tanker operators Mussolini, Hitler, and Idi Amin rolled into one. These tankers have irresponsibly ravaged the roads in SITE industrial estate. The operators charge top rupee for water that is usually sub-soil, they deliver whenever they feel like, and they also do not care if the streets of Karachi are wet and slippery due to the constant dripping from their leaky valves.
The textile fabric manufacturers, of course, are aware of the Imported Fabric Mafia, a group so extremely powerful, influential, and strong, that the CBR hierarchy is as afraid of them as the people in Thakur’s village in the Indian blockbuster movie Sholay were afraid of Gabbar Singh, the ruthless desperado. CBR officers literally plead with businessmen not to even mention their names in the hallowed halls of CBR. “King 52” and “Silky Textiles” (one can deduce their names thru Urdu translations) are well-known for under-invoicing and mis-declaring imports, and in the process making bales of moolah because the various SROs conjured up by CBR have leaks as large as the Niagara Falls. Meantime, CBR people continue to look the other way and ensure that fabric manufacturers do not even whisper the names of this Mafia even in hush-tones.
Then there is the Dry Ports Mafia. A nexus of varied Mafia groups controls the ten Dry Ports. The wheels of the Dry Ports are lubricated by a highly-flavored blend of oodles of money, lots of influence, and the precise dosage of extortion and intimidation. Knock on the right door (in fact any portal in these Dry Ports) and bring in anything under the sun. Duties, Sales Tax, Advance Income Tax, and other such levies are petty items that could be ignored or are entered in the register in the same manner as putting just a dab of Fair & Lovely trying to make the repugnant crone look ravishing. The government is contented that it is facilitating the businessmen. The actual outcome: numerous jobs lost because of the influx of under-invoiced, mis-declared, or smuggled goods into the country. Marvelous strategy to alleviate poverty.
Of course, in any urban city, innumerable members of many different types of Mafia make life miserable for the harried denizens. One may say that elected representatives duly chosen by the populace run the City District Government. These untrained, unknowing, petty-minded representatives learn the hard way to deal with the plethora of roadblocks erected by the Mafia. They soon know how to play ball with them and everything becomes hunky-dory for those who came thru the process of Devolution of Authority. Once they know the rules of the game, once they agree to pay tithe to the Mafia dons, and once they reverse the roles from being people’s representatives to adopting the unanswerable role of rulers, the system starts working beautifully.
There are billboards and hoardings everywhere. How many of these are legal and tax-paid? The Mafia ensures that money goes in fantasy bank accounts rather than the Treasury of CDGK. Go to KDA and try to get a file moved on merit. Only Bozo the Clown would venture there with this assurance that his case would be decided on priority without greasing the palms. The PTCL lineman still gives the same excuse the consumer got in the early Fifties that “pair is not available”. No use mentioning KESC and KWSB. Why regurgitate?
One should not forget the premier Mafia group known all over the country as the Qabza Mafia. These land encroachers and usurpers are a force to reckon with. Families have been financially and morally destroyed trying to oust a Qabza group from their properties. These Qabza groups occupy graveyards, railway land, industrial estates, and private property. Here too, the long hand of the law shies from touching them. Probably, this long hand protects them. Who knows. There are laws on the statute books but who cares. Many cases only require the permission of the Provincial Chief Minister. Alas, they seldom have time to look at the files, and thus a mountain of files and cases swell up waiting for the Sahib to put his John Hancock. Time just drags on. The Qabza group does a little Samba. The band plays on.
All one can say is that the Mafia groups are the Untouchables. Al Capone, the Chicago Don would have loved to be in Karachi circa 2005. Maybe, just maybe, Eliot Ness, the US Federal Agent who headed The Untouchables team and made life miserable for Capone in the 1930s, would have been his partner and not his nemesis in this metropolitan city.
================================
September 07-2005
The Hon’ble jurist mentioned the supremacy of the owners of illegal jewelry factories spread in apartments and small stores in Karachi’s Saddar area. These sweatshops emit lethal elements in the atmosphere resulting in an abnormal increase in asthma and tuberculosis incidents, especially among children dwelling around these factories. He talked about mini Mafia groups at the old Sabzi Mandi (fruit and vegetable market) and disclosed that it was a Herculean task to get them out and relocate on the Super Highway. Thankfully, this old market is now a fabulous 19-acre park courtesy Pakistan Army.
The ex-Ombudsman also talked about the power of private school owners who do not care to register nor give two hoots to the Education Department regarding the fixation of school fees and other charges. He also said that many public places have been encroached by various sects who build mosques in a haphazard mode. Moreover, he said that even police officers maliciously erect makeshift police stations wherever they want. Of course, the actual owners of the property run from here to there frantically trying to get the law-enforcers to obey the law and vacate their properties.
To add to what Justice Khairi elaborated in his inspiring talk, one must not forget the power of the Tanker Mafia. The neglect of Karachi by policymakers nestled in the cozy offices of Islamabad, especially in the matter of water, has made these water tanker operators Mussolini, Hitler, and Idi Amin rolled into one. These tankers have irresponsibly ravaged the roads in SITE industrial estate. The operators charge top rupee for water that is usually sub-soil, they deliver whenever they feel like, and they also do not care if the streets of Karachi are wet and slippery due to the constant dripping from their leaky valves.
The textile fabric manufacturers, of course, are aware of the Imported Fabric Mafia, a group so extremely powerful, influential, and strong, that the CBR hierarchy is as afraid of them as the people in Thakur’s village in the Indian blockbuster movie Sholay were afraid of Gabbar Singh, the ruthless desperado. CBR officers literally plead with businessmen not to even mention their names in the hallowed halls of CBR. “King 52” and “Silky Textiles” (one can deduce their names thru Urdu translations) are well-known for under-invoicing and mis-declaring imports, and in the process making bales of moolah because the various SROs conjured up by CBR have leaks as large as the Niagara Falls. Meantime, CBR people continue to look the other way and ensure that fabric manufacturers do not even whisper the names of this Mafia even in hush-tones.
Then there is the Dry Ports Mafia. A nexus of varied Mafia groups controls the ten Dry Ports. The wheels of the Dry Ports are lubricated by a highly-flavored blend of oodles of money, lots of influence, and the precise dosage of extortion and intimidation. Knock on the right door (in fact any portal in these Dry Ports) and bring in anything under the sun. Duties, Sales Tax, Advance Income Tax, and other such levies are petty items that could be ignored or are entered in the register in the same manner as putting just a dab of Fair & Lovely trying to make the repugnant crone look ravishing. The government is contented that it is facilitating the businessmen. The actual outcome: numerous jobs lost because of the influx of under-invoiced, mis-declared, or smuggled goods into the country. Marvelous strategy to alleviate poverty.
Of course, in any urban city, innumerable members of many different types of Mafia make life miserable for the harried denizens. One may say that elected representatives duly chosen by the populace run the City District Government. These untrained, unknowing, petty-minded representatives learn the hard way to deal with the plethora of roadblocks erected by the Mafia. They soon know how to play ball with them and everything becomes hunky-dory for those who came thru the process of Devolution of Authority. Once they know the rules of the game, once they agree to pay tithe to the Mafia dons, and once they reverse the roles from being people’s representatives to adopting the unanswerable role of rulers, the system starts working beautifully.
There are billboards and hoardings everywhere. How many of these are legal and tax-paid? The Mafia ensures that money goes in fantasy bank accounts rather than the Treasury of CDGK. Go to KDA and try to get a file moved on merit. Only Bozo the Clown would venture there with this assurance that his case would be decided on priority without greasing the palms. The PTCL lineman still gives the same excuse the consumer got in the early Fifties that “pair is not available”. No use mentioning KESC and KWSB. Why regurgitate?
One should not forget the premier Mafia group known all over the country as the Qabza Mafia. These land encroachers and usurpers are a force to reckon with. Families have been financially and morally destroyed trying to oust a Qabza group from their properties. These Qabza groups occupy graveyards, railway land, industrial estates, and private property. Here too, the long hand of the law shies from touching them. Probably, this long hand protects them. Who knows. There are laws on the statute books but who cares. Many cases only require the permission of the Provincial Chief Minister. Alas, they seldom have time to look at the files, and thus a mountain of files and cases swell up waiting for the Sahib to put his John Hancock. Time just drags on. The Qabza group does a little Samba. The band plays on.
All one can say is that the Mafia groups are the Untouchables. Al Capone, the Chicago Don would have loved to be in Karachi circa 2005. Maybe, just maybe, Eliot Ness, the US Federal Agent who headed The Untouchables team and made life miserable for Capone in the 1930s, would have been his partner and not his nemesis in this metropolitan city.
================================
September 07-2005
Pakistan’s Textile Industry Needs Resurrection
PREAMBLE:
From a single textile unit at the time of Independence in 1947, Pakistan’s textile industry has come a long way. Even today, the textile sector is the backbone of the country’s economy being the largest provider of employment, foreign exchange, and revenue. Even today, the textile sector is employing over 40% of the working population, generating 65% of the foreign exchange earnings, and contributing 8.5% to the nation’s GDP. Even today, the textile sector can boast of a major investment of over US$ 5 billion in the last few years, creation of a Ministry of Textile Industry at the Federal level, and having the vision to boost textile exports to US$ 20 billion and provide new job opportunities to six million people within a few years while it’s share in GDP would escalate substantially by 2015.
In 2007-2008, the textile exports were just a shade above US$ 10 billion. In comparison, the Indian textile exports were US$ 17.50 billion, and Bangladesh also crossing US$ 10.00 billion. However, India is now projecting textile exports to rise to US$ 80-85 billion by 2010 while Bangladesh is poised to go over the US$ 15 figures before 2010.
However, the 2007-2008 figures have sounded alarm bells in the textile industry. The export of textiles has declined while retrenchments, closures, and bankruptcies are everyday events in the textile industry. One can rattle off lots of figures to portray the dire situation but suffice to state that Pakistan has the ignominy of being one of those relatively few countries that has experienced stagnation in exports. The prognosis is that the country would not attain its export targets when we close the books end of June 2008. The finance managers of the country were hell-bent on ensuring the demise of the textile industry and it seems that their machinations may come true.
ECONOMIC PICTURE:
The scenario at present is that the economic picture seems robust with a GDP growth in excess of 7% for the fourth year in a row and much improved macro-economic indicators. The per capita income surpassed US$ 900, foreign exchange reserves hover around the US$ 15 billion figure, there is a sharp increase in foreign direct investment, the country’s Eurobonds received a much favorable international response. These figures have been parroted by the finance managers at all platforms and brandishing the contention that there is significant socio-economic development of the nation’s infrastructure, there is a much better implementation of economic reforms, and inspite of hiccups, the privatization process is in motion.
Of course, it is imperative to note that the 9/11 syndrome also contributed significantly to the achievement of economic objectives. The re-profiling and write-off of the debt portfolio, the assistance of multilateral lending agencies, the upsurge in remittances by expatriate Pakistanis, the role of Pakistan as a frontline state in the war against terrorism, and the trade incentives some countries, may not be possible in the years ahead. Pakistan is facing a tough international environment and recent events have highlighted the domestic economic challenges too. The country is in the throes of an over-heated economy, negative fiscal developments, and a widening external account gap. In this scenario, the textile sector has become vulnerable again.
PROBLEMS AND ISSUES:
On December 31, 2004, the Agreement on Textiles and Clothing ended resulting in the abolishment of the quantitative restrictions on textiles and clothing in international trade. Pakistan was projected as being one of the major players in the global textile market taking advantage of its inherent plus points, such as the fourth largest cotton growing country, abundant textile workforce, intensive investment in capital equipment and capacity building, low interest rates, a vibrant stock market, and entrepreneurial expertise, etc. Pakistan was poised to make inroads into the global share of countries such as Bangladesh, Cambodia, and Nepal, etc who were perceived as vulnerable to liberalization of international trade. Pakistan was designated as the producer of excellent quality towels, bedwear, and cotton yarn.
Much to the chagrin of the policymakers as well as the stakeholders, the oft-repeated motivational mantra, that after the elimination of the quota regime Pakistani textile sector would have more opportunities than challenges just did not hold juice. The textile sector faced pressure from internal as well as external influences. These impacted heavily on the cost of doing business in Pakistan.
The reasons for the higher cost of doing business could be enumerated in six broad categories:
Utilities: The Achilles’ heel for the textile sector has been the unpredictable and frequent increases in the rates of power and gas, the low availability of water, and the disruptions, power outages, and breakdowns in the systems. Moreover, the discretionary authority given to utilities to sanction connections has further aggravated the concerns of the industrialists. Gas is an important natural resource yet its tariff is excessively high because of subsidies given to some sectors and because of the method of calculating the guaranteed return on average net fixed assets provided to the two gas companies, i.e. 17% for SSGC and 17.5% for SNGPL. However from October 2006, a new formula has been devised that links the guaranteed return to gas companies to the KIBOR rate plus 8%. This, in effect, would increase the guaranteed return for the gas companies.
KESC, WAPDA, and PEPCO are unable to ensure uninterrupted power, and because of other crucial reasons like rates, attitude, and regulations, many industries have opted for the own captive power generation. These are based on furnace oil, diesel, or gas. Textile industries consume 8.7% and 10.96% of total sales of SSGC and SNGPL respectively while captive power plants consume 10.16% and 4.68% of their total sales. The gas rates in Pakistan are US$ 4.02/MMBTU for general industries as well as captive power plants, while in Bangladesh the rates are US$ 1.90 and US$ 2.65 respectively.
The power rates are substantially excessive and if the invisible losses due to load-shedding and power outrages are taken into consideration, then the impact on the total cost of the product is formidable. Water for Karachi-based textile processing industries is expensive too. Due to non-availability of the required water supply, the industries have no option but to depend on the water tanker mafia to supply water, and that too at a steep cost. The water supply situation is pathetic as well as inequitable since SITE Karachi, the largest and oldest industrial estate of the country having 3002 industries including 40% of the total textile processing mills of the country, has a meager laid down water quota. The estimated cost to Karachi units is about Rs 0.50 per square meter.
The solution lies in rationalizing the utilities rate and putting on hold the frequent increases. Gas prices must be reduced by atleast 45% on an immediate basis. Gas prices have gone up substantially in the last few years. Instead of coming up with a consumer-friendly formula for the gas companies, the new formula devised by the Petroleum Ministry will critically affect the viability of the manufactured textile products. The foreign-owned management at KESC has still not found its bearings and their methods of operation have made lives miserable for the business and industrial establishments as well as for the denizens of Karachi. The city is facing loadshedding from 8 to 12 hours daily. The non-chalant pronouncements of the concerned Ministry further adds fuel to the fire. The general impression is that the KESC hierarchy is not presenting the pragmatic and correct picture to the decision makers. The water problem in Karachi can be addressed to some extent by the installation of effluent treatment plants in all five industrial estates of the city so that environmental standards are complied with and also treated water is available for industrial utilization. The government must take the initiative and set up water desalination plants on a priority basis as the future supply of water to Karachi would continue to have negative ramifications.
Finance: As stated above, the textile sector made heavy investments in capital equipment and in infrastructure. The low interest rates enabled them to undertake these investments. However, the situation changed for the worst when interest rates were allowed to escalate thus putting massive pressure on the borrowers and making their feasibilities go haywire. Today, over Rupees 150 billion is the total principal and interest that is due on the investments made since January 2003. The interest rates are nearly 14% now and have a detrimental effect on the balance sheets of the textile sector. The spinning sector has been weighed down by the increased interest rate circumstances. The State Bank of Pakistan, in order to facilitate the export-oriented industries to overcome their prevailing financial crisis and to remain competitive in the international market, decided to allow a one-time opportunity to the textile industry to refinance their outstanding fixed term loans availed from banks or DFIs for import of plant and machinery with loans under its Long-Term Financing for Export Oriented Projects (LTF-EOP) Scheme resulting in reduction of about 5-6% in the interest rates.
Another demand that was accepted by the ECC of the Cabinet was to reduce the export refinancing rate from 9% to 7.5%. This has provided some relief to the exporters. Overall, the textile industry is still not satisfied by these steps and is adamant in their demand that the interest rates must be further lowered so that enterprises maintain their survivability and do not become the sick industries as in the olden days.
Taxation and Duties: The non-positive impact of high cost of utilities and prohibitive finance charges have rendered profits to a bare minimum or else have resulted in huge losses for many industries. At the same time, the outcome of various measures such as taxation, duties, and levies have been negative cash-flows as well as affecting the cost of production. These are custom duties, sales tax, withholding tax, Export Development Fund surcharge, labor welfare levies, local and provincial levies and taxes, and other miscellaneous such impositions.
The textile industry has recommended that custom duty on import of textile-related machinery and spare parts, generators for captive power plants and their spare parts, and other such equipment for textile industry should be zero-rated. Furthermore, sales tax, if any, on any of these items should also be zero-rated. Withholding tax on exports of textiles should be levied at a flat rate of 0.25% rather than the current multiple rates of 0.75-1.25%. Collection of Export Development Fund surcharge at the rate of 0.25% on textile exports should be held in abeyance for a period of three years. All contributions to EOBI, Social Security, Education Cess Fund, Worker’s Welfare Fund, etc must be frozen for all components of the textile sector for a period of five years.
The negative and biased travel advisories issued by various governments for their citizens who intend to visit cities such as Karachi have severely affected the inflow of foreign buyers into the country. Thus the local textile producers and exporters have to make frequent foreign trips to visit their customers and also to attend international fairs and exhibitions. These also influence a lot on their cost of production. It has been recommended that a 5% Travel Relief Support be introduced for exporters of processed fabrics, apparel, knitwear, home textiles, and made-ups.
Competition: Pakistani textile exporters are facing severe competition from the regional producers because of a non-level playing field. Their governments, being more pro-active, have been providing manifold incentives and benefits to them. The competition has an edge in the form of hidden subsidies, duty free import facilities, duty drawback schemes, lower wages and lower worker benefits, cheaper utilities, subsidized interest rates, and more importantly zero-rated market access for their exports to Canada and EU countries. The United States has Free Trade Agreements with many countries and regions such as Sub-Saharan countries (AGOA), Jordan, Mexico and Canada (NAFTA), Vietnam, and Sri Lanka, etc.
Pakistan’s bedwear industry also has been very much affected by the imposition of anti-dumping duty on exports to EU countries. Even though the anti-dumping duty has now been reduced from 13.5% to 5.6%, yet the ramifications are still problematic since there is also the import duty of 12.5% as Pakistan has not been granted GSP Plus status by EU. Thus countries such as Bangladesh have a 15-23% advantage over Pakistan in exports to EU.
The government had taken cognizance of this predicament and had provided Research & Development support of 6% on readymade garments and knitwear exports. Lately, after much lobbying, the government agreed to grant 3% R&D support to the dyed/printed fabrics and white-Home Textiles and 5% to dyed/printed Home Textiles. Nevertheless, these measures have not been effective in getting the industry out of the woods. This subsidy is still much less than demanded.
The government keeps on maintaining that subsidies are not on the economic agenda. However, the regional competitors and their governments are on the same wavelength when there is a need to subsidize the textile industry. What after all is ‘subsidy’? At a very general level, it is simply support which is meant to help the beneficiary deal with existing market conditions better than the other producers in the sector. In the interest of fair play, such assistance will always have to be for a specific period, preferably with a stipulation that the support will be discontinued on the achievement of the objectives. Moreover, the disadvantage which existing producers would have to face on account of this subsidy to a competitor can be justified only if the target is national economic development. In other words, every economic subsidy to be fair and equitable will have to be totally focused to the larger goal of enhancing national economic development. The Pakistani decision makers must take this into account very seriously.
Non-Official Channels: The domestic textile sector is subject to intensive smuggling of consumer, contraband, and capital goods for decades. The issue is compounded further by the encouragement given to those who mis-declare the consignments, and for turning a blind eye to under-invoicing of the imports. This phenomenon is very prevalent in the inflow of foreign-produced fabrics and apparel. There is an imperative need to control this threat since the domestic industry has been ruthlessly affected due to this multi-headed monster. The following are the reasons and effects of this menace:
• Porous and unmanageable international borders have made the job easier for the law-breakers. The matter has further aggravated ever since the control of the borders was handed over to a designated law-enforcing agency whose personnel have routinely displayed a lax and careless attitude and whose ranks have been allegedly corrupted by the smugglers.
• The corrupt and dishonest environment in the customs department, whether at various border check posts, whether at the seaports or airports, or whether at the ten Dry Ports. Dishonest officers, in blatant connivance with those who under-invoice or mis-declare, especially certain well-identified clearing agents, have wreaked havoc on the economy.
• The Dry Ports scheme was originally intended to serve as a facilitation point for exporters based in the northern parts of the country. However, fraudulent persons and insincere bureaucrats conspired to turn this scheme into a haven for imported goods so that all of them could mutually benefit from the unplanned utilization of the Dry Ports facility.
• The infamous Afghan Transit Trade Agreement has enabled the corrupt elements to misuse this facility and channelize the goods back into the country thru “legalized” and allowable procedures and thus goods much more in excess of the requirements of Afghanistan are imported under this scheme and brought back into Pakistan.
• Goods coming from China have been fundamentally responsible for the proliferation of smuggled, under-invoiced, and mis-declared items into this country. Due to the close and meaningful friendship between the two countries, the government policymakers ignored the devastation caused by the Chinese goods over the past many years. It has now assumed a significantly threatening scenario and has also contributed to the increase in the ranks of the unemployed, the poor, and the bankrupt. How will the FTA with China have an impact on textiles is worth considering.
It is proposed that to counter the menace of these non-official channels of trade and to maintain the sustainability of domestic textile industry, the following measured should be adopted:
* Computation of duties should be made strictly in accordance with the scientific mode prescribed by FBR.
* Strict control in ascertaining the quality, quantity, weight, and origin of imported fabrics at clearing stage.
*Accurate monitoring of wholesale and retail markets and establishments to determine price of the imported
fabrics.
*In case of mis-declaration in terms of weight of 20% or above, the entire consignment should be confiscated
and destroyed. In case the excess weight is less than 20% of the declared weight, than the percentage of
weight under-declared should be carried over for consideration in the clearance of the next consignment of
the same importer for the purpose of enforcement of the penalty.
*Suspending the clearance of fabrics at the various Dry Ports.
*Periodic consultative meetings with stakeholders to evaluate the performance of the customs department
and establishing the international rates of raw materials to decide on the assessment value for the purpose
of determining import duty.
*Introduction of Technical Non-Tariff Barriers to maintain transparency, to ensure compliance with quality
standards, and to protect the domestic manufacturers.
*Placement of the following testing equipment at the seaports, airports, and check posts: Yarn twist tester,
Denier tester, Fabric GSM cutter, Digital weighing scale, and any other equipment required for testing fabric.
General Factors: Apart from the above categories, there are other relevant issues that require concentration and resolution. These include:
Toning up the technical and vocational education and training (TVET) system. A skilled and professionally qualified workforce is now imperative. The present TVET scenario needs large-scale efforts in overhauling and expanding the infrastructure. There is a need to have industry-demand training and thus the syllabi needs to be updated and the system upgraded. There is a need to have a much comprehensive and focused approach towards this objective. There is a need to have a pragmatic public-private partnership in TVET so that the ensuing results are as per the requirements.
Knowledge-based export strategy is another key necessity. WTO Reference Centers have been established at the Trade Development Authority of Pakistan in Karachi, in Islamabad, and at the Lahore Chamber of Commerce & Industry. The WTO Reference Center is a program to disseminate information on international trade, provide a deeper understanding into the working of the Multilateral Trading System and to take advantage of the provisions of international trade rules and market access conditions. The object of the Center is to build national capacity for understanding the multilateral trading system and its implications for Pakistan. The use of the WTO Reference Center would be open to the business community, government organizations, academia, policy institutions, researchers, media, students and all who wish to derive a deeper understanding of international trade. Among the various on-line and off-line trade development tools on offer include Integrated Data Base (IDB) Countries Trade and Tariff Information, Consolidated Tariff Schedule Data Base (CTS) Information on Countries Tariff Bindings Statistical Data Base - Countries' Trade Data, Information on Trade in Services etc. At the same time, consultants, both domestic and foreign, should be engaged to keep the exporters in touch with the trends of the global marketplace. There is a need to create more awareness regarding WTO Reference Centers.
Focus on employment generation is imperative. The textile sector is the largest employer of the active workforce in the country. Any negative impact on this sector results in more pressure on the employment scenario. It should be noted that full employment opportunities manifest positively on the economy and the benefits are multiple. Jobs provide poverty alleviation, reduction in street and major crimes, curbing of extremist and uncivil sentiments, and general well-being and prosperity. The textile value-added industry can provide huge employment if most of its myriad problems and issues are handled in a benevolent manner by the government.
Protection of the textile industry from FTAs is essential. The government must ensure that unbridled inflow of textile goods from FTA or SAFTA partners do not sound the death knell for the domestic textile industry. It is imperative that the Pakistani policy makers do consider the fact that the Indian government has provided tremendous incentives, including duty drawbacks, under varied headings and schemes to the textile industry. It is still adhering to the imposition of non-tariff trade barriers making it tough for imported textile goods to enter the Indian domestic markets.
It is to be noted that the finished textile goods are subject to 14% import duties and zero sales tax. The reduction or zero rating of duty on Indian textile goods under SAFTA would prove to be a boon for the Indian exporters. It is a well-established fact that the Indian textile exporters routinely resort to over-invoicing and mis-declaring their products in order to obtain maximum advantages from the incentives provided to them by their government. Hence, they are able to provide their products at a comparably cheaper rate. This would be replicated in toto in their exports to Pakistan. It is strongly advised that formidable efforts should be undertaken by the Pakistani negotiators to impress upon the Indian officials that Pakistan is not in a position to accede to their demands until and unless there is transparency in their export regime, unless there is elimination of non-tariff trade barriers, and unless there is no official patronage of over invoicing of exportable goods.
Export Facilitation Inter-Ministerial Committee. The Commerce Minister had announced in the Trade Policy 2003-2004 that this Committee would be set up to oversee the progress and implementation of the Trade Policy, would be responsible to resolve all irritants faced by the business and export community, and would meet atleast once every quarter. The Committee would consist of the Ministers of Commerce (as Chairman), Finance, Industries and Production, Investment and Privatization, Governor of State Bank of Pakistan, Chairman of Export Promotion Bureau, and Secretary Commerce. The Committee was notified on September 11, 2003. Unfortunately, till today this Committee has not had a single session at all. It is imperative that this Committee should be revived. In Sri Lanka there is such a Committee that has nine Ministers as members and it meets regularly once every month.
Image building and branding of Made in Pakistan logo. The negative perceptions of extremism, terrorism, and the nuclear syndrome have had a detrimental effect on the nation’s products. It is incumbent upon the business community to play its role in combating these negative perceptions and the biased mindset. The government can assist in this respect by earmarking resources to project the country at all important international forums and on the world media. The Made in Pakistan logo must be developed and placed on all products manufactured in Pakistan. The logo must also be conspicuously placed on all official correspondence, at all Embassies and High Commissions, and on all national media. Postage stamps of the logo be introduced and used. All public transport must display the logo prominently. All Chambers and trade Associations must do likewise on their websites, correspondence, and within their establishments. The government must adopt the Indian experience of utilizing the services of Bollywood and emulate this with the support of the Lollywood film industry.
CONCLUSION:
The new government must now become very pro-active in the promotion of textiles, both in the domestic market as well as in the global marketplace. When a couple of years ago, the textile industry faced immense pressure from all fronts that added up into a precarious position resulting in demands for a level-playing field vis-à-vis regional competitors and when these demands reached a crescendo, the government set up a committee of stakeholders for finding a plausible and workable package to get the textile industry out of the quagmire. The Zubair Motiwala Commission developed and presented a broad-based package for the Prime Minister’s decision. Resultantly, on July 15, 2006 the ECC of the Cabinet announced the Rs 25 billion textile package. Further progress was made by the SBP decision and by the efforts of the Textile Ministry to broad-base the R&D subsidy regime.
The textile sector of Pakistan appreciated and acknowledged the sagacious and far-reaching decisions by the government to boost the textile sector and assist in its rehabilitation and its capability to sustain itself in the global market. Inspite of these incentives and measures, the textile sector continued to face difficulties since the regional competitors went a step ahead to maintain their position and their status. It is crucial that all the components of the textile sector be encouraged and should be appropriately satisfied that they have been adequately backed by the government. It is therefore imperative that the government must resolve on a priority basis the residual issues that still impact negatively on these components of the textile sector. This would definitely ensue into more employment, more exports, and more industrialization. The vision that Pakistan would be a major player in the global textile market would then surely be a reality. The recently elected government is at a vantage position to ensure that Pakistan’s textile industry continues to be the economic engine and propel the nation into a prosperous country.
Jo is sahat mein pinah hai ujala hum bhi dekhayn gay
Jo farq-e-subah per chamkay ga tara, hum bhi dekhayn gay
==========================================
March 28, 2008
From a single textile unit at the time of Independence in 1947, Pakistan’s textile industry has come a long way. Even today, the textile sector is the backbone of the country’s economy being the largest provider of employment, foreign exchange, and revenue. Even today, the textile sector is employing over 40% of the working population, generating 65% of the foreign exchange earnings, and contributing 8.5% to the nation’s GDP. Even today, the textile sector can boast of a major investment of over US$ 5 billion in the last few years, creation of a Ministry of Textile Industry at the Federal level, and having the vision to boost textile exports to US$ 20 billion and provide new job opportunities to six million people within a few years while it’s share in GDP would escalate substantially by 2015.
In 2007-2008, the textile exports were just a shade above US$ 10 billion. In comparison, the Indian textile exports were US$ 17.50 billion, and Bangladesh also crossing US$ 10.00 billion. However, India is now projecting textile exports to rise to US$ 80-85 billion by 2010 while Bangladesh is poised to go over the US$ 15 figures before 2010.
However, the 2007-2008 figures have sounded alarm bells in the textile industry. The export of textiles has declined while retrenchments, closures, and bankruptcies are everyday events in the textile industry. One can rattle off lots of figures to portray the dire situation but suffice to state that Pakistan has the ignominy of being one of those relatively few countries that has experienced stagnation in exports. The prognosis is that the country would not attain its export targets when we close the books end of June 2008. The finance managers of the country were hell-bent on ensuring the demise of the textile industry and it seems that their machinations may come true.
ECONOMIC PICTURE:
The scenario at present is that the economic picture seems robust with a GDP growth in excess of 7% for the fourth year in a row and much improved macro-economic indicators. The per capita income surpassed US$ 900, foreign exchange reserves hover around the US$ 15 billion figure, there is a sharp increase in foreign direct investment, the country’s Eurobonds received a much favorable international response. These figures have been parroted by the finance managers at all platforms and brandishing the contention that there is significant socio-economic development of the nation’s infrastructure, there is a much better implementation of economic reforms, and inspite of hiccups, the privatization process is in motion.
Of course, it is imperative to note that the 9/11 syndrome also contributed significantly to the achievement of economic objectives. The re-profiling and write-off of the debt portfolio, the assistance of multilateral lending agencies, the upsurge in remittances by expatriate Pakistanis, the role of Pakistan as a frontline state in the war against terrorism, and the trade incentives some countries, may not be possible in the years ahead. Pakistan is facing a tough international environment and recent events have highlighted the domestic economic challenges too. The country is in the throes of an over-heated economy, negative fiscal developments, and a widening external account gap. In this scenario, the textile sector has become vulnerable again.
PROBLEMS AND ISSUES:
On December 31, 2004, the Agreement on Textiles and Clothing ended resulting in the abolishment of the quantitative restrictions on textiles and clothing in international trade. Pakistan was projected as being one of the major players in the global textile market taking advantage of its inherent plus points, such as the fourth largest cotton growing country, abundant textile workforce, intensive investment in capital equipment and capacity building, low interest rates, a vibrant stock market, and entrepreneurial expertise, etc. Pakistan was poised to make inroads into the global share of countries such as Bangladesh, Cambodia, and Nepal, etc who were perceived as vulnerable to liberalization of international trade. Pakistan was designated as the producer of excellent quality towels, bedwear, and cotton yarn.
Much to the chagrin of the policymakers as well as the stakeholders, the oft-repeated motivational mantra, that after the elimination of the quota regime Pakistani textile sector would have more opportunities than challenges just did not hold juice. The textile sector faced pressure from internal as well as external influences. These impacted heavily on the cost of doing business in Pakistan.
The reasons for the higher cost of doing business could be enumerated in six broad categories:
Utilities: The Achilles’ heel for the textile sector has been the unpredictable and frequent increases in the rates of power and gas, the low availability of water, and the disruptions, power outages, and breakdowns in the systems. Moreover, the discretionary authority given to utilities to sanction connections has further aggravated the concerns of the industrialists. Gas is an important natural resource yet its tariff is excessively high because of subsidies given to some sectors and because of the method of calculating the guaranteed return on average net fixed assets provided to the two gas companies, i.e. 17% for SSGC and 17.5% for SNGPL. However from October 2006, a new formula has been devised that links the guaranteed return to gas companies to the KIBOR rate plus 8%. This, in effect, would increase the guaranteed return for the gas companies.
KESC, WAPDA, and PEPCO are unable to ensure uninterrupted power, and because of other crucial reasons like rates, attitude, and regulations, many industries have opted for the own captive power generation. These are based on furnace oil, diesel, or gas. Textile industries consume 8.7% and 10.96% of total sales of SSGC and SNGPL respectively while captive power plants consume 10.16% and 4.68% of their total sales. The gas rates in Pakistan are US$ 4.02/MMBTU for general industries as well as captive power plants, while in Bangladesh the rates are US$ 1.90 and US$ 2.65 respectively.
The power rates are substantially excessive and if the invisible losses due to load-shedding and power outrages are taken into consideration, then the impact on the total cost of the product is formidable. Water for Karachi-based textile processing industries is expensive too. Due to non-availability of the required water supply, the industries have no option but to depend on the water tanker mafia to supply water, and that too at a steep cost. The water supply situation is pathetic as well as inequitable since SITE Karachi, the largest and oldest industrial estate of the country having 3002 industries including 40% of the total textile processing mills of the country, has a meager laid down water quota. The estimated cost to Karachi units is about Rs 0.50 per square meter.
The solution lies in rationalizing the utilities rate and putting on hold the frequent increases. Gas prices must be reduced by atleast 45% on an immediate basis. Gas prices have gone up substantially in the last few years. Instead of coming up with a consumer-friendly formula for the gas companies, the new formula devised by the Petroleum Ministry will critically affect the viability of the manufactured textile products. The foreign-owned management at KESC has still not found its bearings and their methods of operation have made lives miserable for the business and industrial establishments as well as for the denizens of Karachi. The city is facing loadshedding from 8 to 12 hours daily. The non-chalant pronouncements of the concerned Ministry further adds fuel to the fire. The general impression is that the KESC hierarchy is not presenting the pragmatic and correct picture to the decision makers. The water problem in Karachi can be addressed to some extent by the installation of effluent treatment plants in all five industrial estates of the city so that environmental standards are complied with and also treated water is available for industrial utilization. The government must take the initiative and set up water desalination plants on a priority basis as the future supply of water to Karachi would continue to have negative ramifications.
Finance: As stated above, the textile sector made heavy investments in capital equipment and in infrastructure. The low interest rates enabled them to undertake these investments. However, the situation changed for the worst when interest rates were allowed to escalate thus putting massive pressure on the borrowers and making their feasibilities go haywire. Today, over Rupees 150 billion is the total principal and interest that is due on the investments made since January 2003. The interest rates are nearly 14% now and have a detrimental effect on the balance sheets of the textile sector. The spinning sector has been weighed down by the increased interest rate circumstances. The State Bank of Pakistan, in order to facilitate the export-oriented industries to overcome their prevailing financial crisis and to remain competitive in the international market, decided to allow a one-time opportunity to the textile industry to refinance their outstanding fixed term loans availed from banks or DFIs for import of plant and machinery with loans under its Long-Term Financing for Export Oriented Projects (LTF-EOP) Scheme resulting in reduction of about 5-6% in the interest rates.
Another demand that was accepted by the ECC of the Cabinet was to reduce the export refinancing rate from 9% to 7.5%. This has provided some relief to the exporters. Overall, the textile industry is still not satisfied by these steps and is adamant in their demand that the interest rates must be further lowered so that enterprises maintain their survivability and do not become the sick industries as in the olden days.
Taxation and Duties: The non-positive impact of high cost of utilities and prohibitive finance charges have rendered profits to a bare minimum or else have resulted in huge losses for many industries. At the same time, the outcome of various measures such as taxation, duties, and levies have been negative cash-flows as well as affecting the cost of production. These are custom duties, sales tax, withholding tax, Export Development Fund surcharge, labor welfare levies, local and provincial levies and taxes, and other miscellaneous such impositions.
The textile industry has recommended that custom duty on import of textile-related machinery and spare parts, generators for captive power plants and their spare parts, and other such equipment for textile industry should be zero-rated. Furthermore, sales tax, if any, on any of these items should also be zero-rated. Withholding tax on exports of textiles should be levied at a flat rate of 0.25% rather than the current multiple rates of 0.75-1.25%. Collection of Export Development Fund surcharge at the rate of 0.25% on textile exports should be held in abeyance for a period of three years. All contributions to EOBI, Social Security, Education Cess Fund, Worker’s Welfare Fund, etc must be frozen for all components of the textile sector for a period of five years.
The negative and biased travel advisories issued by various governments for their citizens who intend to visit cities such as Karachi have severely affected the inflow of foreign buyers into the country. Thus the local textile producers and exporters have to make frequent foreign trips to visit their customers and also to attend international fairs and exhibitions. These also influence a lot on their cost of production. It has been recommended that a 5% Travel Relief Support be introduced for exporters of processed fabrics, apparel, knitwear, home textiles, and made-ups.
Competition: Pakistani textile exporters are facing severe competition from the regional producers because of a non-level playing field. Their governments, being more pro-active, have been providing manifold incentives and benefits to them. The competition has an edge in the form of hidden subsidies, duty free import facilities, duty drawback schemes, lower wages and lower worker benefits, cheaper utilities, subsidized interest rates, and more importantly zero-rated market access for their exports to Canada and EU countries. The United States has Free Trade Agreements with many countries and regions such as Sub-Saharan countries (AGOA), Jordan, Mexico and Canada (NAFTA), Vietnam, and Sri Lanka, etc.
Pakistan’s bedwear industry also has been very much affected by the imposition of anti-dumping duty on exports to EU countries. Even though the anti-dumping duty has now been reduced from 13.5% to 5.6%, yet the ramifications are still problematic since there is also the import duty of 12.5% as Pakistan has not been granted GSP Plus status by EU. Thus countries such as Bangladesh have a 15-23% advantage over Pakistan in exports to EU.
The government had taken cognizance of this predicament and had provided Research & Development support of 6% on readymade garments and knitwear exports. Lately, after much lobbying, the government agreed to grant 3% R&D support to the dyed/printed fabrics and white-Home Textiles and 5% to dyed/printed Home Textiles. Nevertheless, these measures have not been effective in getting the industry out of the woods. This subsidy is still much less than demanded.
The government keeps on maintaining that subsidies are not on the economic agenda. However, the regional competitors and their governments are on the same wavelength when there is a need to subsidize the textile industry. What after all is ‘subsidy’? At a very general level, it is simply support which is meant to help the beneficiary deal with existing market conditions better than the other producers in the sector. In the interest of fair play, such assistance will always have to be for a specific period, preferably with a stipulation that the support will be discontinued on the achievement of the objectives. Moreover, the disadvantage which existing producers would have to face on account of this subsidy to a competitor can be justified only if the target is national economic development. In other words, every economic subsidy to be fair and equitable will have to be totally focused to the larger goal of enhancing national economic development. The Pakistani decision makers must take this into account very seriously.
Non-Official Channels: The domestic textile sector is subject to intensive smuggling of consumer, contraband, and capital goods for decades. The issue is compounded further by the encouragement given to those who mis-declare the consignments, and for turning a blind eye to under-invoicing of the imports. This phenomenon is very prevalent in the inflow of foreign-produced fabrics and apparel. There is an imperative need to control this threat since the domestic industry has been ruthlessly affected due to this multi-headed monster. The following are the reasons and effects of this menace:
• Porous and unmanageable international borders have made the job easier for the law-breakers. The matter has further aggravated ever since the control of the borders was handed over to a designated law-enforcing agency whose personnel have routinely displayed a lax and careless attitude and whose ranks have been allegedly corrupted by the smugglers.
• The corrupt and dishonest environment in the customs department, whether at various border check posts, whether at the seaports or airports, or whether at the ten Dry Ports. Dishonest officers, in blatant connivance with those who under-invoice or mis-declare, especially certain well-identified clearing agents, have wreaked havoc on the economy.
• The Dry Ports scheme was originally intended to serve as a facilitation point for exporters based in the northern parts of the country. However, fraudulent persons and insincere bureaucrats conspired to turn this scheme into a haven for imported goods so that all of them could mutually benefit from the unplanned utilization of the Dry Ports facility.
• The infamous Afghan Transit Trade Agreement has enabled the corrupt elements to misuse this facility and channelize the goods back into the country thru “legalized” and allowable procedures and thus goods much more in excess of the requirements of Afghanistan are imported under this scheme and brought back into Pakistan.
• Goods coming from China have been fundamentally responsible for the proliferation of smuggled, under-invoiced, and mis-declared items into this country. Due to the close and meaningful friendship between the two countries, the government policymakers ignored the devastation caused by the Chinese goods over the past many years. It has now assumed a significantly threatening scenario and has also contributed to the increase in the ranks of the unemployed, the poor, and the bankrupt. How will the FTA with China have an impact on textiles is worth considering.
It is proposed that to counter the menace of these non-official channels of trade and to maintain the sustainability of domestic textile industry, the following measured should be adopted:
* Computation of duties should be made strictly in accordance with the scientific mode prescribed by FBR.
* Strict control in ascertaining the quality, quantity, weight, and origin of imported fabrics at clearing stage.
*Accurate monitoring of wholesale and retail markets and establishments to determine price of the imported
fabrics.
*In case of mis-declaration in terms of weight of 20% or above, the entire consignment should be confiscated
and destroyed. In case the excess weight is less than 20% of the declared weight, than the percentage of
weight under-declared should be carried over for consideration in the clearance of the next consignment of
the same importer for the purpose of enforcement of the penalty.
*Suspending the clearance of fabrics at the various Dry Ports.
*Periodic consultative meetings with stakeholders to evaluate the performance of the customs department
and establishing the international rates of raw materials to decide on the assessment value for the purpose
of determining import duty.
*Introduction of Technical Non-Tariff Barriers to maintain transparency, to ensure compliance with quality
standards, and to protect the domestic manufacturers.
*Placement of the following testing equipment at the seaports, airports, and check posts: Yarn twist tester,
Denier tester, Fabric GSM cutter, Digital weighing scale, and any other equipment required for testing fabric.
General Factors: Apart from the above categories, there are other relevant issues that require concentration and resolution. These include:
Toning up the technical and vocational education and training (TVET) system. A skilled and professionally qualified workforce is now imperative. The present TVET scenario needs large-scale efforts in overhauling and expanding the infrastructure. There is a need to have industry-demand training and thus the syllabi needs to be updated and the system upgraded. There is a need to have a much comprehensive and focused approach towards this objective. There is a need to have a pragmatic public-private partnership in TVET so that the ensuing results are as per the requirements.
Knowledge-based export strategy is another key necessity. WTO Reference Centers have been established at the Trade Development Authority of Pakistan in Karachi, in Islamabad, and at the Lahore Chamber of Commerce & Industry. The WTO Reference Center is a program to disseminate information on international trade, provide a deeper understanding into the working of the Multilateral Trading System and to take advantage of the provisions of international trade rules and market access conditions. The object of the Center is to build national capacity for understanding the multilateral trading system and its implications for Pakistan. The use of the WTO Reference Center would be open to the business community, government organizations, academia, policy institutions, researchers, media, students and all who wish to derive a deeper understanding of international trade. Among the various on-line and off-line trade development tools on offer include Integrated Data Base (IDB) Countries Trade and Tariff Information, Consolidated Tariff Schedule Data Base (CTS) Information on Countries Tariff Bindings Statistical Data Base - Countries' Trade Data, Information on Trade in Services etc. At the same time, consultants, both domestic and foreign, should be engaged to keep the exporters in touch with the trends of the global marketplace. There is a need to create more awareness regarding WTO Reference Centers.
Focus on employment generation is imperative. The textile sector is the largest employer of the active workforce in the country. Any negative impact on this sector results in more pressure on the employment scenario. It should be noted that full employment opportunities manifest positively on the economy and the benefits are multiple. Jobs provide poverty alleviation, reduction in street and major crimes, curbing of extremist and uncivil sentiments, and general well-being and prosperity. The textile value-added industry can provide huge employment if most of its myriad problems and issues are handled in a benevolent manner by the government.
Protection of the textile industry from FTAs is essential. The government must ensure that unbridled inflow of textile goods from FTA or SAFTA partners do not sound the death knell for the domestic textile industry. It is imperative that the Pakistani policy makers do consider the fact that the Indian government has provided tremendous incentives, including duty drawbacks, under varied headings and schemes to the textile industry. It is still adhering to the imposition of non-tariff trade barriers making it tough for imported textile goods to enter the Indian domestic markets.
It is to be noted that the finished textile goods are subject to 14% import duties and zero sales tax. The reduction or zero rating of duty on Indian textile goods under SAFTA would prove to be a boon for the Indian exporters. It is a well-established fact that the Indian textile exporters routinely resort to over-invoicing and mis-declaring their products in order to obtain maximum advantages from the incentives provided to them by their government. Hence, they are able to provide their products at a comparably cheaper rate. This would be replicated in toto in their exports to Pakistan. It is strongly advised that formidable efforts should be undertaken by the Pakistani negotiators to impress upon the Indian officials that Pakistan is not in a position to accede to their demands until and unless there is transparency in their export regime, unless there is elimination of non-tariff trade barriers, and unless there is no official patronage of over invoicing of exportable goods.
Export Facilitation Inter-Ministerial Committee. The Commerce Minister had announced in the Trade Policy 2003-2004 that this Committee would be set up to oversee the progress and implementation of the Trade Policy, would be responsible to resolve all irritants faced by the business and export community, and would meet atleast once every quarter. The Committee would consist of the Ministers of Commerce (as Chairman), Finance, Industries and Production, Investment and Privatization, Governor of State Bank of Pakistan, Chairman of Export Promotion Bureau, and Secretary Commerce. The Committee was notified on September 11, 2003. Unfortunately, till today this Committee has not had a single session at all. It is imperative that this Committee should be revived. In Sri Lanka there is such a Committee that has nine Ministers as members and it meets regularly once every month.
Image building and branding of Made in Pakistan logo. The negative perceptions of extremism, terrorism, and the nuclear syndrome have had a detrimental effect on the nation’s products. It is incumbent upon the business community to play its role in combating these negative perceptions and the biased mindset. The government can assist in this respect by earmarking resources to project the country at all important international forums and on the world media. The Made in Pakistan logo must be developed and placed on all products manufactured in Pakistan. The logo must also be conspicuously placed on all official correspondence, at all Embassies and High Commissions, and on all national media. Postage stamps of the logo be introduced and used. All public transport must display the logo prominently. All Chambers and trade Associations must do likewise on their websites, correspondence, and within their establishments. The government must adopt the Indian experience of utilizing the services of Bollywood and emulate this with the support of the Lollywood film industry.
CONCLUSION:
The new government must now become very pro-active in the promotion of textiles, both in the domestic market as well as in the global marketplace. When a couple of years ago, the textile industry faced immense pressure from all fronts that added up into a precarious position resulting in demands for a level-playing field vis-à-vis regional competitors and when these demands reached a crescendo, the government set up a committee of stakeholders for finding a plausible and workable package to get the textile industry out of the quagmire. The Zubair Motiwala Commission developed and presented a broad-based package for the Prime Minister’s decision. Resultantly, on July 15, 2006 the ECC of the Cabinet announced the Rs 25 billion textile package. Further progress was made by the SBP decision and by the efforts of the Textile Ministry to broad-base the R&D subsidy regime.
The textile sector of Pakistan appreciated and acknowledged the sagacious and far-reaching decisions by the government to boost the textile sector and assist in its rehabilitation and its capability to sustain itself in the global market. Inspite of these incentives and measures, the textile sector continued to face difficulties since the regional competitors went a step ahead to maintain their position and their status. It is crucial that all the components of the textile sector be encouraged and should be appropriately satisfied that they have been adequately backed by the government. It is therefore imperative that the government must resolve on a priority basis the residual issues that still impact negatively on these components of the textile sector. This would definitely ensue into more employment, more exports, and more industrialization. The vision that Pakistan would be a major player in the global textile market would then surely be a reality. The recently elected government is at a vantage position to ensure that Pakistan’s textile industry continues to be the economic engine and propel the nation into a prosperous country.
Jo is sahat mein pinah hai ujala hum bhi dekhayn gay
Jo farq-e-subah per chamkay ga tara, hum bhi dekhayn gay
==========================================
March 28, 2008
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