‘And this too shall pass’

Majyd Aziz

A king once asked all the wise men in his kingdom to travel all around the world and discover the eternal truth. Years later, they returned and told him that they have found the answer. It was, ‘and this too shall pass’. Today, the leaders and office bearers of various Chambers and Associations are routinely asked at various forums to offer their opinions and views on the economic situation in Pakistan. More often than not, the representatives of trade and industry would highlight the difficulties in doing business and would drone on with a litany of complaints and how these roadblocks were making life miserable for trade and industry. However, ironically, the nabobs of Karachi Stock Exchange would continue to maintain their position that everything is hunky-dory and foreign investors are stepping on one another’s toes to invest in the self-claimed ‘Best Performing Stock Exchange in the World”. There is a dichotomy here somewhere. Is everything super duper on the economic front? Are industry and trade representatives the perennial cry-babies trying to shift the onus onto Islamabad’s officialdom or political disposition? There has to be some veracity in both the situations because just raving and ranting about dire economic issues will not bring sanity in the business environment.

There is a sense of frustration within trade and industry that pragmatic and courageous policies are announced and applauded but generally it seems that policymakers themselves lose interest and rarely conduct a deep and focused review of the implementation of these policies. They tend to move on to other subjects with the result that most of the doable objectives are scattered on the sidewalk because the planner and the implementer are either not on the same page or, unfortunately, one or both the concerned officials have been transferred to some other office and the newcomers are rarely keen to own the policies. Ergo, it’s back to square one.

There aren’t any bombshells or hare-brained policies either proposed by trade and industry or even by the army of consultants, mostly foreign, who descend on Islamabad with tried, hackneyed or even radical game plans. Notwithstanding all the expert advice, theoretical from consultants and practical from businessmen, the issues and problems continue to remain the same. Or, as the French say it, plus ça change, plus c'est la même chose. 

So what are the issues that continue to be the main thrust of all government-private sector heartburning? Invariably, the enumeration begins with the chronic shortages of electricity, gas and water. SITE Karachi industrialists will also highlight the deterioration of the roads in SITE. Load shedding and power outages are so frequent that, as the joke goes, Pakistanis are ready both for Heaven or even Hell. The approval of CNG stations to provide affordable fuel for vehicles may have had its initial benefits but when greed and discretionary powers become the approving methods, then the proliferation becomes disastrous. So has been the case with CNG stations. Public vehicle transporters and even private car owners rushed to get their vehicles converted. Like the Ponzi Scheme, this too gave a short term relief while the loot was going on unabated, and today, there are long lines outside CNG filling stations on the days when gas is available. People have accepted this hardship too. Water has always been a big bucks item for the tanker mafia in urban areas while it has become a bone of parochial contention among provinces on the national front.

While infrastructure shortages and losses are discussed, debated and even cursed, the representatives of trade and industry get bogged down every post-Budget time trying to understand what exactly the Finance Minister had in mind while announcing the amendments, changes, and additions in the tax regime. What is so comical about the whole opera is that tax consultants, chartered accountants, and businessmen seldom seem to understand what FBR has proposed. To most of the businessmen, all this is gobbledygook, and so the harried business representatives band together and make the usual trips to Islamabad to try to understand what on God’s green earth, FBR officials really want to do. 

The so-called Global War on Terror, with all its ramifications, with all its devastation, and with all its costs has been a nightmarish event in the nation’s history. This war has put Pakistan in a precarious position and the ensuing result has been the regrettable branding of the Citadel of Islam as ‘epicenter of terrorism’ by forces and people hostile to the very concept of Pakistan.  The law and order situation was allowed to deteriorate by politicians, law enforcers, and those in command of the security and safety of citizens. No one was willing to keep the bull out of the china shop. Citizens are still left to the mercy of extortionists, kidnappers, gangsters, suicide-bombers, and petty goons lurking in every nook and corner. It seems that those who could control the situation were themselves involved in playing a macabre game and that the impact of this game was shredding the moral fiber of this country.

There is massive unemployment with even talented people not getting quality employment opportunities, there is bad governance with government unable to maintain, provide and sustain the social infrastructure, politics has not come out of the juvenile stage, smuggling, under-invoicing and mis-declaration are hot money-making ventures and are blatantly carried on with neither fear nor apprehension, land is encroached through the strength and influence of political parties and government officials, there are guns and ammunition everywhere, there is no fiscal stability, and people with money are buying bullet-proof vehicles, hiring more and more uniformed guards, and daily transferring $250 million out of this country to safer havens.

More ominously, all of the above are direct result of the corruption syndrome. Today, corruption is the norm not the exception. Citizens know that and they have resigned to the fact that the piper has to be paid and thus the piper gets his pound of flesh.  190 million denizens of the Islamic Republic of Pakistan have also discovered the eternal truth: ‘And this too shall pass’

Economic Diplomacy: Agenda Item One

                                                         Majyd Aziz

Pakistan’s Presidents and Prime Ministers love to travel during their tenure, declare that every foreign trip is official, and that every trip is always imperative, a game changer, and more importantly, hyped as a super success. These leaders usually have a large delegation traveling with them and these also include family members. Naturally, the leaders have a full itinerary that includes the bilateral political, economic and global issues. Invariably, world issues are always a hot topic of discussion among leaders in the comity of nations. Photo opportunities are galore and there is always the mandatory interaction with the Pakistani expatriates based in that country. 

As a former Foreign Secretary recently revealed, General Musharraf was the most traveled head of state in the world. His Prime Minister, Shaukat Aziz, visited over one hundred countries in three years. Asif Ali Zardari loved to be the state guest all over the world. Now, Prime Minister Nawaz Sharif keeps his luggage all packed, ready to show himself to foreign governments. He has already made trips to the crucial countries, China, Saudi Arabia and United States of America. In between, a trip to Turkey was also undertaken. After Eid, he is to visit the White House to meet its resident.

Pakistan is handicapped by a tough scenario in her economic environment where a strait-jacket of economic malaise has tightly wrapped her and preventing her to freely hobble in the global marketplace. The dire situation is further compounded by the lack of revolutionary initiative and pragmatic policy making among a host of economic managers who have been entrusted with the task of making the country a viable economic entity again. Thus, this is the desired signal that should prompt the Prime Minister to base his foreign visits on a truly focused approach through economic diplomacy.

What is economic diplomacy? Bergeijk en Moons in Economic Diplomacy and Economic Security, describe economic diplomacy as related to cross border economic activities (export, import, investment, lending, aid, migration) pursued by state and non-state actors in the real world. They further explain that typically economic diplomacy consists of three elements:

• The use of political influence and relationships to promote and/or influence international trade and investments.
• The use of economic assets and relationships to increase the cost of conflict and to strengthen the mutual benefits of cooperation and politically stable relationships, i.e. to increase economic security. This contains structural policies and bilateral trade agreements.
• Ways to consolidate the right political climate and international political economic environment to facilitate and institute these objectives. This covers multilateral negotiations and is the domain of institutions such as the World Trade Organization, the Organization for Economic Cooperation and Development and the European Union.

 The past few years have seen a major upheaval in the economic state of affairs in many countries, regions, and blocs. The negative impact of these mini, as well as mega, meltdowns has exposed the inadequacies of economic policies and at the same time has brought into the forefront the demonic after-effects of unbridled spending, laxity in regulations, non-adherence to economic priorities and more ominously, displaying the total disregard for prudence in policymaking. These discouraging and purposeless ramifications have strengthened the need to bring about a fundamental change in how governments apply economic deliberations and justifications in their relationship with other countries as well as with the concerned organizations and institutions. Thus, bilateral or compound contentious issues are being gradually relegated to the lower side of priorities and economic diplomacy and economic security have elevated to the top of international policy agenda, driven by a blend of political and economic factors. It has to be understood that economic diplomacy is a practical tool to generate and increase economic security. This is of foremost importance given the formidable development in the global thinking of countries who have achieved new economic powers.

A quick review of the economic situation in Pakistan, especially after the assumption of the powers of the state by the Sharif government, demonstrates the crucial need to enhance and improve economic diplomacy and focus on achieving the status of a viable and functioning country. The macro-economic indicators are gloomy and a shuddering thought reverberates through the mind that even the economic managers are enjoying foreign sojourns, with a nary a worry on their foreheads about where the country’s economic ship is drifting. Recently, IMF’s Mission Chief for Pakistan Jeffrey Franks in an interview stated that “Pakistan is in a difficult economic situation right now; foreign exchange reserves are falling, chronic fiscal deficit is widening and in addition high inflation and major structural impediments have stalled economic growth.” IMF has agreed to a $6.64 billion new credit program that would give breathing space to the government and assist in repaying loans. However, the conditionalities are so tough and so anti-people that it would be a gargantuan and uphill task for the government to bring to fruition these conditionalities and sustain them.

The government, with hands tied and a default looming over on the horizon, did put up a brave face and went ahead with enhancing rates of energy, petrol and diesel, elimination of certain subsidies, closing loopholes and distortions in the revenue collection system, and announced with fanfare the program to disinvest and privatize 31 corporations and institutions still under governmental control. Notwithstanding the adherence to abide by the IMF diktat, the disturbing facts are that foreign exchange reserves have drastically dipped to an alarming low of less than $3.90 billion, the Rupee sank to 110 to $1 until artificially resuscitated by intervention of the State Bank of Pakistan, the continued liberal import regime, the messed-up rules and regulations in Sales Tax, Excise, and Income Tax, and this government’s penchant for focusing on public-popular schemes rather than a serious approach to resolving outstanding issues.

It is in keeping the economic malaise in perspective that the government should strategize its global policies and must initiate solid steps to promote economic diplomacy. Sad to report, there are no full-time Ministers for Foreign Affairs, Commerce, and Defence. These highly sensitive and key Ministries are being managed by retired and serving bureaucrats. Probably, the ruling party does not have competent elected representatives to oversee these Ministries. Thus, a concentrated and centralized power base is the modus operandi and this does not bode well for democracy to prosper.

Pakistan is at a very crucial stage now. The European Union is deciding on GSP Plus, Washington is sympathetic to a long-term trade and investment relationship that may lead to a US-Pak FTA, India is demanding MFN, Russia is supporting Pakistan’s membership in Shanghai Cooperation Organization, the Iran-Pakistan and the TAPI gas pipelines need full-time attention, while ASEAN is also making positive approaches towards a strong role for Pakistan in the near future. Pakistanis want their political leaders and economic managers to emulate Mahmood Ghaznavi, Muhammad Bin Qasim, or even Sher Shah Suri. Alas, in Islamabad, it seems that their role models are globe-trotter Marco Polo, Roman Emperor and crazy fiddler Nero, or General Ibrahim Babangida the Nigerian strongman who devastated the economy. In short, as someone said about this government, “they are still trying to sort out where they are and where they want to go”.  

Promoting Workplace Safety in Sindh: A Strategic Dialogue

Majyd Aziz

September 11, 2012 was to be just another mundane day in the lives of 257 families residing mostly in low income areas of District West in Karachi. Alas, that fateful day turned into 9/11 Duex for them and for some 600 other families. A well-known apparel manufacturing company, employing between 1200-1500 workers got engulfed in a fire incident that some attribute to the boiler and many who suspect it to be the handiwork of Karachi’s ruthless extortionists. By the time the smoldering ashes subsided and the fire-fighting crew left the premises, this tragedy became the worst and most deadly industrial event in the history of Pakistan.

It is over a year now that this avoidable disaster occurred. During the past one year, it fully exposed the flaws and inadequacies in the systems of industrial operations, the role of governmental agencies and departments, the exploitation of workers, the callous attitude and mindset of employers, the lack of security provisions, and the disregard of rules and regulations by the workers. However, most importantly, the total deficiency, ignorance, and implementation of occupational safety standards that are fundamentally vital in the smooth functioning of an enterprise, where there is substantial human involvement, were either lacking or adopted casually.

The blame game reached a crescendo within no time and the social activists, media and worker representatives demanded exemplary punishment for the Directors. The payola factor enabled the company to keep itself off the records of the provincial Labor Department and other worker-related government organizations. The internationally-based certification agencies had very nonchalantly issued the required certificates without intensive checks. The foreign buyers were more concerned with getting products at dirt-cheap prices and so turned a blind eye to the shortcomings in the implementation of various standards. Globally, the negative image of Pakistan was further highlighted in a brandish tone. It seemed that Pakistan’s value-added textile products would face a very disturbing backlash in various foreign markets.

There have been clarion calls emanating from various sections that the concept of inspection of industries is missing and that sanity would only prevail if inspectors from the Labor Department, from the Civil Defence, and from other government organizations were empowered to conduct detailed inspections and to penalize the errant industrialists. This is better said than done. The rationale behind the discontinuation of these so-called inspections was that the inspectors were mostly concerned with their proverbial pound of flesh rather than a facilitative and productive inspection. Moreover, the obsolete Factory’s Act 1934 is still on the statute books despite outliving its conditions.

The AFL-CIO, the largest workers’ representative organization in USA, in its report, “Responsibility Outsourced” castigated the role of Social Accountability International (SAI) that issues the SA8000 Certificate after exhaustive inspection, audit and monitoring. In the Baldia case, SAI outsourced the task to RINA who further subcontracted it to a local agency. The report says: “Far from enabling major multinationals to ensure safe conditions  . . . . .  SAI appears to have problems .  . . . in delivering credible corporate accountability services.” Germany’s largest discount clothing retailer, KIK, also blindly accepted the flawed certification and continued with its orders to this unit.

The Wal-Mart syndrome is also a root cause for the unsafe environment prevailing in enterprises in the developing countries. For mega companies like Wal-Mart to continue to offer products at competitive rates, it is imperative that they source countries for a bottomless reserve of cheap and low-priced goods. This exploitation compels manufacturers to disregard costly safety standards and a working environment that is conducive. The charm to become a formidable and sustainable supplier becomes an incentive as well as a noose around their necks. The factory in Baldia got caught in this vassal-type whirlpool too.

In an article, “SITE Inferno” penned after the Baldia tragedy, this writer stated, “Karachi has seven industrial estates where about 10,000 industries are based. Moreover there are atleast 50,000 cottage and small industries in the informal sector that are based in residential areas too. Many factories are like a cauldron waiting for its contents to overflow. It is also important to state that corruption, lax conformation of safety rules and regulations, ill-planning of units, usage of shoddy material such as electric wires, switches, gas cylinders etc are prime as well as disturbing reasons for such incidents.”

In Bangladesh, the eight-storey Rana Plaza, where thousands of workers earned their livelihood, collapsed on April 24, 2013 resulting in the death of 1126 people. This enterprise too had the required Suppliers Code of Conduct, ISO 9000 and ISO 14000, SA 8000, and other types of certification.  But, here too, this disaster will always remain a testimony to unbridled greed, political influence, and outright sleaze.

Taking due cognizance, The International Labor Organization also became pro-active and authorized and funded a project to develop a “Joint Action Plan for Promoting Workplace Safety and Health in Sindh”. This report would be officially launched on October 3, 2013 in Karachi at the “Promoting Workplace Safety in Sindh:  A Strategic Dialogue”. This event has been initiated by the US Consulate General in Karachi and is being supported, endorsed, and approved by Trade Development Authority of Pakistan, ILO, Sindh Labor Department, WEBCOP, PILER, SGS, and enlightened industrialists such as this writer. 

The idea behind this Dialogue is to end the blame game and to inculcate in the ranks of employers the crucial need to understand, accept and implement safety standards in their units. It will also promote the concept of safety among the workers and the employees. Moreover, there would be the demand of employers that the concerned government officials should become facilitators rather than inspectors who are more concerned with penalties and fines rather than improving the quality of the workplace. The role of TDAP is extremely important since a recurrence of another tragedy may force importing countries to withdraw various trade facilities and benefits given to Pakistan. At this crucial juncture, all eyes are on Brussels where EU is to decide on GSP Plus for various countries and Pakistan is well-poised to be granted this from January 01, 2014. The best message for all who have a laidback outlook towards overall safety standards is what Captain E J Smith, the Captain of Titanic said: “it will never happen to me”. The rest, as they say, is history!

Multi-Dimensional Chinese Lessons for Pakistan

Majyd Aziz

“The friendship between China and Pakistan is deeply rooted in the hearts of the two peoples. It is in our blood, and has become our noble and firm conviction.” Wen Jiabao, former Premier of China, December 2010. “The China-Pakistan all-weather strategic partnership of cooperation has gone beyond bilateral dimensions and acquired broader regional and international ramifications.” Joint statement issued after his state visit to Pakistan in December 2010.

The comforting exhortations do echo the sensitivities of this all-weather friendship and creates a rhapsodic emotion among the Pakistanis. The disconcerting fact is that it is very seldom that a serious effort is undertaken either by political leadership, by economic planners, by trade and industry or by media to actually adopt Chinese lessons. China is focused on long-term commitment to the policies and reforms that have been undertaken. This allows the policymakers to introduce practical aspects in a gradual and evolutionary manner rather than mid-term second-guessing. The emphasis is on institutions and rarely on individuals. This concept is, regretfully, anathema to the mindset of Pakistani leadership and is probably one of the reasons why Pakistan’s economy or other state matters dive into troublesome waters. 

It has been the avowed policy of Chinese leaders to assiduously go for development through a focused transformational process. The guiding principle is what is known as the Beijing Consensus rather than the oft-emulated Washington Consensus forced on, or followed by, many a country.

In 2004, the United Kingdom's Foreign Policy Center published a paper The Beijing Consensus by Joshua Cooper Ramo , a former senior editor at Time magazine. Ramo laid out three broad guidelines for economic development. The first guideline involves a "commitment to innovation and constant experimentation." The second guideline states that “Per Capita Income (GDP/capita) should not be the lone measure of progress.” The third guideline urges a policy of “self-determination”, where the less-developed nations use leverage to keep the superpowers in check and assure their own financial sovereignty. In his January 2012 article in Asia Policy, John Williamson, an English economist who coined the term Washington Consensus,  described the Beijing Consensus as consisting of five points: 1. Incremental Reform (as opposed to a Big Bang approach) 2. Innovation and Experimentation 3. Export Led Growth 4. State Capitalism (as opposed to Socialist Planning or Free Market Capitalism) and 5. Authoritarianism (as opposed to Democracy or Autocracy).

The result has been phenomenal for China and is reflected in a stellar growth in foreign exchange reserves, in formidable GDP growth in the past three decades, in developing a process of political, socio-economic influence in many countries, blocs, and regions, and a resolute reliance on traditional perspectives rather than borrowing theories or dictates. Until 2008, China still followed Premier Deng Xiaoping’s vision to build China’s strength while maintaining a low profile in international affairs. But in 2008-09 when the global economic crisis devastated the economies of most of the democratic countries, China survived the downward spiral and emerged in a dominant position. A re-thinking then evolved and China ventured to become a global force.

China’s model of development is actually more complex and highlights steps designed to ensure that the government remains the focal point of economic and political policy-making and maintains a high degree of control over the economy. China has created substantially favorable strategies to attract foreign investment. Beijing has developed a mixed form of capitalism in which there is an open-economy to some extent, yet it ensures governmental control of strategic industries, encourages entrepreneurship, decides the investing of state funds, and allows the banking sector to prop up profitable and innovative enterprises. Thus there are now over 300 billionaires in China.

An important point within the Beijing Consensus guidelines is emphasis on export-led growth. That has been the hallmark of the Chinese economy and it is through this determined policy that today China has been able to become the envy of other nations and has enabled Beijing to play a leadership role in the global marketplace. The prediction is that Chinese exports would cross US$ 2.75 trillion in 2013. Of course China is also a major market for global goods and in 2013 imports may exceed US$ 2.25 trillion. China’s foreign exchange reserves are a mind-boggling US$ 3.50 trillion. These figures are a manifestation of adherence to Beijing’s own thinking process rather than allowing external influences to dictate strategies.

“Indigenous Innovation”, or “zizhu chuangxin”, has been a cornerstone of China’s march towards self-sustainment. When Deng Xiaoping launched the reform process and opening up of the economy in 1978, he counseled that supremacy in science and technology should be the key to China’s modernization. Some 20,000 experts were at that time directed to draft a new blueprint for science to serve as a conducting force for restarting China’s economy. The importance accorded to science and technology is evident even today by the fact that state leaders themselves control the science policy. The prime factor of this policy is to reduce China’s overall reliance on foreign technology to below 30% from an estimated 50% at present. More importantly, China is embarking upon a campaign to inculcate “Buy China” on the domestic front. This would be a monumental boost to domestic industry and would become a source of concern for countries that do bilateral trade with Beijing. Furthermore, even foreign companies now have to conform to the Chinese demands for co-innovation and re-innovation, a conditionality that is agonizing and difficult to fathom.

The reliance on this policy has enabled the Chinese government to undertake mega reforms that has resulted in China making tremendous headway into solving the infrastructure shortages, development  of efficient physical infrastructure like high-speed railways,  excellent road network, and utilization of automotive vehicles, etc. Four basic research sectors have been provided extensive support and significance. These are protein science, nanotechnology, quantum physics, and developmental and reproductive science. The decision makers have a target of increasing gross expenditure on R&D to 2.5% of GDP by 2020 with basic research reaching 15% of R&D spending by 2020. More importantly, the Chinese policy is to ensure that essential goods, services, and privileges are provided to assure quality of life. One fact that exemplifies this is that official poverty that was 15% in 1984 is less than 2% today. This is possibly the most dramatic poverty reduction achievement in recorded history.

Pakistan has to learn a lot from the Chinese Model. The potential lessons that deem consideration include ownership of policies at all levels of society. Recently, the political and establishment leadership displayed such an ownership during the All Parties Conference on National Security. This sincerity can and should be replicated in other sectors too. It is imperative that there should be an Islamabad Consensus on the economic vision that is notoriously deficient in Pakistan’s policymakers. An APC should have been convened long time ago in association with representatives of trade and industry to discuss and agree on a three-tier economic vision, containing short, medium, and long-term strategies and targets.

Another lesson to be learned from China is that reliance should be on homegrown or indigenous solutions rather than depending on imported or abstract answers to resolve the country’s myriad issues. It is important to understand that the encouragement accorded to grassroots initiatives would generally indoctrinate commitment to reforms, a feature that is seriously missing in this nation of nearly 190 million denizens. A paradigm shift is crucial and this may even be requiring an unorthodox approach and revisit of established parameters. It seems that building constituencies, scaling up the initiatives, and shedding unworkable decisions just do not factor in any successive Pakistani government’s thinking.

There is a fundamental need to change the equation by stepping onto a higher plateau and imbibing the wisdom oozing out of the Chinese success of becoming a great nation. Pakistanis should now literally follow, in more ways than one, the Hadith of Prophet Muhammad (PBUH): “Seek knowledge even as far as China.”