The budget: Populism vs realism

The federal budget for 2011-12 has been presented amidst difficult and adverse economic circumstances. It is, given the prevailing situation, as positive and realistic a budget as possible. The country needs to expand revenue generation and expand the tax net to lay the foundations of sustainable economic growth. It is, therefore, ironic that populist rhetoric and slogans like ‘the budget offers no relief to ordinary people’ are being bandied about instead of solid analysis while discussing the government’s budget priorities.

Abolishing special excise duties and harmful, unnecessary duties are measures that would lead to a favourable economic environment. Theidentification of 700,000 eligible income taxpayers who have to-date not even had a national tax ID number will enable the Federal Bureau of Revenue (FBR) to methodically expand the tax base. In future, the CNIC number will serve as the tax ID number, making it possible to ensure that everyone pays their tax dues.

Until Pakistan expands its tax base and sustainable economic growth can be achieved with resources generated within the country, it is mere fantasy to say that any of the provinces will be able to execute development projects without external financing. Punjab continues to receive loans from many countries and international donor agencies for aid projects even after its government leaders’ recent pronouncements against US aid. How economically sensible is it to take loans which need to be paid back instead of US grants which could help reduce the debt burden? Speeches against USAID and the IMF attract applause but do not make economic sense.

Collective efforts to address our economic troubles are the need of the hour rather than political ploys and games that simply muddy the national discourse. Historically, it was Pakistan’s founding generation assembled under the banner of the Muslim League which started the process of seeking international aid to build up Pakistan’s infrastructure and industrial base — something that had not been inherited at the time of independence.The largest amounts of foreign aid were obtained during the Ayub Khan and Ziaul Haq eras, which again were Muslim League eras. Even the negotiations about the current IMF loan facility were initiated under the able Senator Ishaq Dar of the PML-N, when he served as finance minister in 2008. We have seen the consequences of populist slogan-mongering about shunning aid without working out an alternative. The ‘qarz utaro mulk sunwaro’ scheme of seeking contributions from overseas Pakistanis as a substitute for aid was initiated in 1998 amid claims of breaking the begging bowl. Only $178 million were raised against the outstanding international debt at the time, which was $38 billion.

There is no disagreement on the principle that Pakistan should not be dependent on foreign aid and assistance, and more trade and self-reliance would be ideal. That ideal, however, would best be attained by realistic and consistent policies, not symbolic gestures or populist slogans. The IMF and the World Bank are multilateral institutions of which Pakistan is a contributing member and asking them for assistance or aid is in no way a blow to our self-respect — a fact Senator Dar reasonably acknowledged while briefly in the federal government in 2008.

Pakistan has suffered due to populist decision-making trumping economic realism before. The largest flow of foreign investment in Pakistan’s history came during Shaheed Mohtarma Benazir Bhutto’s second term as prime minister (1993-1996) — when it jumped from $443 million in 1993 to $1,532 million in 1994-95 and $1,295 million in 1995-96. This inflow of investment was the result of incentives, particularly for foreign investors setting up independent power producing plants. Unfortunate populism led to the cancellation of these power-generating contracts amidst false accusations of corruption immediately after the manipulated ouster of the PPP government. The country not only lost the investment stream but is to this day suffering from shortages in power generation capacity in relation to the demand for electricity.

Published in The Express Tribune, June 14th, 2011.

http://tribune.com.pk/story/188143/the-budget-populism-vs-realism/

 

Where is a Marshall Plan for Pakistan?

Just as many Americans are expressing frustration with what they see as Pakistan’s slow progress in defeating terrorism (most recently underscored by Secretary of State Hillary Clinton‘s visit today to Islamabad), Pakistanis are equally frustrated with the increasingly ugly anti-Pakistan sentiment in the United States. Most Pakistanis simply do not understand how cutting U.S. economic and military aid to Pakistan advances the fight against terrorism.

Pakistan is projected by many in the international news media and by some in the U.S. Congress as a purveyor of terrorism but, in cold fact, it remains its chief victim. Three thousand Pakistani troops have been killed (more than all NATO losses in Afghanistan combined). Add to that 2,000 police cut down, the tragedy of 35,000 civilian casualties and the assassination by terrorists of our country’s most popular leader, Benazir Bhutto, and one might understand Pakistani exasperation. This recent al-Qaeda attack on a Pakistani Naval Base in Karachi, killing 10 of our sailors, again demonstrates that Pakistan is the principal target of terrorist rage.

How much of our people’s blood does it take for Washington to get it? British Prime Minister David Cameron said it most succinctly standing next to President Obama in London earlier this week: “Pakistan has suffered more from terrorism than any country in the world. Their enemy is our enemy. So, far from walking away, we’ve got to work even more closely with them.”

Another Marshall Plan?

At the onset of the Cold War, the U.S. understood that political stability in vulnerable countries like France, Italy and Greece was intrinsically linked to the viability of their economies. President Truman advanced the European Recovery Plan (the Marshall Plan) that brilliantly operationalized this thesis, and by doing so saved Western Europe from communism. The same construct should be applied to Pakistan as we jointly work toward the defeat of the terrorist menace and the rebuilding of a peaceful and stable South and Central Asia.

Secretary of Defense Robert Gates has spoken of Kerry-Lugar-Berman Act for economic development, health, education, energy and infrastructure. Yet only $179 million, according to Sen. Dick Lugar, R-Ind., has actually been spent. The rest sadly has been bottled up in a bureaucratic quagmire within USAID.

The people of Pakistan, especially the poor who were most affected by last year’s historic floods, have yet to feel the effects of a U.S. policy that under President Obama was to re-craft the U.S.-Pakistani relationship beyond a short-term military alliance into a sustained economic and social partnership. It is that new relationship that will be the lynchpin to the long-term stabilization of Pakistan and our ability to contain and destroy the terrorist threat to our people, and to the world.

After World War II, the Marshall Plan spent $49.06 per capita in Greece and $30.02 in Italy. Today, the per capita U.S. assistance to Pakistan, adjusted for inflation, is only $7.90. That’s a dramatic 400% less than the Marshall Plan’s assistance to Italy. And let us be clear: The long-term stakes to world peace are as great or greater in South and Central Asia today as in Europe at the end of the 1940s.

Pakistan’s role

We are all aware that U.S. aid alone will not get the job done. For its part, Pakistan’s elected government has mobilized the entire nation, at great political cost, against extremist ideology and terrorist organizations. But if our government is to successfully win the war for the hearts and minds of our people, Pakistanis must feel the economic benefits of globalization. President Asif Ali Zardari has repeatedly emphasized the need for more market access in the West and expanded trade replacing aid over time. The enactment by Congress of the Reconstruction Opportunity Zone legislation, followed by a Free Trade Agreement between Pakistan and America, would not only open up America for Pakistani products but would provide a huge market for U.S. products and grain in Pakistan.

Ultimately, in the epic joint struggle against terror, a prosperous Pakistan with good jobs for our young people would suck the oxygen out of the terrorists’ fire. How better to set Pakistan on this path than a Marshall Plan model of economic reconstruction for a country devastated by war?

Pakistan’s education emergency

Pakistan faces an education emergency — a fact known widely but discussed insufficiently by Pakistan’s political and media elite. The inadequacy of quality education renders our country incapable of dealing with the challenges of the 21st century. Redressing weaknesses of our education sector are a prerequisite for building a progressive, tolerant, enlightened and non-violent society. We can begin by talking candidly about the magnitude of the problem.

The Pakistan Education Task Force’s report, Education Emergency Pakistan 2011, highlights the crisis. This year has been declarededucation year in the country. But national awareness about the depth of the crisis remains low. Our discourse is focused more on issues of power politics and real, or perceived, flaws of those in public life, than on the disaster that is looming on account of our poverty in education. Those who raise their voice over even the slightest imagined threat to national honour, fail to recognise that having the second largest number of children out of school in the world (next to Afghanistan), probably brings greater dishonour to the country than any other issue.

So let us recall the basic facts: One of every 10 children not in schoolin the world lives in Pakistan. The country is far from meeting the Millennium Development Goal (MDG) of providing universal education by 2015. Only 23 per cent of our children under the age of 16 attend secondary school and almost one-third of Pakistanis live in extreme educational poverty — having received less than two years of education. It is also distressing that 50 per cent of school children (aged 6-16 years) in Pakistan can neither read nor write. Appointing low qualified teachers at the primary level is among the main reasons for falling standards of education that renders this age group illiterate.

In a recent briefing, President Zardari was informed that out of 11 million school age children in Sindh, only 6.4 million are enrolled — leaving over 4.5 million children out of schools. Twenty per cent of schools have no building at all, 45 per cent encompass only one or two rooms and over 60 per cent schools have just one or two teachers. Sixty per cent of schools in the province of Sindh have no access to safe drinking water.

The 18th Amendment to the Constitution of Pakistan, which received presidential assent on April 19, 2010, states, “The state shall provide free and compulsory education to all children of the age of five to 16 years in such a manner as may be determined by law.” Along with the rest of the world, Pakistan is also pledged to meeting the MDG for education, promising that, by 2015, “children everywhere, boys and girls alike, will be able to complete a full course of primary schooling and that girls and boys will have equal access to all levels of education.” But neither our constitutional obligation nor the MDG objective is within sight of fulfilment.

A swift decrease in dropout rate and boost in enrolment rate is possible through provision of a monthly stipend for students from poor families, along with free books and uniforms. But this would require allocating more money for education in the federal and provincial budgets, possible only if education is accorded the priority it deserves. Once education receives the necessary investment, forcing children to drop out from school could be declared a criminal act and legal action should be taken against those parents who urge their child to work at the expense of attending school.

Education must be made a national priority no less important than national defence. Unfortunately, while most Pakistanis can proudly recount measures taken to protect national security, few know the state of education in Pakistan.

Published in The Express Tribune, April 19th,  2011.