Pakistan Economy & Development

Discussion in 'Pakistan' started by BlueOval, Jul 27, 2010.

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    Pakistan Economy News and Views

    News Items and Opinions related to Pakistan Economy to be posted on this thread.
     
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    Pakistan’s Moral-Hazard Economy

    Hillary Clinton’s just-concluded visit to Islamabad – for the second session of the strategic dialogue that she and her Pakistani counterpart, Shah Mehmood Qureshi, launched in Washington earlier this year – brought some comfort to her hosts. The United States promised to provide $500 million of funding for several “highly visible” projects in Pakistan. This was to be part of the $1.5 billion allocated to Pakistan in legislation signed by President Barack Obama last year.

    The day before Clinton arrived in Islamabad, the Friends of Democratic Pakistan met there. An earlier meeting of the group was chaired by Obama on the sidelines of the United Nations General Assembly session in New York last year. It was attended by then-Prime Minister Gordon Brown of Britain, the heads of the World Bank and the International Monetary Fund, and government ministers from several countries. At the Islamabad meeting, the FDP agreed to provide finance for Pakistan’s energy-development program, and requested proposals from the Pakistanis for the development of other sectors considered vital for the economy.

    A few days before that, President Asif Ali Zardari paid his fifth visit to Beijing since taking office in August 2008 – this one a state visit – and received pledges of support for developing nuclear power and constructing a railway line over the Karakoram mountain range, linking the two countries. This would facilitate western China’s access to the sea, via the Pakistani port of Gwadar.

    These promises and pledges underscore Islamabad’s growing dependence on foreign assistance, which is not surprising, given that Pakistan’s tax-to-GDP ratio has declined to less than 9%, the lowest among the 22 largest emerging economies. They also suggest the continuance of a sort of moral-hazard approach to economic management that ensures foreign help whenever the country drives itself to the edge of an abyss.

    Today, Pakistan is Asia’s worst-performing economy. Its GDP growth rate of 3% is half that of Bangladesh and one-third that of India. And, while there is a good chance that this latest infusion of foreign money will help the country to pull out of a deep economic crisis, it will simply be history repeating itself. Pakistan does well when it receives large flows of foreign assistance, as in the 1960’s, during President Ayub Khan’s term in power, the 1980’s, when General Zia-ul-Haq ran the country, or the early 2000’s, when General Pervez Musharraf was in charge.

    During these three periods of military rule, the country was able to align itself quickly with the US. In the 1960’s, America wanted Pakistan to be on its side as it sought to contain the spread of communism in Asia. In the 1980’s, the US wanted Pakistan to help it force the Soviet Union out of Afghanistan. After the terrorist attacks of September 11, 2001, the US wanted Pakistan to help end Taliban rule in Afghanistan.

    Now, for the first time, the US is providing large amounts of assistance to a democratic government. Will this relationship help Pakistan get off the economic rollercoaster it has been riding for the last half-century?

    To ensure that its economy’s performance is no longer dictated by the availability of foreign aid, Pakistan must undertake some fundamental restructuring. If carried out by a representative government, such economic reforms have a better chance of being sustained. On the other hand, there is no assurance that the right policies would be maintained if power once again passed to a military ruler.

    The foreign governments that are currently engaging Pakistan should encourage its leaders to move forward on at least two related fronts: trade and better relations with India are crucial.

    At independence more than 60 years ago, Pakistan had a larger trade-to-GDP ratio, owing in part to trade with India. That came to a sudden stop in 1949, as a result of the first of many trade wars that the two countries have fought.

    Before 1949, India absorbed roughly 60% of Pakistan’s exports and accounted for 70% of its imports. Nowadays, India accounts for less than 5% of Pakistan’s total trade turnover.

    This is contrary to what would be predicted by the so-called gravity model of trade, which is based on both the size of the trading partner and its distance. According to this model, China and India, not the US, should be Pakistan’s largest trading partners. Thus, Pakistan should not devote so much of its energy to improving its access to the US textile market, as it now does. Indeed, given competition from low-wage economies such as Bangladesh and Cambodia, Pakistan should abandon its focus on textiles altogether and expend much greater effort to develop its knowledge-based industries.

    Another area of emphasis for donor dialogue with Pakistan is governance – not just reducing and controlling corruption, but also bringing policymaking closer to the people. Long stretches of military rule, with its emphasis on command and control, has left policymaking in Pakistan highly centralized. More power needs to be devolved to the provinces.

    Today’s democratic government has taken a step in this direction by amending Pakistan’s constitution. The country’s “friends” should encourage this effort, perhaps by requiring that the country’s provinces be given a voice in their dialogue with Zardari’s government.

    Foreign donors must insist that Pakistan reform its economy in order to escape the moral hazard implied by continued dependence on aid flows. But that outcome is much more likely if democracy flourishes throughout the country.

    Pakistan?s Moral-Hazard Economy - Project Syndicate
     
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    Circular debt holds Pakistan economy hostage

    Circular debt holds Pakistan economy hostage


    Pakistan State Oil (PSO), the only supplier of furnace oil to the country’s troubled power sector, teeters on the verge of default on oil import payments as various state-run and private entities remain unable to clear its dues worth more than Rs133 billion, a top official of the company said on Monday.

    “PSO continues to remain in a deep financial crisis,†Irfan Qureshi, managing director of the state-run company, told The News in an interview. As on July 19, various major power generation companies, including Water and Power Development Authority (WAPDA), Pakistan Electric Power Company (PEPCO), Hub Power Company (HUBCO), Karachi Electric Supply Company (KESC) and Pakistan International Airlines (PIA) owe PSO Rs133.2 billion, he said.

    “This created such an acute financial crunch that the state-run oil company struggles to meet its import payments. We live in a constant danger of default on the foreign oil import payments. In case we default on our letter of credit (LC) payments, the country would be unable to import for another four months POL (petroleum, oil and lubricants) deficit products.â€

    In June, PSO, which holds around 70 percent of the overall market share of the country, was on the verge of default on import payments, but the government and the power sector managed to clear Rs34.2 billion of its dues.

    In a meeting held on June 15, Prime Minister Yousuf Raza Gilani ordered the payment of Rs41.4 billion to the company to ensure an unhindered oil supply in the country. However, the total pledged amount was not paid.

    Qureshi, appointed managing director of the company in February 2009, said that not just PSO, but the circular debt holds the entire economy hostage.

    “When the power generation companies, including WAPDA, PEPCO, HUBCO and KESC fail to clear their dues we are unable to meet our payment commitments. Today we owe around Rs80 billion to the oil refinery companies and Rs36 billion to the international fuel suppliers.â€

    PSO supplies around 23,000-24,000 tons of furnace oil on credit to the power generation companies daily, which amounted to around Rs28-30 billion a month. “It is a huge amount. Only PSO supplies oil on credit. We want other players to join in, but none wants to supply oil on credit.â€

    “Meeting our foreign payments has become a battle for us every month. I am not joking, but we have become master fund managers, swapping this payment with that and that with this.â€

    The problem of the circular debt started getting worse since May-June 2009 because the main power distribution companies failed to collect dues, as well as to curtail theft and line losses.

    Officials in the Finance Ministry say that PEPCO remains one of the main culprits in creating the circular debt issue. “Its inability to clear dues stems from weak collection system from consumers,†said one official on the condition of anonymity.

    Qureshi said that PSO had to depend on bank loans and overdraft to keep itself afloat. “Our overdraft limit is around Rs40 billion and we had already taken Rs38 billion in advance,†he said.

    “The heavy bank barrowings result in high financial costs borne by the company in terms of interest payments, which hurts PSO’s profit margins. From July 2009 to May 2010, PSO has made interest payments worth Rs8.5 billion. Had this amount not gone into interest payments, this would have been part of our revenues. Despite all these constraints PSO closed the fiscal year on a positive note, which would be made public shortly.â€

    “The circular debt is a vicious cycle. It has restricted us from investing in enhancement of the storage network. Moreover, other investment and expansion projects have been withheld, which have resulted in low job opportunities. The circular debt is even eating away the Public Sector Development Programme.â€

    The circular debt issue should be addressed on war-footing that includes stern action against power theft and raising the power tariff, he added.

    “The best option would be to use technology against the power theft. Smart cards should be issued to consumers for electricity purchase so that the collection process gets streamlined and it should be linked with NADRA’s ID card system so that defaulters are identified and action is taken against them.â€

    PSO remains one of the few well-managed and profitable state-run companies of the country, but has been bogged down due to the circular debt, Qureshi said.

    “If we can get our dues cleared on time, then there is no problem in ensuring streamlined supplies.â€

    Qureshi said that despite challenging times, PSO has been managing uninterrupted oil supply to the country, but the number of days cover for all the products has reduced significantly as the power sector continuously default on payments.

    ‘Circular debt holds Pakistan economy hostage’
     
  4. BlueOval
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    DAWN.COM | Editorial | Economic mess

    Pakistan’s economy is a mess. Growth remains sluggish, not least because of falling investment, energy shortages, political instability and an unfavourable security environment.

    Inflation is resurging and the rupee showing signs of weakness. The fiscal deficit is estimated to have swelled to 6.2 per cent of GDP last year from an earlier official forecast of 5.1 per cent. Could these be the signs of reversal of the recent economic gains? That will be too early to say though the country’s future economic outlook remains precarious. The country’s economic future largely hinges on external capital flows. But, as things stand today, financial support from the International Monetary Fund (IMF) and other donors is likely to get delayed due to Islamabad’s failure to hold down its fiscal deficit to the agreed level and implement Value-Added Tax (VAT). It is important that the government took convincing steps to show to the world that it is serious about fixing the economy. The curtailment of unproductive expenditure and increase in tax revenues will be a crucial step in this direction.

    The failure to boost tax revenues has led the government to cut price subsidies and development expenditure. But it has done nothing substantial to plug the leakage of about Rs200bn through various loss-making state-owned entities like PIA, Pakistan Steel Mills and the railways. The cut in ‘wasteful’ price subsidies alone, though necessary, will not help. These measures have only spelled more difficulties for the man on the street. The budgetary deficit is growing in spite of the massive cuts in subsidies and reduction in development budgets. Besides, Islamabad should also take the provinces on board on its economic policies. Its finance managers blame provincial deficits for the widening of the fiscal gap. Now they want the prime minister to intervene and convince the provinces to slash their expenditure to help cut the overall fiscal deficit. The provinces are required to create a surplus equal to 1.5 per cent of GDP this year for controlling the overall fiscal deficit.

    The provinces, however, should be cautioned against axing their development spending to throw up surplus. It will hurt the poor and result in the loss of more jobs.

    Also, the prime minister has been requested to defuse political opposition to the implementation of VAT, which is crucial if tax revenues are to be boosted for development. It remains to be seen if the chief executive of the country will be able to neutralise opposition to the tax. If that does not happen, the country will actually risk the reversal of the economic gains of the last 20 months. That will be disastrous for both the country and its people.
     
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    Fresh statistics reveal sharp increase in poverty

    ISLAMABAD: Statistics officially offered to international agencies, monitoring the poverty situation in Pakistan, reveal a sharp increase in the number of poor people, owing to the unmanageable price rise in the energy and food items during the last couple of years.

    A sharp increase in the number of poor people during July-March period of the fiscal year 2009-10, was shown in a new report because of exorbitant increase in prices of petroleum products, electricity, natural gas and food items (chiefly flour, sugar and meat).

    A World Bank’s Task Force on Food Security had previously pointed out that 40 percent Pakistanis were living below the poverty line during the last three years of the Musharraf regime.

    Officials, working on the report, say that the government does not intend to make it public, though international institutions would be able to use it for in-house assessment of the situation in Pakistan, in late 2010 and thereafter.

    According to the report, the government did not launch a fresh household income-and-expenditure survey to assess the impact of upswing in energy and food prices, in villages and slums of the cities.

    “The government still considers a five-year old assessment valid for determining the severity of the situation, which shows how serious it is in improving the conditions for the poor,” said a senior official who did not want to be named.

    Previously, it was stated that the financial meltdown was responsible for a rise in the number of poor, as the country’s industry failed to cope with the rising energy prices, triggering a slowdown in growth and jacking up inflation.

    Fresh statistics reveal sharp increase in poverty
     
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    Food shortage may spark violence in Pakistan: report

    Food shortage may spark violence in Pakistan: report

    About 77 million people go hungry in Pakistan while 36 per cent of the population are afflicted by poverty, says a new report released on Wednesday.

    “From small farmers to the urban masses and internally displaced persons, millions of Pakistanis are affected by the scourge of food insecurity,†warns the report by the Woodrow Wilson International Centre for Scholars, Washington.

    The report notes that while the global food crisis subsisted in 2009, Pakistan continues to suffer from an acute food shortage.

    The report — “Hunger Pains: Pakistan’s Food Insecurity†— warns that the food shortage may lead to widespread violence if immediate steps are not taken to feed the hungry.

    Quoting figures provided by the UN Food and Agriculture Organisation, the report notes that in February 2010, the prices of wheat and rice — Pakistan’s two chief staple crops — were 30 to 50 per cent higher than before the global food crisis, and were on the increase.

    The study links several recent incidents of violence to the food crisis, including the 2009 bombing of a World Food Programme office in Islamabad.

    It also quotes WFP data from early 2010, showing that the prices of essential staples in Pakistan are nearly 40 per cent higher than five-year cumulative averages. The costs of sugar and cooking oil also escalated in the initial months of 2010.

    The report notes that in early 2010, Pakistan’s food inflation registered at about 15 per cent — a far cry from the 30 per cent-plus figures several years earlier, “but still of great concern to the country’s economists, who noted that the Wholesale Price Index, a predictor of future price movements, stood at almost 20 per centâ€. Such “soaring WPI-based inflationâ€, they said, portends further spikes in retail prices of key commodities.

    “Weather, resource shortages, and conflict are exacerbating food insecurity in Pakistan,†says Michael Kugelman, who edited the report along with Robert Hathaway, director of the centre’s Asia programme.

    The study notes that farmers and government authorities blamed drought-like conditions for reduced crop yields in late 2009 and early 2010. In the Swabi district, one farmer said his maize crop was “slashed†by 50 per cent. Rain-fed wheat-cropping areas have been hit particularly hard. Even the yields of irrigated areas are at risk. Meanwhile, Pakistan is burdened by devastating water shortages. The country’s per capita water availability ranks among Asia’s lowest, and is lower than that of many African nations.

    At least 90 per cent of Pakistan’s dwindling water supplies are allocated to agriculture, yet inefficient irrigation and poor drainage have produced epidemics of water-logging and soil salinity across the countryside. As a result, “vast expanses†of farmland fail to produce successful harvests. Additionally, Pakistan is suffering through a chronic energy crisis with frequent electricity outages; these power failures undermine the effectiveness of energy-dependent agricultural technologies.

    Finally, Pakistani military operations against militancy displaced about three million people in 2009. Those uprooted from Swat were forced to depart in the middle of the harvest season. About 1.7 million of these internally displaced persons have started returning home, yet they continue to struggle to obtain food.

    More than a million Pakistanis remain displaced – including 250,000 from Bajaur.

    “Little wonder that in February 2010, the FAO concluded that the country’s IDP crisis was causing severe localised food insecurity,†says Mr Kugelman.

    “Yet as of mid-April 2010, only about 20 per cent of the nearly $540 million international appeal to assist Pakistan’s IDPs had been fulfilled.â€

    DAWN.COM | Front Page | Food shortage may spark violence in Pakistan: report
     
  7. BlueOval
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    Negligence made the country lose valuable irrigation water and suffer floods

    Negligence made Pakistan lose valuable irrigation water and suffer floods

    The country is in the middle of the worst flood seen in the last 80 years. Experts believe that poor management, lack of planning and weak political determination became the recipe of disaster. The flood, so far, has claimed over thousand lives, put infrastructure in shambles, damaged property and displaced millions in various parts of Khyber Pakhtoonkhwa and Punjab, yet the losses keep mounting with the passage of every single minute. This leaves a scar which can not be cured even in decades to come.

    But the thing that will keep reminding us of our failure is the loss of precious water, which could not be conserved because of authorities’ lethargic attitude and paucity of dams in the country.

    It would take a lot of time and money to rehabilitate the affected families and reconstruct the damaged infrastructure. Nevertheless, the magnitude of the water lost, can be gauged by the fact that the country, after the flood, would not have enough water to irrigate its agricultural land.

    Understanding how the concerned authorities have been acting is enough to know why the situation was mismanaged. Scores of pre-flood meetings were held to review the precautionary measures and flood fighting plans of the concerned departments. Flood Warning Centre, which closed its operations on October 15, last year, resumed work immediately after the first flood warning. It reports daily river flows and flood situation in the country.

    Provincial irrigation departments failed to maintain the irrigation system, despite spending Rs5 billion annually for this purpose. The capacity of rivers was not enough to contain the high flow from the upper catchments and, therefore, it resulted in flooding.

    What failed to get attention of the authorities was the radar system of the Mangla Dam. The device had not been functioning for the last eight months, a Mangla Dam official confirmed. Besides the non-functioning radar system, more than two years delay in completing Mangla Dam upraising project and the issues in settlement of colonies deprived the country of precious water. The water, which ultimately resulted in Jehlum River flood, could have been enough for irrigating lands for eight years.

    How the project got delayed and why the settlement issue surfaced during the present regime is a strange story itself. A technical team in March 2008 cleared the dam for enhanced storage after all the necessary tests. But the project could not get off the ground on time and its allocations in the development budget remained unutilized for the second consecutive fiscal year of 2007-08. As a result, the estimated cost of the project went up, from Rs102 billion initially, to Rs204 billion. After completion of the project, the government could not handle the resettlement issue of the people of the area, as their new demands added extra cost of Rs10 billion which sponsors did not agree to pay.

    Mangla Dam, after the upraising work, can hold 8.89 million acre feet (MAF) of water, against the previous capacity of 5.88 MAF. Besides an increase of 290,000-acre feet in storage capacity, the powerhouse capacity was also enhanced by 12 per cent or 500,000 units. But all of this extra capacity remains unutilized until the settlement problems are decided.

    Another example of depriving the country, of much-needed water resources, was a billion-rupee Munda Dam project. Had the dam been constructed on time, it would have helped in restricting the floodwater at Sawat River. The project is now in courts, and the matter needs to be settled between Water and Power Development Authority (Wapda) and sponsors before construction is started.

    Shortage of funds also remains a big hurdle in timely completion of dams. The government could release only 38 per cent of funds, allocated in two years, for 13 power projects. The government allocated Rs67.6 billion and Rs139.3 billion for these projects respectively during the last two fiscal years.

    Delay in building six other small dams in Khyber Pakhtoonkhwa, has not only let the flood wreak havoc, but the chance of storing water for future needs has also been missed. The delayed- projects, if completed on time this year, could have contributed in restricting floods in the area. These dams are: Palai Dam in Charsadda, Karak Dam and Lowaghar Dam in Karak, Dar Malik Dam in Kohat, Khyber Bara Dam in Haripur and Jabba Dam in Nowshera district.

    Other projects in the pipeline in Kyber Pakhtoonkhwa are: Rs230 million Mardan Khel Dam in Karak district, Rs279 million Ghol Banda Dam in Karak, detailed design of Sheikh Haider Zam and Chaoudwan Zam Dam Project (PC-II) of Rs53.547 million, Bara Multipurpose Dam Project in Khyber Agency of Rs20.7 billion, including Rs269 million as FEC and Rs2.9 billion Daraban Zam Dam Project.

    The projects of Punjab are: Rs1.2 billion Papin Dam, Rs530 million Mujahid Dam and Rs556 million Mohra Shera Dam in Rawalpindi district, Rs2.1 billion Ghabir Dam, Rs289 million Jamalwal Dam and Rs426 million Lawa Dam in Chakwal and Rs600 million Kot Fateh Khan Dam in Attock district with Rs22 million FEC.

    The projects of Sindh are: Rs3.7 billion Darawat (Baran) Dam on Nai Baran near Thano Bulla Khan in Thatta district, Rs140million on consultancy services etc. on seven dams in Kohistan Region, Rs 17.8 billion Nai Gaj Dam Project in Dadu district, including Rs414.5 million as FEC and Khadeji Dam Project.

    Business & Finance Review
     
  8. BlueOval
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    Donor fatigue or trust deficit? (Opinion Piece in Pakistan Newspaper)

    Concern is being expressed everywhere in Pakistan that the response of our people towards the plight of the flood-affectees isn't very enthusiastic compared to past crises. It is being observed that individuals and organisations aren't donating much to help those uprooted by the floods and deprived of their livelihoods. The October 2005 earthquake and the largest displacement in the country's history last year following the military operations in Swat and the rest of Malakand division and the tribal areas are cited as great examples of the indomitable Pakistani spirit and largely unacknowledged generosity to collectively tackle and overcome challenges faced by the nation.

    This observation is largely true, though the campaign to help the flood-affected communities is picking up. It seems more people are making up their mind to assist the affectees as they come to realise the massive scale of the devastation caused by the torrential rains and record floods. Some of the reasons for the hitherto less enthusiastic response of the general public towards the suffering of the affectees could be the 'donor fatigue' that may have set in due to the endless crises that Pakistan is facing. Due to the stagnating economy, the capacity of the common people to donate in cash and kind has also been reduced.

    Besides, many Pakistanis who were among the donors during the previous man-made and natural disasters are now part of the communities that have suffered losses due to the floods. Charsadda and Nowshera, the worse-affected districts in Khyber-Pakhtunkhwa province along with Swat and Shangla in the recent floods, had generously hosted internally displaced persons from Swat and Malakand for months in 2009 and lessened the burden of the government. Together with the residents of Mardan, Swabi and Peshawar districts, common villagers in Charsadda and Nowshera had opened their doors and hearts to even strangers in a remarkable example of sharing and caring. Now these people themselves are in need as their homes have been washed away by floodwater or made unliveable and their livelihoods have been destroyed. One has heard stories of affectees making the remark that they used to give Zakat, but would now be accepting Zakat.

    Another important reason for the sluggish response to appeals for donations for the flood affectees seems to be the low credibility of the ruling elite. The prime minister's relief fund wasn't attracting many donations. In Khyber-Pakhtunkhwa, information minister Mian Iftikhar Hussain expressed unhappiness over the poor response of the federal government and the international donors to the relief fund set up in the name of the chief minister and even warned that the provincial government would refuse to accept untimely and delayed help. Government departments and semi-government and autonomous organisations would surely put their donations in these official funds, but expecting the common people to do so would be futile. Foreign donors also prefer the UN, WFP, ICRC and some of the reputed western non-governmental organisations while donating money and goods for relief work.

    The sentiments of common people wishing to donate money for the cause of flood affectees were aptly summed in this letter to the editor published in The News on August 9. "The overseas Pakistanis like me are ready to help the flood-affected people in whatever way we can, but we are extremely reluctant to contribute our money to the government or prime minister's funds for reasons which need no repetition," wrote Qasim Kazmi from Sharjah. Overseas Pakistanis like him in the Gulf States and the well-to-do Pakistani diaspora present in many countries of the world have the capacity to help their hapless countrymen and women, but they would like to give their money to trusted people and organisations. If Pakistanis are reluctant to trust their rulers with money, one cannot expect foreigners to repose confidence in them and be sure that that their assistance would be honestly spent.

    The ruling elite have to lead by example to become credible and convince the people that they are trustworthy. Many among them have a tainted past and are still facing cases of corruption. Among them are fabulously rich industrialists, landowners and others with no visible source of income and yet in possession of unimaginable assets. Some have made public donations for the flood affectees, but the amounts are small and much less than their paying capacity. President Asif Ali Zardari, Mian Nawaz Sharif and most leading politicians are very rich and could pay substantial amounts of money for the flood affectees and in the process prompt their wealthy party colleagues to make donations.

    Much has been said and written about President Zardari's absence from the country when it was suffering from the most devastating floods in its history. It would be naïve to expect him to act differently this time when he failed to visit Swat or the tribal areas during record displacement of people and meet troops conducting military operations despite being the commander-in-chief of the country's armed forces. Elected for five years, enjoying majority in parliament and still able to keep his political allies on his side, he doesn't have to worry much about losing power. This is how most Pakistani rulers and ruling parties behave after coming to power.

    One doesn't believe that the government's response or management of the crisis created by the floods would have been any better had President Zardari been around and leading the rescue and relief efforts. In fact, a presidential visit to flood-ravaged places would have been bothersome and costly due to security concerns for our insecure president. All such VVIP visits are rather a waste of time and resources and should be best avoided. Government officials, the police and even rescue workers are tied up when such visits take place and their time and resources are wasted in ensuring security and protocol for the dignitaries. Rather than pushing the VVIPs to visit sites of a tragedy or emergency and come to a hospital to meet the injured, it would be better to keep them out of such situations. Like the 'blue book' containing rules concerning security and protocol procedures for VVIPs on the move, we should have another book detailing situations where VVIPs should have no role and presence.

    Prime Minister Yousuf Raza Gilani's visit to Mianwali caused him embarrassment instead of creating any goodwill for him or benefiting his PPP government. Wearing his designer sunglasses, he used a motorboat to visit the affected areas and was then brought to a medical relief camp. As reported by the media, the camp was wound up and the crowd paid some money as soon as the prime minister left. This is how some of the VVIP visits are arranged, hiring the participants and making a feel-good atmosphere. Shahbaz Sharif, or for that matter Nawaz Sharif using Punjab government resources, performed much better than Gilani and walked deeper into the flooded areas and mixed more with the affectees. But it wasn't a good idea for Shahbaz Sharif to dole out money to some old women seeking his attention in front of television cameras.

    In Khyber-Pakhtunkhwa, the provincial government failed to implement its orders regarding protocol for ministers visiting flood-affected areas. Ministers were seen moving with a number of vehicles escorted by the police. Chief Minister Ameer Haider Hoti had to calm down angry affectees as he met them in relief camps in Nowshera and Charsadda after flying in a helicopter. People felt letdown not only due to the inadequate rescue and relief activities of the government but also its failure to issue a timely warning about the above-normal monsoon rains and the expected flooding. In faraway Swat, Shangla, Kohistan, Dir and Tank districts, people are angry that they have been ignored as the Peshawar valley was getting all the attention of the government and donors. The suffering affectees would be impressed if their rulers agree to suffer with them in the absence of electricity and basic services and walk in the mud even if their spotless clean clothes become dirty. As this isn't going to happen, embarking on those brief VVIP trips is an exercise in futility.


    Donor fatigue or trust deficit?
     
  9. BlueOval
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    Pakistan: Local children have Rs21.5b to spend: Cartoon Network

    Pakistan: Local children have Rs21.5b to spend: Cartoon Network

    Pakistan’s children have a total spending power of Rs21.45 billion, a Cartoon Network survey revealed. Some 87 per cent of the children receive gift money amounting to Rs4.98 billion while 89 per cent receive pocket money amounting to Rs16.47 billion.:D

    The network recently surveyed seven to 14-year-old population of 3.9 million kids from seven cities.

    The Cartoon Network has surveyed the trends, attitudes and behaviour of 1,783 kids aged seven to 14 and their parents in Pakistan. “This year’s New Generations™ 2010 survey has deepened our understanding of the lifestyles, preferences and aspirations of Pakistani kids,†says its Marketing and Research Vice President for Asia-Pacific, Duncan Morris.

    The American cable television network, which primarily shows animated programming, continues to build on the wealth of information about kids in Pakistan that it has tracked over the past five years, according to their Sales Director, Fawad Qureshi.

    He added that the study was acknowledged as the leading source of what kids are thinking today and offers immense value to the marketing and media industries.

    The majority of the interviewed children considered watching television to be their favourite pastime.

    The New Generations™ Pakistan was launched in 2006 and is the largest children’s lifestyle survey in the country. The study helps connect the dots for today’s young kids’ preferences and throws up interesting trends which help the network and the industry at large understand this audience better.
    The survey also discovered that Pakistani children’s displayed a higher degree of technology awareness since the last survey with 67 per cent being aware of a digicam; 51 per cent knowing what a 3G mobile phone was; 44 per cent being aware of MP3 players; 26 per cent being familiar with a Sony Playstation and 17 per cent of them knowing what an Apple iPod was. :D

    Local children have Rs21.5b to spend: Cartoon Network – The Express Tribune
     
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    The floods have ravaged Pakistan's economy with PM Gilani stating it has set them back several years. More than 15 million people facing starvation and disease with huge areas of food crops and cash crops destroyed in a largely agrarian economy. A country that is mostly feudal has been sent back to the middle ages, but one thing you will see in spite of such an economic backlash is that there will be no reduction in military spending and financing of terrorism. After all, poor civilians and their houses and crops will be washed away, but the "THREAT :eek:" from India is so much that they cannot afford to lessen military spending. :rolleyes: Let's see if there is a positive attitude to this tragedy shown by pakistani military with reduction in military budget.
     
  11. BlueOval
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    BlueOval Captain SENIOR MEMBER

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    US pouring aid to Pak, but Americans not contributing much

    US pouring aid to Pak, but Americans not contributing

    Though the US Government is pouring millions of dollars in aid to help people affected in the Pakistan's worst-ever floods, Americans, who are known for their generosity, look reluctant to contribute to the cause.

    The Obama Administration is making every effort to prove the point to Pakistanis that the US is their "best friend" in their hour of crisis, but the same is not the case with the citizens.

    Nearly a week after Secretary of State Hillary Clinton asked fellow citizens to donate USD 10 each for the relief of the flood victims -- now numbering 14 million, only a little over USD 12,000 has been raised.

    This means, only 1,200 people in the US have so far made a personal contribution of USD 10 by using their mobile phones.

    This is in sharp contrast to Americans' contribution to victims of the Haiti earthquake. They raised millions in just a few days by the same process. Americans had done the same during the 2004 Tsunami.

    But, the US administration has announced USD 71.25 million for relief work in Pakistan and officials have indicated that more US aid is forthcoming and could soon touch the USD 1 billion mark.

    White House officials said President Barack Obama is taking personal interest in relief work in Pakistan.

    "He is being briefed every day and had directed the US Government to work with Pakistani authorities and the international community to provide an appropriate response," the official said.

    Special US Representative for Pakistan and Afghanistan Richard Holbrooke in an interview to the Council on Foreign Relations website acknowledged that the response from the American people this time with regard to the relief operations on Pakistan has been far below expectations.

    "The American people should recognise that this situation is affecting, already, over fourteen million people," Holbrooke said.

    "Americans have been very focused on other, equally heart-wrenching, issues, like Haiti. I hope they will turn their attention as well to this extraordinary crisis that Pakistan is facing," he said.

    US pouring aid to Pak, but Americans not contributing much-Politics/Nation-News-The Economic Times
     
  12. BlueOval
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    Pakistan’s economy deluged


    Floods crisis in Pakistan is an evolving story, where questions like what would be its affect on millions of people and on the economy are being asked by local and foreign journalists. We all know it is too early to assess the full impact of this colossal disaster. But the local and international media and donors are waking up slowly to the rude shock that it is a much bigger calamity than any witnessed by Pakistan in the last 80 years. Last flood of this magnitude in what is Pakistan today was in 1929.

    But 80 years ago the population that lived along the course of the rivers that flow through Pakistan was perhaps 10 to 15% of what it is today. The growing population has hardly left the fertile land along these rivers that has no habitation. This has resulted in the displacement of around two million people and inundated around 2 to 3 million acres of agriculture land in all the provinces.

    The first victim of heavy rains was Balochistan. The strong flash of rain-water that flows from the mountain caused immense damage to the small villages. Most of their agriculture and livestock were washed away. But once the heavy rains followed by angry rivers swept Khyber Pakhtunkhwa everybody forgot Balochistan’s remote villages. Balochistan government has been painfully slow in reaching the affected areas with the relief goods.

    In Punjab, Agriculture Secretary, Arif Nadeem says according to the preliminary estimate around 1800 villages are flooded and over 1.4 million acres of agriculture land has come under water. He said that the “break-up of the flood affected agriculture land is: 650,000 acres of cotton fields; 134,000 acres of rice; 128,000 acres of sugarcane; 200,000 acres of fodder; and 14000 acres of vegetable.†“Because of a shortage of fodder,†he added “the prices of livestock have fallen in Punjab by almost one-third.â€

    Sindh Agriculture Secretary, Agha Jan said that it was too early to access the damage to the crops in Sindh at this stage because the flood water is passing through the province. But he added “one thing is certain that the rice crop of three districts – Shikarpur, Jacobabad and Kashmore – has been destroyed.â€

    What is clear from these preliminary reports is the fact that the shortage of crops would push up the prices and affect the industrial growth also. Devastating floods have dampened all official economic targets for this year. The growth target of over 4% is now history as agriculture, industry and livestock growth is likely to shrink. Hafeez Shaikh’s dream to pull down inflation to the single digit has been now drowned in the flood. But the construction material industry expects sizeable growth once the reconstruction works starts in the country. Some economists say that agriculture would do better in 2011 once the flood water recedes.

    The country would need billions of dollars to meet the relief work first. According to a rough estimate to feed the flood affected people for 30 days @ US$ 4 a day around $1.6 billion is required by the country. We are not talking about the reconstruction of over 500,000 houses damaged by the flood. This number is likely to increase substantially once the flood recedes and a survey is done. It also does not include the cost of infrastructure reconstruction which has washed away in the entire country. Government officials on the ground agree that it would take Pakistan 4-5 years to recover. The first slash is likely to come on the Rs600 billion federal and provincial development budgets for the current year. UN has asked for $460 million dollars on the basis of its initial flood devastation estimates. The World Bank and ADB have been tasked to prepare short and long term plans for the rehabilitation and reconstruction.

    The good thing is that the philanthropic Pakistan is waking up. Individuals are contributing to the people and NGOs doing relief work in the affected areas. Corporate sector is donating directly either to reputed NGOs which are working in the flood affected areas or are partnering with NGOs to adopt an area. According to a report pouring in so far Jehangir Tareen, who is an industrialist and known corporate farmer, has adopted Rahimyar Khan -- a good model to follow by other big business magnates. Coca Cola, GSK, Reckitt Benckiser, Getz Pharma, LTC, PTC, Continental Biscuits and many other companies are now donating to the NGOs for relief work.

    Although the government is engaged in the relief and rescue work, the credit is only scored by the Army in the media. The fact that is overlooked by the media is that they are called in by the government for assistance in such calamities and relief work and are funded from the civilian budget – the taxpayers’ money. Army should get the credit of doing its duty efficiently but as an institution that is a part of the government.

    And lastly, the question is that why in many places the dykes and canal gates broke down when every year billions of rupees are allocated to maintain the irrigation system of the country? Large amounts were also spent on the flood protection programme of the Federal government which was implemented by the respective provincial irrigation departments. This reminds me of the allegation made by the former Sindh Irrigation Secretary at a seminar. He alleged that 67% of the funds for the upkeep of the irrigation system actually go for the lavish upkeep of the officials of the department.

    Business & Finance Review
     
  13. BlueOval
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    Debt, debt and more debt

    Debt, debt and more debt

    The IMF has announced to provide $450 million to Pakistan under emergency assistance for the rehabilitation and reconstruction of flood-hit areas. The World Bank and the Asian Development Bank (ADB) have also offered $1 billion and $2 billion respectively, for the same purpose. Thus, the three International Financial Institutions (IFIs) together would provide almost $3.5 billion to Pakistan as loan in the shortest possible time. The international community has also pledged about a billion dollar assistance for the flood-affected areas. Some of the pledges would be in cash and some in kind. The pledge in the shape of cash would mostly be in terms of soft loan.

    It appears that the current finance minister has entered a race with the former finance minister in terms of drowning the country under debt. The former finance minister remained at the helm of affairs for 16 months and signed an over $11 billion assistance package with the IMF, of which $8.7 billion has been disbursed. The current finance minister has had the privilege to borrow $3.5 billion in just four months of his stay. With this speed he will definitely outpace his predecessor in accumulating debt.

    Let me present some facts about the external debt. Pakistan's external debt and liabilities (EDL) stood at $38.9 billion at the end of June 1999, which rose to $40.3 billion by end of June 2007 - an increase of only $1.4 billion in eight years. During the last three years (2007-10), the EDL surged from $40.3 billion to $55.6 billion - an increase of $15.3 billion as compared to $1.4 billion in the previous eight years, should be an eye-opener for the current economic team. Should we continue to borrow more?

    The consequences of the surge in EDL are alarming for the economy. As a result of exorbitant increase in EDL, the external debt-servicing surged from a $2.87 billion in 2006-07 to $5.64 billion in 2009-10 - almost doubled in just three years. Debt-servicing was only 16.6 per cent of the total export earnings in 2006-07 but rose to almost 29 percent in 2009-10. In other words, almost 30 per cent of export proceeds were consumed for debt-servicing in 2009-10, thus reducing the country's capacity to import.

    The economic activities in developing countries like Pakistan are largely dependent on imported raw material, capital goods, energy etc. A decline in the country's capacity to import is bound to slow down the economic activity with the attendant rise in unemployment and poverty. This is exactly what is happening today in Pakistan. Should we continue to borrow indiscriminately? No country in the world has ever come out of a difficult situation like us by living on borrowed resources.

    Pakistan's economic situation has never been so bad in decades. The economic management has never been in such a pathetic condition in recent decades either. There have been four finance ministers and four finance secretaries in two and a half years. There had been no finance minister in the country for six months (April-October 2008) and no governor of the Central Bank for the last three months (June-September 2010). The Securities and Exchange Commission of Pakistan (SECP) has been without 2-3 important commissioners. A tug-of-war continues between the regulator (SECP) and brokers on the selection of chairman of the Karachi Stock Exchange (KSE). As a result, the trading volume at the KSE has declined with negative consequences for Capital Gains Tax.

    The ministry of finance is the nerve center of the country's economic management, which now appears to be in disarray. A low morale, lack of discipline, absence of coordination, some offices being dysfunctional but their heads continuing to draw hefty salaries without any work are some of the ailments of the nerve center. On top of that, the prime minister continues to embarrass his own economic team.
    The principal economic advisor to the ministry of finance prepares a note on the economic effects of the floods and suggests a zero growth for real GDP and a 25 per cent inflation. These numbers are published in the newspapers as official views of the ministry of finance. The prime minister, after the cabinet meeting, announces that this year's budget deficit would be within the range of 6-7 per cent of the GDP.
    While these numbers were appearing in the print media, Pakistan's 17-member economic team under the leadership of the finance minister was meeting the IMF officials in Washington DC to complete the 5th review of the programme. The IMF officials did raise the issue of conflicting numbers appearing from the ministry of finance and the prime minister. It was a real embarrassment to the economic team. The Pakistani team received a lukewarm treatment from the IMF and the 5th review was delayed till November/December 2010.

    The ministry of finance never bothered to clarify that those numbers were not the official position of the government of Pakistan and as such, the country paid the price of lack of discipline in the ministry. The offices of the principal economic advisor and director general debt office, have been dysfunctional and yet their heads are paid heavily from the national exchequer. No one in the ministry including the minister has ever bothered to look at the functions of these two important offices.

    This is not the ministry of finance I have seen during my stay there for eleven years. I found the staff highly dedicated, motivated and disciplined. The motivation, dedication and discipline appear to have diminished. The nerve center is running out of fuel. Doom, gloom and despair are spreading fast. The finance team is resorting to indiscriminate borrowing but failing to inject any financial discipline. They would love to cut the PSDP and education budget, particularly for higher education but would say nothing on the "Multan Package." The president of Pakistan believes in "trade not aid." His economic team believes in "debt not trade." So God save Pakistan.

    Debt, debt and more debt
     
  14. BlueOval
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    Country owes Rs 90 trillion debt, PAC informed

    ISLAMABAD: Finance Secretary Salman Bashir has told the Public Accounts Committee that the country still faces a burden of national and foreign loans amounting to Rs 90 trillion.
    The PAC, chaired by Opposition Leader in the National Assembly Chaudhry Nisar Ali Khan, met at the Parliament House to review the audit objections on the monetary matters of the Ministry of Finance.

    The committee members, including Khawaja Asif, Hamid Yar Hiraj, Sardar Ayaz Sadiq, Riaz Hussain Pirzada, Rukhsana Bangash, Yasmeen Rehman, senior officials of the finance ministry and the Auditor General of Pakistan, attended the meeting.

    The Finance Secretary told the PAC that during the financial year 2007 and 2008, the loan was Rs 60 trillion that has now risen to Rs 90 trillion, including Rs 45 trillion national loans against Rs 45 trillion foreign loans.

    Salman informed the PAC that the Ministry of Finance was giving Rs 250 billion to government departments for subsidy. He said out of this amount, the ministry was giving Rs 183 billion to energy sector whereas Rs two billion were going to PIA.

    He further stated that the Ministry was providing more than 90 billion for the government employees of which approximately Rs 72 billion were being paid to retired military employees. The PAC took notice of providing a huge amount to military retired employees from the civil budget. Khawaja Asif said the decision made in 2001 in which military pensioners were allowed payment from civil budget should be withdrawn, and said the PAC would soon forward its recommendations in this regard.

    Country owes Rs 90 trillion debt, PAC informed
     
  15. BlueOval
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    Basket case: Pakistan or Bangladesh?

    Basket case: Pakistan or Bangladesh?


    No government in Pakistan can dare to undo the constitutional provisions that make the country a religious state. As a matter of fact, democratic and military governments compete with each other to make it more religious. Presently, no political force or institution exists that can usher in modernity and enlightenment in Pakistan

    An article titled ‘Bangladesh, “Basket case†no more: Pakistan could learn about economic growth and confronting terrorism from its former eastern province’ appeared in the Wall Street Journal (WSJ) (September 29, 2010). During the same period, President Barack Obama specially congratulated Bangladeshi Prime Minister Sheikh Hasina Wajed when she came to receive the prestigious United Nations (UN) award. Bangladesh was one of the six countries from Asia and Africa who were honoured for achieving the Millennium Development Goals. Why have the US media and President Obama started pampering Bangladesh? Has Bangladesh bypassed Pakistan in economic development or is it about to do so in the near future?

    Many insiders believe that besides the ground economic reality, the US is pampering Bangladesh because it wants its army in Afghanistan. The US administration has requested the participation of the Bangladesh Army in Afghanistan to fight the Taliban. It is highly unlikely that Bangladesh will dispatch its army to Afghanistan because of the geopolitics and lack of fighting skills. Many observers believe that the Bangladesh Army is a police force rather than a war-making machine.

    Besides the US motivation, the WSJ article provides some useful insights into the development of Pakistan and its former province East Pakistan, now Bangladesh. To start with, Bangladesh had more population than Pakistan but after breaking away, due to successful programmes, it has checked its population growth. Now Pakistan is more populous than Bangladesh. If the trend continues, as expected, Pakistan will be left behind even if its annual growth rates are a bit higher than Bangladesh — a doubtful presumption.

    Bangladesh’s garment industry is genuinely touted as a success story. Last year, the country exported $ 12.3 billion worth of garments and is considered fourth in the world behind China, the EU and Turkey. It is amazing how a non-cotton producing country can achieve such a status. However, the article acknowledges that other than the garment industry the Bangladeshi economy is shallow.

    Most importantly, the ideological direction taken by the present Awami League government will help the country to industrialise fast. A few months back, the Bangladesh Supreme Court struck down a 31-year-old constitutional amendment and restored the country to its founding status as a secular republic. Furthermore, the government has banned Abul Ala Maududi’s writings. A long-awaited war crimes tribunal will try senior Jamaat-e-Islami figures for mass murders during Bangladesh’s war of independence.

    The Awami League government could take these bold constitutional initiatives because of public support for such actions. No government in Pakistan can dare to undo the constitutional provisions that make the country a religious state. As a matter of fact, democratic and military governments compete with each other to make it more religious. It is hard to envision how long it will take to halt the theocratic onslaught on society. Presently, no political force or institution exists that can usher in modernity and enlightenment in Pakistan. Therefore, Pakistan will remain mired in the web of religious ideology while Bangladesh has a chance to modernise itself. Nonetheless, given the fickle politics of Bangladesh, its future direction is not assured.

    Bangladesh can be optimistic about its future because of a multi-religious society and absence of feudalism as an economic order. Luckily or otherwise, Bangladeshi Muslims were mostly peasants while the Hindus constituted the landed aristocracy. The movement for creating Pakistan originated and strengthened in East Bengal because of the Hindu feudal domination. Ironically, the feudals of West Pakistan went along with the Muslim League due to an opposite reason: to save themselves from land reforms that the All India Congress had vowed to enforce. And the Nehru government fulfilled its promise of land reforms very early on.

    In the united Pakistan, the eastern wing, led by middle class politicians, had a basic contradiction with the western part, which was largely dominated by the feudals. Punjabi and Sindhi feudals were always scared of Bengali Muslim rule because they could have abolished feudalism. Muslim League was routed in the first election held after independence and the liberal-progressive alliance called Jugto Front was expected to win the 1959 elections. One of the main reasons for Ayub Khan’s martial law was to pre-empt the Jugto Front’s possible government at the Centre. Ayub Khan just delayed the process, because in 1970 the Awami League, a middle class party, swept the elections that led to the independence of Bangladesh.

    Like the movement of Pakistan, Bengali Muslims led most of the democratic movements in Pakistan. The separation of East Pakistan took away the most democratic and enlightened force from the country. This is one of the reasons that no significant democratic movement has penetrated in Pakistan after East Bengal broke away in 1971.

    In this historical backdrop, one can comprehend how Bangladesh can become a modern, secular state, unencumbered by the landed aristocracy. At present, Pakistan’s per capita of $ 2,600 is much higher than that of Bangladesh’s $ 1,500. However, given the socio-historical trends, Bangladesh may have far better future prospects than Pakistan.

    Daily Times - Leading News Resource of Pakistan
     

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