Perpetuating mediocrity

Majyd Aziz

PAKISTAN is considered a developing country that, inspite of its myriad internal problems and external events, keeps on inching forward. The recent slide in the value of the Rupee, the ever-increasing cost of production, and the negative image have all been formidable influences on her economic growth and prosperity. Over many years in the past, productivity was seldom a cause for concern in the industrial sector, or even in commercial ventures or service sectors. Labor was affordable and thus low performance was tolerated and accepted as nothing worth losing sleep at. To compensate for absenteeism, holidays, and the fear of shortfalls in delivery, the managers would resort to hiring extra staff so that the wheels would continue to move on.

At the same time, the situation in state-owned enterprises faced the same predicament. Productivity was never an issue because of diverse reasons. The most explanatory reason was the influx of political appointees who considered their employment as secure and therefore they could nonchalantly take liberties with impunity. The management executives too were infected with political patronage and thus their agenda was in tune with the dictates of their patrons rather than the viability or survivability of the enterprises they managed.

Moreover, in other sectors, such as education, health, and even the legal profession, there is much to be said of the sad affairs of having people who are unashamedly inefficient, ill-trained, and unfit for the tasks allotted to them. Most of the one-star schools in Pakistan have teachers who are paid less than the legal minimum salary. This reflects the low caliber of the teacher and it is a shuddering consideration about the trained output from these schools. In many clinics and hospitals, the performance of the medical personnel leaves much to be desired. In fact, many of them are playing with the lives of patients who depend on them for their medical diagnosis and solutions. It is also a matter of concern when small-time lawyers and even petty magistrates write in an atrocious manner, literally massacring the English language.

Restaurants, bistros, cafes, and fast food joints have more employees than is usually prescribed for their establishments. The clear explanation is low wages, long hours, and horribly high prices of their so-called delicacies. It is another story that in many such places, the servers, for example, cannot even properly pronounce the names of the dishes, what to talk about offering suggestions on the choices.

What do all these reflect? Obviously, there is a common factor that loudly reverberates the truth. Remember the oft-repeated management advice, “Well, if you pay peanuts, you get monkeys.” That is one very evident answer. However, the prime reason is that in all what is happening, everyone in every sector is just perpetuating mediocrity. This is a manifestation of the inadequacies of the decision makers themselves too and shows their own lack of ability. It becomes magnified when a time comes when mediocre people become invaluable to the organization and start making and implementing decisions or directives. The outcome then is like that of a whirlpool that keeps on gathering momentum and gradually becoming a tornado of incompetence and ineptness. This is so much in abundance all over Pakistan. It is time to sit up and observe what Napoleon Bonaparte once stated: “When small men attempt great enterprises, they always end by reducing them to the level of their mediocrity.”   

Do trade bodies lack critical mass?

Majyd Aziz

The hierarchy of various Chambers and Associations lack the critical mass to enforce their protest, criticism and disapproval because of the very obvious matter-of-factness that although there is constant hobnobbing with the policymakers, the captains of trade and industry are not keen on being on the wrong side of these decision makers. The onus, therefore, lies on the representatives of the small traders, markets, or small and cottage industries to vociferously create opposition to the steps taken by agencies, such as FBR. This is not the ideal way to get things done, but more often than not, it propels the leaders of trade and industry to come to terms with the ground reality and then they attempt to adopt, albeit for a short time, the stand taken by the agitators.

The business community has never had a strong voice in the corridors of power. In the Parliament, there are relatively very few members who could be classified as businessmen or industrialists. Traditionally, this community has been apolitical and whatever influence it had was thru its financial and moral support to the established candidates representing major political parties. One very important reason for this approach is, in fact, due to the very nature of politics in Pakistan, where the ruling party is “us” and anybody against it is “them”. These “them” are always considered anti-Pakistan, criminals, cheats, and what not, and thus it is always open season for the minions of the ruling party to indulge in opposition-bashing. It is precisely for this reason that the businessmen have maintained a sideline posture when it came to politics.

The stalwarts of the industrial and business community will invariably fawn over and flatter the hierarchy of the ruling party. They will leave no stone unturned in getting the Prime Minister or the strategic ministers, such as of Commerce or Finance, to their meetings and conferences. It is a common sight to see them at dinners and lunches going gaga over them, professing their support to the party’s manifesto, and at the same time proving their undying loyalty to the party. These are the “Commercial Lotas”. Even the government takes advantage of this and will offer bait to these businessmen to join the party or to keep on supporting it. Many businessmen know which side the bread is buttered and they will strive to squeeze maximum benefit out of this relationship.

The best way for any businessman to get into the good (or bad) books of the government is to become someone “important” in the various Chambers and Associations. Those who take this seriously can in a few years become “godfathers” of these organizations and can then “control” these organizations to their own advantage. Thus there is always a dogfight for top positions in FPCCI, KCCI, and other Chambers etc. Of course, some of these Associations have become “family-oriented”, and the Chairmanship of these Associations is rotated between brothers or between father and son. In most of the Chambers, the “ruling group” maneuvers to stay in power, and the way they do is to have a staff that is compliant and loyal, not to the Chamber or the general body, but unabashedly to these “godfathers”.

The leaders of the business community generally tend to play it safe when it comes to dealing with the ruling party, even in these days of democracy and freedom of expression. At times, the business community has tried to show its wings and there have been strikes or protest marches. However, the government plays softball with the leaders and soon things are back to square one. The media tries to coax the leadership to take action so that sensational news can be conjured up but leadership usually side-steps the goading and the issue seldom creates waves. Expediency and the need to enjoy the perks of office brings these leaders out of their stance and pretty soon diehard agitators who really feel the pain are left dangling in high air.

The present economic scenario and the recessionary trends in the country alongwith cost increases, fortified with low demand, uncertain business conditions, decrease in export orders, uncertainty of the rupee-dollar parity, and the deteriorating law and order situation, not to mention the upsurge in terrorism, have brought businessmen into a frenzy. Their long-term planning has gone to the boondocks while in the short run the capital crunch is proving disastrous. 

Business leaders routinely carp and complain about various roadblocks. The cost of economy of inefficient services of state-owned entities in energy, telecommunication, ports, railways and other public utilities, in terms of increased cost of doing business has been obscenely high indeed. Power outages and voltage fluctuations, shortage of gas supply, inadequate urban water supply, and the high incidental and transaction costs associated with these services have imposed considerable costs on entrepreneurs. The management of the government entities has been largely incompetent, ineffective and unresponsive. The utilities, whether electricity, gas or water providers, have made life miserable for industrialists and the top executives of these organizations don’t even care to meet the business leadership.

One area where business leadership has failed miserably to oppose is that corruption has become endemic. Corruption thrives in an environment of pervasive bureaucratic and regulatory controls. Extensive discretionary powers in the hands of the officials and weakness in the legal framework also generates corruption. There is no recourse to settling matters transparently. Seldom anything happens until the wheels on the files are well-oiled. Reasons for the depth of official corruption can be several. Many of these are sociological, but the more significant ones are political-linked, organization-related and economic policy- based.

Though corruption badly affects different sections of the society in various ways, its costs fall heavily on the investors and entrepreneurs. Corruption has become a camouflaged form of taxation. When regulations, discretionary power and controls are all-encompassing then effective means of obtaining redress through legal or administrative procedures are missing and thus businessmen end up paying the piper to get through them. Graft is usually regarded as just one of the costs of doing business and it needs accounting jugglery to show these payments as legitimate business expenses.

With the advent of a new political thinking in the country, it is imperative that the business leadership brings about a paradigm shift in various business organizations. A focus on institutional quality is crucial, because, like good governance in government, trade bodies should also be high-quality institutions. Is it so difficult to correct? The answer is that the rank and file in the business community has adapted to the prevalent outdated mindset and is now dependent on them. Change is painful and sensitive because powerful forces defend and vigorously protect these organizations. Thus, only a few brave souls advocate change, modernization and improvement. Most of the time, it is nothing but a lost cause. So, they do what has been done for decades. Either fade away or join the bandwagon. Mostly, the latter is their best option. US Navy SEALS have a saying: “Individuals play the game, but teams beat the odds.”

Merchant Power: Is it a workable alternative?

Majyd Aziz

In Pakistan’s energy scenario, the chickens have, literally, come home to roost. Years of indecisiveness coupled with the hackneyed assertions that Pakistan has more electricity than required has manifested into a situation where the nation’s foundations are shaking. New words have entered the domestic lexicon and even the uninitiated are recognizing and understanding the ramifications of these new or oft-used words. Circular Debt, Rental Power Projects, Independent Power Projects, NEPRA, PPIB, DISCOs, Loadshedding, etc are floated around casually every now and then. Moreover, WAPDA and KESC have become words of ridicule and curse in the languages spoken by residents in small hamlets and all the way to metropolitan cities. It seems that, today, electricity can bring into power a political party or even consign it into the wilderness.

With the advent of the new government in Islamabad, all eyes are on the actions that Prime Minister Nawaz Sharif will take to tackle this issue. It is not possible to wave the magic wand and announce “Voila! Let there be light” overnight. What is more constructive is that all alternative channels must be energized to lessen the magnitude of power crisis. Experts and laymen have been huddling to come up with some pragmatic solutions. There is no other choice but to take the bull by its horns.

The distressing fact is that even though alternatives were available or could be harnessed, the proverbial bureaucratic red-tape, the high incidences of corruption, the inability to rewrite the rules and regulations, and the dishonorable vested interests have so much impeded the momentum that just trying to get out of these tentacles has become a gargantuan task for any investor or policymaker. Everybody and his next door neighbor are talking about the wonders of Thar Coal, about Wind or Solar power, about cheap Hydel power thru Dams that are susceptible to provincial politics, and of course generating energy thru biogas, garbage, or even imported tyres. There is also talk about fast track conversion of power plants by imported coal. 

All the above are doable and could be feasible, and some may be done on a fast track but, frankly, many alternatives are still a long way into the future. What should be done immediately is to revisit the various rules and regulations that hamper or slowdown the efforts of investors and get these amended, modified or removed. These steps would introduce the concept of Merchant Power Plants (MPP) in the country.

The government must pave the way for MPPs by making it easier for investors to penetrate into this field and take advantage of the back-breaking shortage of electricity. There is a need to allow potential investors to enter into a comfort zone in this sector. There should be no restriction on the use of fuel or on the minimum capacity for the MPPS. However, in keeping with the vision of the government to utilize coal, initially imported too, it is recommended that coal-based projects be encouraged. It is a good augury that NEPRA recently announced an upfront tariff of 9.65 cents per unit for large coal-based projects for 30 years while for less than 200mw it would be 8.275 cents. It is hoped that NEPRA would soon decide the tariff for less than 50 mw.

Merchant Power Plants (MPP) are not something new in the world. Investors have developed over 200,000 MW of power plants in the United States. India has an active Merchant Power program too. MPPs are technically different in the sense that they are unlike the power plants operated by WAPDA or KESC who distribute power at a set price that is determined through a mechanism and approved by a regulatory body. They are legally and economically different from IPPs and plants owned by traditional power companies in Pakistan or, for that matter, even captive power plants of the industries. Unlike IPPs, the MPPs have no single sales contract for the term of their life and there is no guarantee about their continued income.

It should be understood that MPPs will not be large power plants and only generation-based. What is important is that capacity should not be the limiting factor. There are three guiding points that justify the case for MPPs. First and foremost is the yawning gap between installed capacity, between actual generation, and between immediate consumer demand. The second fact is that investment in power plants is still not forthcoming at the speed that is imperative. The third argument is that too much emphasis on regulations and the dependence on WAPDA or KESC are impeding the distribution of electricity.

Therefore, MPPs should be set up and their viability and feasibility would become sustainable through three options that could be availed by a potential MPP. An example of a MPP could be a large industrial unit that has set up a captive power plant of, say 30 mw. This unit can firstly use power for self-consumption, secondly under the system of wheeling, sell extra power to WAPDA or KESC or use the existing power lines for transmission to consumers within the area, and thirdly set up a grid to supply power to units within its own proximity. Of course, if there are more MPPs in any sector they could share ownership of the transmission lines to attain economies of scale and reduce investment costs. In each case, the rate per unit could be negotiated between the supplier and user rather than going through a plethora of documentation, useless inspections, mind-boggling regulations, and slow process of approvals. Thus electricity would be treated as a commodity with its own market dynamics. This could attract investors from the stock exchanges and thus, in effect, become a sort of retail power market.

 

The rationale for allowing MPPs is pragmatic and makes sense. At present the transmission and distribution losses are abnormally high and the main reason is theft, corruption, and free electricity. Secondly there is excessive governmental interference in the workings of the present energy sector companies. Thirdly, rates are regulated by the government and inefficiencies, management inadequacies, theft, overstaffing, cost of subsidies, etc are factored in to calculate the rates. Fourthly, since the government is unable to rein in the galloping circular debt, the impact is passed on to the consumer. More importantly, the gap between generation, transmission and distribution would not be reduced any time soon. Ergo, a MPP can be a game changer. It is proposed that this should be debated and discussed by the economic planners on an urgent basis. 

As US Congressman from Iowa Steve King once stated: “That's the key: get the constitution in place. Get rule of law in place, capital will come, electricity will follow.” This, in short, is the answer to our energy crisis.

Bangladesh: Would Rana Plaza be a game-changer?

Majyd Aziz

Cupidity. Cronyism. Corruption. These blend into a lethal Molotov Cocktail that if exploded, brings about pain, misery or death. There is enough empirical evidence accumulated to substantiate this premise. The unashamed misuse of power or callously exploiting access in the corridors of power, are black spots on governance, on accountability, and on humanity. One such gruesome and shocking symbol is the crumbling edifice known as Rana Plaza in Savar District, on the outskirts of the Bangladesh capital, Dhaka. It was home to a bank, apartments, five clothing factories and several shops. More than 3100 people earned their livelihood from there.

Bangladesh, after her emergence in the last days of 1971, became an icon of those states that are known as economic “basket cases”. The rallying cry in those days was to lift this nascent nation, shattered by annual cyclones, deeply embedded in poverty, devastated by civil war, and having a burgeoning population. The strategy was to immediately provide funds for sustenance and also to develop the country through a focused industrialization process.

That is when textiles entered into Bangladesh. Garments and knitwear provided massive employment, not only to men but also to womenfolk as well as children. Major global brands made a beeline to take advantage of the situation and succeeded in making the economy and survival of Bangladesh dependant on these global labels and retail chains. Everyone turned a blind eye to lack of occupational safety standards, low workers emoluments, flouting of labor laws, proliferation of child labor, and ruthless exploitation of money, political influence, and legislation.

Over the past few decades, Bangladesh textile industry flourished. Her decision makers played their cards pragmatically at international forums and this paved the way for the textile industry to enjoy the fruits of trade preferences and privileges. Coup d’état, political instability, natural calamities, riots, and the Battle of the Begums (Khaleda Zia and Hasina Wajed) for the coveted position of Prime Minister, did not discourage Western buyers from sourcing products from Bangladesh.

Bangladesh industrialists further took advantage by harping on the familiar tune that employment, especially for women, was essential if child labor was to be eliminated. They managed to keep wages under check. This was the “edge” that propelled this impoverished country to hit the $ 20 billion textiles export figure, second only to China. 80% of the country’s exports are textile-based. 25% of the total textile exports are destined for the US market. 

The garment worker generally takes home less than $ 40 per month. It should be noted that after worker protests in 2010, wages were raised by 80%. This means that just 30 months ago, the wages were a shade over $ 20 per month. UN poverty threshold is $ 1 per day. This is the tragedy, and not only Bangladeshi industrialists but also global importers were equal partners in blatant exploitation of the workers, especially over three million women. 

The modus operandi prevalent in Bangladesh garment units was to obtain maximum orders by quoting favorable prices that appealed to the international buyers. They have formidable support of the politicians who kept harping on the facade of Bangladesh being under-developed and in dire need of global support. Most of the orders were outsourced to sweatshops making the product cheaper. What is really pathetic is that disasters in Bangladeshi garment factories are nothing new. In November 2012, a garment factory caught fire and 112 workers perished. Since 2005, over 900 workers were killed and thousands injured due to tragic incidents such as fires and collapsed buildings, mainly due to poor working conditions and lack of safety procedures. The nexus between local manufacturers, global buyers, and politicians continued to downplay these disasters.

Will the Rana Plaza catastrophe be the catalyst of change in the garment industry? The first reaction came from the global labels that came out with statements that they would be revisiting their procurement policies. Wal-mart, J C Penney, Calvin Klein, H&M, Target, The Gap, Tommy Hilfiger, Tchibo, etc had in the past refused to fork out a few pennies more to improve the safety standards. Many of the labels openly refused to sign any programs to monitor safety and social standards in the factories. Even today, there is no consensus among the labels and the issue lingers on.

A lot of hype is created by quality assurance firms and independent inspection organizations. There is lot of hullaballoo about mega labels setting up Suppliers Code of Conduct, demanding ISO 9000 and ISO 14000, SA 8000, and other types of certification. They send their teams for on-spot inspection of the working environment and whether the supplier is conforming to the agreed upon conditionalities, procedures and safeguards. The Rana Plaza tragedy has blasted all these so-called certification and codes. It gives credence to oft-repeated objections and allegations that, in reality, most of these certification requirements are not essential and only add to the cost of the product.

What if this was not Rana Plaza of Dhaka and instead was Rana Plaza of SITE Karachi? Last year a well-established garment factory in SITE Karachi got engulfed in fire. 262 lives were lost. Workers Federations and social activists went ape while the hapless owners were put behind bars and a FIR under Section 302 was lodged against them.  Human Rights organizations all around the world sharpened their knives against Pakistan. It seemed that Pakistani garments and knitwear would be boycotted. Of course, today, save one organization, all other representatives of workers and the social activists have gone to search for new issues. If it would have been a Rana Plaza, surely Pakistan would have been condemned and hung on a stake by everyone everywhere.

Today, representatives of garment associations etc are touting the claim that there would be a massive exodus by global labels from Bangladesh and soon substantial orders would be placed with Pakistani manufacturers. A clarion call has been given to garment units to prepare for the deluge of orders. This is nothing but utmost naiveté on the part of these business leaders. This isn’t going to happen as anticipated. The minimum monthly wage in Pakistan is $ 90 compared to less than $ 40 for the Bangladeshi worker. Pakistan does not enjoy GSP Plus trade preference (so far). Bangladesh does. The former suffers from a distorted and negative image. The latter still brandishes herself as a basket case.  This works beautifully for Dhaka. Ergo, not much will happen in Pakistan.

Alas, the eight-storey Rana Plaza, where thousands came to earn their daily bread, which collapsed on April 24, 2013 resulting in the death of 1126 human beings, will always remain a testimony to unbridled greed, political influence, and outright sleaze. The dead would be debited in the Bangladesh corporate annals as well as in the records of mega global labels and retailers as ‘collateral damage’ and, once the debris of Rana Plaza is removed, then it would be time to place new orders and set up new sweatshops in buildings constructed on swamps. There may still be, after all, many Sohail Ranas among the owners of the 4500 plants still in Bangladesh. Meanwhile, for the owners of the global labels, a quote from Martin Luther King Jr. should serve as an eye-opener: “He who passively accepts evil is as much involved in it as he who helps to perpetrate it. He who accepts evil without protesting against it is really cooperating with it.”