STORM IN A TEA CUP?

The elected President of Pakistan had a cardiac episode and decided to go to Dubai for treatment. Perhaps he knew a doctor there or maybe he felt more secure or maybe he thought that if required he could go to London from there. His last cardiac check up was in London in September. Whatever the reason he decided on Dubai. Instead of one factual statement from his spokesman,everyone and his aunt came out with their own version of why the President had gone to Dubai. They felt compelled to add that he would soon be back—as if they were reassuring themselves.

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The War of the Rallies

The Chairman Pakistan Tehrik Insaf (PTI) Imran Khan started it. Sensing that the Pakistan Muslim League Nawaz (PML—N) had been sidelined with even their government in Pakistan’s largest province with Shahbaz Sharif as the Chief Minister under criticism and the ruling party, the Pakistan People’s Party (PPP), helpless against the mounting grievances of the people, Imran announced a political meeting in Punjab’s capital Lahore for Sunday October 30th. Not only that, Imran rubbed his advantage in by predicting a massive turn out that would decisively tilt the people in his favor. Woken from their slumber and desperate not to be outdone on their home turf the PML(N) announced a political rally (as distinct from meeting) for Friday October,28th with one single agenda—to start a movement “Go Zardai Go” against the President of the country. People wondered what this meant because the PML(N) was part of the political set up, being the government in Punjab, and so far had been an ineffective opposition. Once the PML(N) rally had railed against the government in strong language the PPP’s coalition partner the Muttahida Qaumi Movement (MQM) jumped in and announced a rally in their home city Karachi to be addressed by their exiled leader from London with the objective of supporting the President and condemning the outbursts of Shahbaz Sharif that had come in for across the board criticism because of the language used.

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The bloody monsoons of Karachi

The monsoon season has hit Pakistan. While most parts of Pakistan enjoy the good weather, Karachi bleeds. The deteriorating situation in Karachi has been a constant since the past twenty years and in the recent months it has further debilitated to the point where the value of life for the common man has become virtually non-existent. It is a curious title to choose, knowing that in early July more than 110 people perished in just five days in Karachi, and countless others were either forced to flee their homes, or still remain trapped in them.  Consider further that it was but part of a recurrent pattern, and one is bound to question that have there ever been any gains to preserve and possibly build on.

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How the PPP fumbles and fails

How the PPP fumbles and fails

BY NADIR HASSAN

 ON 03 11TH, 2011 | NO COMMENTS

The PPP is the Kamran Akmal of public relations. Put its representatives behind a microphone and they will flail and fumble over their words. It is one of the conundrums of our time, on a par with the continued existence and relevance of Zaid Hamid, how the likes of Rehman Malik can continue displaying rank insensitivity and political cowardice.

After the unsurprising yet shocking assassination of minorities minister Shahbaz Bhatti, the interior minister decided to make the brutal slaying all about himself. He wanted to assure the inquiring media not that the killers would be apprehended and brought to justice but that none of this was his fault. Washing your hands off something is one thing. Rehman Malik rinsed his hands with soap, bleached his fingernails and rubbed anti-septic all over his palms.

As an act of cowardice, Malik disavowing any responsibility for the security of Bhatti was an epic performance. He began by claiming that Bhatti had chosen not to stay in the parliamentary lodged, finding a rented home with his parents more secure. Malik also stressed that Bhatti voluntarily refused extra security. Never mind that the reason Bhatti felt so insecure was because the government had done nothing after Salmaan Taseer’s murder to ensure that government guards were loyal to their bosses and not demagogic preachers.

After the governor’s assassination at the hands of his ostensible protectors, two PPP members were considered to be at the most risk. One, Shahbaz Bhatti, who has now been successfully eliminated and the other, Sherry Rehman, who still does not have the kind of security that would inspire confidence. And yet, Rehman Malik would have us believe, this was all Bhatti’s fault.

Picking on Rehman Malik is easy but not entirely useful. The behaviour he has displayed over the last week is a mere symptom of the fear felt by the PPP leadership. The timidity shown by the party in the wake of Taseer’s murder is unprecedented. Forget repealing the blasphemy law, the interior minister (who once again proudly showed off the worst instincts of his party with his unhinged rhetoric) declared that he would personally wring the neck of any blasphemer. This would be akin to George W Bush insisting that he would torture in Guantanamo anyone who said an unkind word about Muslim terrorists.

What makes the PPP’s inaction so galling is not that we expect them to take instant action on the misuse of the blasphemy laws. After Benazir’s two stints in power, the one thing we have learned is that the PPP will not back up its rhetoric with achievement. But now even the courageous rhetoric has vanished, replaced either with stony silence or, worse, a focus on the grievances of the murderers not the murdered.

Here’s one way to measure the fear of the PPP leadership. Since the Aasiya Bibi case first made a media splash, Imran Khan and Chaudhry Shujaat Hussain have confessed that perhaps the blasphemy laws need to be reconsidered. Asif Zardari, Yousuf Raza Gilani and Rehman Malik, on the contrary, have not even expressed the level of ambivalence shown by these two politicians who relied on the MMA in the 2003 elections. This doesn’t mean Imran and Shujaat are more liberal than the PPP leaders. It only proves that they are not as cowardly.

History has judged that British Prime Minister Neville Chamberlain was the greatest appeaser that ever existed. If Chamberlain had the PPP leadership negotiating for him, he would have ended up delivering Britain to Hitler gift-wrapped on a silver platter.

Nadir Hassan is a journalist based in Karachi and can be found on Twitter.

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

To Spend or Not to Spend

The challenges that Pakistan faces today are colossal; however, what lies ahead is much worse. Reform is needed desperately, but it seems like a lot of the people who had been trying to implement reforms have fallen victim to the callous politics of our country. Reports of several top officials at different institutions in Pakistan resigning as a result of politicians prying into their daily affairs have stripped our country of many sincere leaders. Moreover, inefficient spending is on a rise and certain issues that need to be tackled on a crisis basis have been ignored by our leadership time and again. Their solutions have been sought in policies that have caused Pakistan more harm than good.

One such policy measure has been the Benazir Income Support Program (BISP). It accounts for 1.5% of the total budget and although this might seem small, it is equivalent to Rs. 50 billion (compared to Rs. 34.5 billion for education). The project entails giving away Rs. 2000 cash grants every alternate month to poor families until their livelihoods bounce back. At a time when the economy is being trampled under the debt burden, I feel concerned about such a prolific spending that only adds to the fiscal deficit and fails to achieve its indented goals. Although the ‘intended’ goals of the project are definitely noble, one also has to analyze the effectiveness of such a project in achieving those goals and its impact on the economic growth. While some might be more concerned about the short-run, one also has to consider the medium and long-run.

Two of BISP’s stated goals are to provide short term food security, by increasing the recipients’ purchasing power, and to alleviate long term poverty. Whereas the purchasing power of the recipients does increase, to the extent that inflationary pressures as a result of the stimulus do not counter it, one must ask themselves whether such a mechanism is a solution to the problem; more importantly, whether it is the lack of liquidity or the lack of infrastructure that has resulted in the poor’s plight.

I believe that for a country like Pakistan, which is on the bottom rungs of development, the issue is that of infrastructure rather than liquidity. With a huge population living under the poverty level and inflation rampant, the impact of a project like BISP gets diluted. Nations are not taken out of poverty by giving away money. What reduces poverty is economic growth that results in urbanization, capital growth and empowerment of the poor by integrating them into the economic system. This phenomenon is most clearly observable, in China and India, two of our next-door neighbors. Gross capital formation in Pakistan, as shown in Fig. 11, has been the lowest in the region and has trended downward in recent years.

Investment in infrastructure provides the necessary tools to be productive and efficient enough for a sustained growth that allows rural areas to be urbanized and also integrates more of the poorer population into the labor force of the economy. In countries with high population, this can add to the growth inertia. Availability of adequate infrastructure is also necessary to avail the demographic gift – positive effects of falling fertility rates, resulting in an increase in the labor to total population ratio of countries that previously had a high population growth rate. Lack of infrastructure investment results in lack of employment opportunities for a growing labor force, which can have enduring negative effects on the future productivity and growth of an economy.

Fig. 1. Pakistan’s gross capital formation as a percentage of GDP has been the lowest in the region, indicating a lack of investment in fixed assets/infrastructure.

The effectiveness of stimulus money in increasing the purchasing power and spurring growth is very limited. Firstly, such a spending could add to the inflationary pressures if it persists. That, I believe, is going to be the likely case as BISP does not have the potential to move people out of poverty, which is the requirement for such support to stop. Secondly, at times when people do not have confidence in the economy, they tend to hold back their spending. Hence, we see people putting that extra money in their safes rather than using it to improve their standards of living. The opposite might also be true, as people with low incomes have a higher marginal propensity to consume and with inflation high, people have more incentives to consume the money today rather than tomorrow. Finally, many analysts believe that such grants add to the disincentive to work. This has been observed in the US where jobless claims under the extended and emergency unemployment compensation programs have increased due to the extension of emergency benefits.

The reasoning that goes behind the belief that such stimulus packages promote growth follows the Keynesian school of thought. According to this approach, demand falling short of the potential supply can trigger a contraction in the economy and governments need to stimulate demand by increasing spending. This as a result is expected to increase the consumer spending, which fills the demand shortfall.

Anecdotal and empirical evidence have shown that this does not happen. Stimulus money was ineffective to stir the stagnant economy of Japan in 1990 and the US in the current recession.

Although Pakistan’s annual average CPI for FY 2010 (11.7%) has been brought down significantly from the level in FY 2009 (23.7%) and it must be complimented that the wheat prices (as of August 19) have been significantly reduced from those last year (price of wheat on August 19, 2010 was 2.7% lower than the price last year and that of flour was 9.4% lower than the price last year), the inflation level is still high and the wheat prices are going to change drastically in the next few months. A quick look at the domestic commodity prices shows that as of August 19, 2010, the sensitive price indicator (SPI) was 16.2% higher than the level at the same time last year. Global wheat prices are expected to rise as a result of Russia, the third-largest wheat exporter in 2009, banning the export of wheat due to a severe drought this year.

Although some economists believe that wheat prices are not yet a threat to trigger global food inflation, the same does not apply for Pakistan as its own wheat crops have been destroyed due to the floods and speculators have rarely missed a chance as good as this one to make a few bucks at the cost of the poor of our country. The industry of Pakistan which is already in shambles as a result of the energy crisis is expected to get another blow by the growing cotton prices, which are up 97.7% from the previous year.

Pakistan’s textile sector is expected to import $900 million worth of cotton to fulfill its immediate needs.2
Our leaders must realize that chronic dependence on foreign aid and short-term methods of solving issues by giving away money are only going to make things worse. A fallacy in this approach is that in order to spend that extra dollar, the government has to borrow. This adds to the fiscal deficit and further exacerbates the inflationary pressures that are already damaging our economy and motivating such projects in the first place. Cash grants like the ones proposed in BISP are not the most efficient way of using the already limited funds. Giving grants to communities to start self-sustaining businesses can be one way of empowering the poor; however, that is not the goal of BISP.

At times when the economic situation looks so grim, projects such as BISP that only provide temporary relief to a selected few, without really solving the issue of poverty itself, seem ostentatious. Such projects do serve the purpose of gaining political leverage; however, they also add to the crunching debt burden. Between 2001 and 2006 the public debt-to-GDP ratio of Pakistan fell from 81.4% to 56.1%. However, just before the recent floods, Pakistan’s debt-to-GDP rose to 61%3, which was above the 60% limit set by the Fiscal Responsibility and Debt Limitation Act. This is expected to rise even more in the coming months as a result of the floods. Hence, streamlining the economy and making effective use of the money by terminating projects like BISP and investing in infrastructure is imperative. Obviously the question then arises about the issue of corruption in infrastructure projects, but that is a question that we must ask our elected representative and for which they need to be made accountable.

BY SHUJAAT ALI KHAN ON 08 26TH, 2010
Shujaat Ali Khan is a research associate at the Fed. He is interested in the applications of deterministic chaos and complexity in the field of economics. He can be contacted at khan@alumni.middlebury.edu
The views expressed herein are solely those of the author and do not necessarily reflect the views of the Federal Reserve System.

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

Fauzia gives short-lived relief to Americans over Davis

ISLAMABAD: It was music to the ears of the US diplomats in Pakistan on Monday afternoon when central secretary information of the ruling Pakistan People’s Party (PPP) who is also spokesperson of the party declared in Karachi that US assassin Raymond Davis, who killed three innocent Pakistani youngsters in Lahore last month, was a diplomat having the blanket of immunity against any criminal proceedings.

The US diplomats who had prior knowledge of the announcement made by the PPP spokesperson took detailed notes of the proceedings of the press conference of the old lady fervently and transmitted it to Washington without wasting a moment.

The press conference was organised hurriedly in Karachi soon after the US ambassador in Pakistan Cameron Munter held a meeting with Foreign Secretary Salman Bashir in Islamabad. The meeting was requested by the US ambassador. The foreign secretary immediately reported the Presidential Palace regarding the briefing given to him by the US envoy since the prime minister was away from the federal capital on a foreign trip.

It is believed that Fauzia Wahab addressed the press conference when President Zardari had received the briefing from the foreign secretary. She pleaded what all being argued by the Americans about Raymond Davis and she also added strength to the case of Washington in the matter just to please them.

The US diplomat took the assertions by the lady as official version of the host government, but their pleasant surprise proved to be short-lived when public opinion turned violent about views expressed by the elderly member of the National Assembly and fear was felt that demonstrations could erupt across the country within no time.

The patriotic circles turned alarmed on the development and the government had to make arrangements on emergency basis for announcing disassociation from the remarks made by Fauzia, who also talked of disciplinary action against former Foreign Minister Shah Mahmood Qureshi.

The observations made by former federal foreign minister Shah Mahmood Qureshi has pushed the presidency to an extremely awkward position because the tall house has turned up to be the hub of American sympathisers in Pakistan and for the reasons security of the former foreign minister is being enhanced.

Sources told The News that the government was extremely frightened from the acceptance by the masses of the version of the story given by Shah Mahmood Qureshi in the case of Raymond Davis. The government had to withdraw whatever was earlier said by the lady. She was asked to disown the position that was attributed to her on the basis of her statement that she gave while giving reference to a voluminous, but closed book.

“It was my personal opinion,” she explained later. She could not differentiate her official position and her personal opinion. It is believed that her personal opinion is confined to her house kitchen otherwise whatever she will be saying or doing it would be attributed to her party for which she is acknowledged spokesperson. She never said in her press conference called in haste that the observations she was giving were her personal opinion.

The statement of the lady was first disowned on behalf of the government by another lady who is official spokesperson of the government and federal information minister. The denial was further fortified by the press secretary of the president when a strong message from somewhere reached the presidency, the sources added.

By Muhammad Saleh Zaafir
Tuesday, February 15, 2011