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MONTHLY

Volume-II, Issue-VI June 2013

T h er e a r e c er ta in s oc i o- e c on o mi c , g e o- po l iti c a l a n d g e o - s tra te g ic i s su e s w hi c h wi l l ha v e to b e a d dr es s e d o n pr io r ity b a s is ; ot he r wi se th e n e w p o pul a r g o v e rn m e n t m a y f a c e th e s a m e f a te a s o f P P P P .


Page 6-7 Page 8-9 Page 12-13

Firming up

EDITORIAL From the Editors desk

June 2013

EDITORIAL BOARD
Dr Ashfaq Hassan Khan Dr Abid Sulehri Pervez Amir Shah A Hassan Zubair Malik

Keeping IMF at bay


audi Arabia is an old and trusted friend of Pakistan and has rescued the country during the toughest of times in its history. There is a general expectation amongst the people that with our "amiable" (PML-N) government in pla ce, the same story may be repeated again. According to a newspaper report, Saudi Arabia is expected to extend a bailout package of a bout $15 bi llion to Pakistan's highly-indebted energy sector by supplyi ng crude and furnace oil on the deferred payments to enable it to resolve the chronic circular debt issue. Although PML (N) s ources, in private conversations have denied the veracity of this report and some cynics have termed it a tool used by vested interests to manipulate the stock market. However, this expectation, of some sort of assistance from the kingdom refuses to die . In specific terms, the news report had stated that Pakistan would seek about 100,000 barrels of crude oil and 15,000 tons of furnace oil per day from S audi Arabia on deferred payments for three years, the cost of which works out to be between 12 to 15 billion dollars. The facility can be utilised to reduce acute electricity loadshedding in the country, besides restructuring the power sector by minimising subsidies, eliminating circular debt, ensuring recoveries a nd reducing system losses to a sustainable level. Needless to say that Pakistan finds itself in dire straits on the energy front and the fact that a formal denial of the news report has not been made by the PML (N) lends a measure of credence that such an arrangement or a variati on thereof is li kely to be discussed at the highest level during Nawaz Sharif's expected visit to Saudi Arabi a soon after assuming the office of Prime Minister early next month. And that help from Saudi Arabia is probable to the Nawaz government due to the strong fraternal relations between Saudi Arabia and Pakistan in general and Sharif's close personal ties with King Abdullah in particular. Thus Sharif's assumption of reins of g overnment may prove to be fortuitous for the Pakistan economy is becoming a matter of satisfaction for trade and industry in the country. According to the report, as soon as PML-N emerged as the majority party after the May 11 elections, the Saudi Ambassador to Pakistan sought a briefing on the country's oi l requirements from the foreign ministry before he called on Sharif. Prior to this, the Saudi government had not taken any interest in the matter because of a visible chill in its relationship with the PPP government. It may be recalled that Saudi Arabia extended a similar speci al package to Pakistan soon after this South Asian country went nuclear in 1998 and faced international economic sanctions. Pakistan at that time had received $3.5 billion worth of oil from Saudi Arabia on deferred payments, a part of whi ch was later converted into a grant. Needless to say, that granting of such facility to Pakistan by Saudi Arabia at this critical juncture w ould be of immense help to the country. From whatever way the government looks at the problem, the measures contemplated to increase total energy supply in the country, at least in the short run, would involve a huge amount of foreign exchange, which the country cannot afford at the moment. Pakistan imports about 400,000 barrels of crude oil per day and 30,000 tons of furnace oil at a cost of about $15 billion per annum. If Pakistan could get a good part of these products on a deferred payment basis, the PML-N government could at least reduce the electricity crisis in the short run and, in the meantime, could initiate a number of measures to augment energy supplies in the country. Thi s would provide a measure of relief to the people and the industry and contribute to PML-N government's popularity. Those who believe that such a facili ty could be used to stay away from the Iranian gas import may be mistaken because the Iranian gas project has reached a stage that backtracking on it is not an easy option. However, such a package could be used to r enegotiate gas price with Iran for the Iran-Pakistan gas pipeline to bring it down to a more reasonable level. It needs to be stressed, nonetheless, that such a stop-gap arrangement should not be used to avoid hard and bol d deci sions in the energy sect or to make it v iable in the l ong-run.

ADVISORY BOARD
Haroon Akhtar Khan Shahid Khaqan Abbasi Hamidullah Jan Afridi

EDITOR
Yassir Rasheed

Deputy Editor
Maria Khalid

OPERATIONS
Tausif ur Rehman

MARKETING
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PHOTOGRAPHY
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GRAPHICS
Muhammad Iqbal Qazi

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MONTHLY

June 2013

The Leviathan

EXCLUSIVE

GLIDES
THE COVER
MO NTHL Y Volume-II, Iss ue-VI June 2013

13-14

CONTENTS
6-7 12-13

Firming up
T he re a re ce rt ai n s oc i o-e co n o mic , ge o - p ol i t ic al a n d g e o-s t ra t eg ic i ss u es w h ic h w i ll h a v e t o b e ad d r ess ed o n p rio ri t y b a si s; o t h e rwi s e t he n ew p o p u la r g o ve rn me n t m a y f a ce t h e sa me f a t e as o f P P P P .
P age 6-7 P age 8-9 Page 12-13

16-17

18

Firm ing up

Taliban! F irmingup...............................6-7 The Leviathan Glides...........................8-9

FE ELS LIKE A M ILL IO N DO LL ARS


Pe rfor man ce portfolio in Pakistan s

accountability 19

When Investing Becomes Gambling


15-16

Power Shortfall, the Spoiled Chi ld...12-13 Not the same old Mode of Security...........................................14-15

NAB Feels like a Million Dollars......16-17 Human Capital Investment, The Only Way Forward.......................19 News in Brief...................................24-26 NBP Performing Despite Challenges.......................................28-29 Pak Army Watching Sharifs Cosying up to India............................................34-35 Pakistan needs to draw lessons from Nepals Crop Insurance...................36-38

Fashion Week
More Than A Pretty Footnote

Security &
balanc ing the unba lance d

30-31

32-33

Capturing the
Armed to the teeth D I S C L A I M E R
demographic dividen d th rough edu cation

Utmost care is taken to ensure that articles and other information published are up-to-date and accurate. Furthermore, responsibility for any losses, damages or distress resulting from adherence to any information made available through the contents is not the responsibility of the Magazine. The opinions expressed are those of the authors and do not necessarily reflect the views of the editor, publisher and the management. Comments and suggestions are welcomed.
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TERRORISM

June 2013

Sajid Gondal
Peace and prosperity is the top pri ority, says Nawaz Sharif after taking oath as Member of Parliament. He is pinning hope on bringing peace to this country by pursuing the Taliban for a peace deal through negotiations. However, the groun d real it ies suggest ot herwise . In telligence report s availabl e wit h Monthly Economic Affairs revealed that getting advantage of politica l transition in Pakistan, the Tehreek-e-Taliban Pakistan (TIP) gathered its strength. It also hinted that the taliban will only use negot iations as a time bargaining practice and will never disarm themselves for a long lasting peace agreement. The Commandant Frontier Corps recently repo rted Mini str y o f Interior about an emergent threat erupting from the western borders. The commandant in a report available with Monthly Economic Affairs alarmed that miscreants who ha d fl ed from Swat and Malakand and other areas are gathering across the Chamman (Baluchistan) border and are contemplating to send their agents in Pakistan. Citing the report during a recent meeting of interim federal cabi net, the ex- interim minister for interior Mr. Habib was of the view
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Firming up
t hat the misc reant groups were gettin g instructions from their handlers across the borders. He informed the members that the i nt ellig ence se rvices submi tted inevitable evidences in this regard. The FC Commandant sta ted t hat the provincial home departments were already abreast of incoming threats to law and order and internal security and advised to strengthen the se cur ity of important personalities and installations. It was also suggested in the report that as the army and security forces are tightening t heir controls of t ribal area s along with northern borders, the miscreants have been shifting their focus and men power to western borders in Baluchistan. However, i n con sideration of new developments, the Frontier Crops as well as military is also shifting their resources to Baluchistan to defeat their nefarious designs. The intelligence report also pointed out that the security situation in Karachi is getting complicated due to the presence of TTP a nd Baloch militants. Thou gh t he enhan ced security measures reduced the incidents of target killings, yet t he polit ical parties ANP, PPP and MQM are apprehensive of curtailing TTP and B aloch miscreant s i n Ka rachi .

Peace Talks With the Taliban


The PML (N) chief Nawaz Sharif, Tehreeki-Insaf chair man Imran Khan, JUI -F leade r Maul ana Fazlur Rehman and Jamaat-i-Islami Chief Syed Munawar Hasan called for dialogue with the Taliban. But while there seems to be a consensus on negotiations, the Taliban are internally divi ded and unwilling t o meet governments demands to sever all ties with foreign miscreants, disarming themselves and abide to the law of the land. To understand the complexity of the situation, it will be prerequisite to know about the various factions of the militant groups

June 2013
foreign, nationa l and loca l operating in Pakistan. and has so far refused to be drawn into conflict with the Pakistani security forces following an agreement in 2007. That agreement still holds. Authorities in Sout h Wazir ist ans regi onal headqu arters, t herefore, enj oy so me admini strative control .

TERRORISM

7 4

Tehreek-i-Taliban Pakistan: Led by


it s ameer, Ha keemul lah Mehsud, it is the largest network. Having been displaced from it s native South Waziristan, t he TTP, now headquartered in North Waziristan, serves as a platform for several other groups with cells and operationa l capabilities across Pakistan. It has a national agenda but collaborates with other groups, too, both across the border as well as inside Pakistan. Then there are several affiliated groups, which though i ndependent i n operationa l matters, ha ve ideol ogical and operationa l l inkages with the TTP. These incl ude the Tehreek-i-Taliban Mohmand, Tehreek-i-Taliban Bajaur, Tehreek-i-Taliba n Swat , Tehreek-iTaliban Darra Adam Khel, Orakzai and Khyber. The TT (B) and TT(S) in the past have had sepa rate peace ta lks with the government.

The Punjabi Taliban: There a re at least nine known groups called the Punjabi Taliban, many of them disillusioned by what they saw a s retired Gen Pervez Musharrafs betrayal of the Kashmiri freedom struggle. Others ha ve stri dently violent se ctarian agendas all base d in North Waziri stan. Foreign Groups: In terms of strength, chief among the foreign groups operating from Nor th Waziristan, are the Haqqa ni network (the bi ggest group), followed by militant s affi l i ated wi th Isl amic M ov eme nt of Uzbekistan, Al Qaeda Central, the Islamic Jihad Union, Eastern Turkistan Islamic Movement, Libyan Islamic Fighting Group, Turkish Gamaat, Dutch Tali ba n, DT Mujah ideen, Isla mic Movement of Turkestan, Azeri Jumaat, Taifatul Mansurah and one other group. What to negotiate?
Based on failed peace agreements, aborted talks and statements at di fferent t imes, the TTPs m ain talking points could be summed up as: 1) Establishment of caliphate and enforcement of Sharia to replace the exist ing infidel democra tic sy st em and the Const ituti on. 2) Pakistan pulls out of the US-led war on Terror, end drone st rikes, sever ties with Washington and for eign pol icy should be within the dictates of Islam. 3) Pak istan Armys withdra wal from tribal areas, relocation of security checks posts and handing over securi ty to the Frontier Corps. 4) Release of all TTP prisoners. 5) Th e TTP wi l l n ot l ay do wn arms. 6) Support the Afghan Jihad. 7) Compensation and war repa rations. What does the government say? 1) Renounce militancy and l ay d ow n arms . 2) No parallel

Hafiz Muhammad Gul Bahadar Gro up: Th e Mi ran shah -b ase d Ha fi z


Mohammad Gul Bahadar has also had a peace agreement with the government since 2008 (revived), the terms of which have never been implemented amid attacks on security forces and counter-art illery shelling. Authorities in North Waziristans regional headquarters have no control over the area whatsoever. The Gul Bahadar group operate on the principle of live and let-live.

Smaller & Independent Groups:


These are all based in Khyber tribal region and include Mangal Baghs Lashkar-i-Islam, Nahiwa-anil -Munkar, pro-government Ansarul Islam and another relativel y smaller groups. There a re a few inde pendent groups also operating in Darra Adam Khel and other places.

Intelligence reports available with Monthly Economic Affairs revealed that getting advantage of political transition in Pakistan, the Tehreek-e-Taliban Pakistan (TIP) gathered its strength. It also hinted that the taliban will only use negotiations as a time bargaining practice and will never disarm themselves for a long lasting peace agreement
administration. 3) Expel foreign militants. 4) Accept the states writ, constitution and law of the land. 5) No prisoner exchange. Given Talibans history, its hard to be optimistic. But with American troops leaving Afghani stan, t here should be an inte rest in advancing a politi cal system t hat insurgents might see as an alternative to armed conflict.

Pro-government group: The Wanabased late Maulvi Nazir Group is the onl y socalled pro-government militant group, whose interests lie across the border in Afghanistan

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WAR ON TERROR

June 2013

The Leviathan
Tammy Swofford

GLIDES

I first became aware of the mov ement of th e C. I.A. with the ir barrels-of-cash program i nto Afghanistan sev eral years ago. W ith y ears o f n et wo rk i n g jour nal ism and research under my belt I am aware of a distinct reality. Information is the Nasdaq of the Arab street. Problematic, is how individuals adeptly play both sides of the street. So it can be difficult to sort out the t ruth. So when receiving information di scussi ng t he mov ement of money into Afghanistan, I merely filed it away as an uncorroborated account. Today, the information is both verified and vilified. The C.I.A. has been on quite the spending spree. The Leviathan glides into Afghanistan, Pakistan and across th e globe. The bl under of America in the Middle East and beyond i s a basic one. We have t aken an or gani zation whose pr i mary task is tha t of information-gathering and reduced it to the tasteless task of i nflue nce pandering . Two consecutive administrations have attempted to accomplish nation-building in Afghanistan by allowing our primary security apparatus to

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June 2013

WAR ON TERROR

4 9

The role of the C.I.A. is meant to be one of information gathering, critical analysis, and ongoing Threat Con evaluation to safeguard our national sovereignty. This mission can only be accomplished by dedicated professionals who have a high level of sociolinguistic, ethnographic, and perceptual/conceptual skills. But into Afghanistan, the Leviathan glides. It glides into every strata of society. It moves with pay-offs to tribal warlords all the way up to economic inducements for the powerful morally corrupt.
function a s an ATM machine as opposed to doing the gritty and dangerous work of HumInt. We have failed in Afghanistan because of a paradigm shift. This new order of business has allowed C.I.A. operatives to function as the first link in the cha in for international money laundering schemes. American tax dollars are laundered right into the hands of a lphabet organizations run by Karzai kleptocrats. The baron robbers then launder the money past the noses of the citizens a nd into vaults of personal wealth. The C.I.A. is involved in an ugly business not befitting their oath of office. It would be cheaper to train a circus troupe of chimps to deliver the money. We might obtain equivalent results. The role of the C.I.A. is meant to be one of information gathering, critical analysis, and ongoing Threat Con evaluation to safeguard our national sovereignty. This mission can only be accomplished by dedicated professional s who ha ve a high l evel of socioli nguisti c, ethnographic, and perceptual/conceptual skills. But into Afghanistan, the Leviathan glides. It glides into every strata of society. It moves with pay-offs to tri bal warlords all the way up to economic inducements for the powerful morally corrupt. And for the dowry, America ha s received a tubercular cow. The various milk maids within the Karzai administration continue to squeeze the teats to this day. The outcom e of our folly is less than spectacular. Future historians will assess the worth of our barrels-of-cash program and find both administration and stewardship lacking. Our failures and lost opportunities will plague us for decades to come. The hemisphere has regional corruption which seems insurm ountable. Nepoti sm, cronyism and tribal customs whi ch dicta te tribute for an audience are not confined to the poverty belts within the tribal regions. These societal ills extend into the corridors of power and boardrooms of multinationals. We have imagined that the best m anner in which to enter the matrix is to respond in kind. But dirty hands cannot wash dirty hands. And more than anything, the emerging democracies which are hybrids of Shari'ah princi pl es and Western thought, require the extension of clean hands of governance. The ravages of British Colonialism no longer suffice to cover the flanks of t h e p o we r f u l corrupt and their consistently

n e f a r io u s business dealings. This script no longer seduces the underserved masses. My private corridor writing predicted a vast social tumult two years in advance of the Tunisian warning shot. The thoughts which I no longer divulge trouble my sleep to this day. Perhaps our involvement in the region is absolutely necessary because of the nature of an asymmetrical battle space. But what remains to be rectified, is the use of our spy agency to facilitate the ongoing and rampa nt cor ru pt busi ness pr acti ces of

Afghanistan and beyond. The digital age provides for a flood of information which presents a different current reality and truth than many care to assess. So whilst facts may be hidden for a season, once overtaken by discovery and digital nimbleness, there is hell to pay. Such is the case with the unfol di ng story o f t he C. I.A. and t heir involvement in money laundering of American tax dollars into a matrix of corruption. The breadth of t hi s financial occultus remains indeterminate. Recognition of corr uption is one thing. Bu t because we ha ve had a policy o f encouraging corruption, we have decimated any and all opportunities to establish interfacing healthy governance models for the good of Afghanistan. Instead of holding leade rship accountable, we have satiated the desire for enormous wealth . Inst ead of teaching governance as stewardship, we have reinforced governance without an ethical component. The losers are those at the bottom of the food chain. These are the ones who may not have the strength to rise up against injustice. But they will give their remaining strength to their progeny. The United States must pull back and take a good hard look at the mission of the C.I.A. It is an increasingly dangerous world in which our operatives must work. But perhaps we need to pull in the leash and make it taut again regarding the responsibilities of the men and women who se rve. Their work should be confined to that of information gathering with the best available tools of the trade. Let the Leviathan glide. But let it glide for the sake of intelligence. Let the Leviathan glide. But let the movement be to ward greater i nte r- agen cy collaboration amongst our various services for the good of all. of a new century. It is the critical need within an environment where asymmetrical terror presents as the greatest risk to stability within volatile societal rims. Wh en abuse of offic ial capa cit y i s accompli shed through a gift of monetary recompense, your l eadership must give full account. When that gift is extended through unofficial and untraceable channels, America must give account. Your nations are too fragile, you are s eated upon powder kegs of human fl esh, and th e f uses must not b e l i t. Those who gov ern have been given a trust. Turn the corner. With, or without us.
The writer is a Freelance Jo urn alist and author o f the novel Arsen al. She can be reached at tammyswof@msn.com Economic Affairs | www.economicaffairs.info

10

COVER STORY

June 2013 Mehmood Ul Hassan Khan


Elections 2013 are ov er and post elections political heat is also going to simmer down. Different parts of the country are confronti ng the dust of defeat. PML-N Chi ef Mi an Nawaz Sharifs sher (lion) is roaring. Tehrik-e-Insaaf Chairman I mran Khans tsunami has already hit the mountainous areas of Khyber Pakhtunkhwa. The new change has many prospects and constrai ns. PML-N Chie f Mian Nawaz Sharif will have to live up to expectations of the people to steer the sinking economy from the choppy waters. There are certain socio-econom ic, geopolitical and geo-strategic issues which will have to be addressed on priority basis; otherwise the new popular government may face the same fate as of PPPP. Genie of acute energy shortage which has been hovering over the country for the last so many years badly needs a genuine effort. There is a skyrocketing budgetary deficit which needs space-shuttle drive to manage. There is menace of terror ism and extr emism which needs appropriate short and long terms policies of the heavy mandate.

New Chessboard

Socio-Economic Challenges
Neither macro-economic indicators are in good shape nor are its prospects bright and healthy. The new

Economic Affairs | www.economicaffairs.info

June 2013
government at center would face difficulties to address the prevailing gigantic economic issues like low tax-to-GDP ratio (lowest even in the region) currently soaring around 10 percent; high debts level (domestic & external) currently at 68 percent of GDP or Rs15.2 trillion, showing that each Pakistani carries a loan burden of Rs. 80,000, rampant corr uption i n the white elephants of public sector enterprises (PIA, PIA, Railways, Pak Steel and Wapda) alone eat up over Rs. 300 billion annually through budgetary subsidies; widening fiscal deficit i.e. 8.5 percent of GDP, which causes inflation and the abnormal increase in government borrowing from the SBP/banks. The new government would also confront weak private sector, low gross national savings ratios, (lowest in the region 15 percent) and circular debt that needs hundreds of billions of cash i nj ecti ons by t he governm ent. According to estimation the government needs US$ 4 billion to get rid of circular debts. Act ive comm erci al diplomacy may provide breathing space to newly formed government. Opti on of supply of oil and other energy resources on deferred payments ought to be activated but not on the compromise of socioecon omi c o r geo-st rategic soverei gn ty. Reduction in line losses (40 percent), theft (20 percent), and capacity building measures for the existing infrastructure and a paradigm shift in the means of production would be i deal com bina ti on to cur b the waves of heat throughout the country. Importing 1,000MW electricity from India as part of short to medium term strategy to end load-shedding would be another opti on. Publi c-private str ategic pa rtnership i n al l ind ustrial area s l ike (Faisalabad, Gujrat, Gujranwala, Karachi etc.) fo r t he en ergy p ro duc ti on f ro m th e unconventional means should be encouraged. Even coal (imported or local) should be used for energy production. Alternative energy drive must be started. Strong relations with Turkish and German entrepreneurs i n the fi elds of green energies mi x shoul d be further strengthened. Moreover, the PML-N lead government must take appropriate steps to negotiate with the IMF for obtaining bailout package of $5-7 billion to avert balance of payment crisis and preparing ground for present ing a feasible budget for 2013-14. Federal Budget 2013-14 would be one of the toughest tasks of the center. Dwindling foreign currency reserves, vanishing FDI ratios a nd the last but not the least, imbalanced parity between i mportsexports would cause serious challenges in the days to come. The only good sign is high ratios of worker remittances i.e. may surpass to US$ 11 bi llio n i n t he cur re nt fis cal yea r. The complexity of the situation requires composite short and long term strategies. The government will not depend on conventional or traditional means to fix it by either tightening the belt by compressing imports to the tune of $3 billion on immediate basis or approaching the IMF to avoid default. Role of commercial diplomacy would be crucial. The government should approach its strategic partners like, China, UAE, Saudi Arabia and Qatar to shower assistance in shape of joint venture projects and financial support for the time being for meeting the budgetary deficits. Unemployment is spreading like a cancer in the society. According to Pakistan Survey (2012) the country has more than four million un emplo yed and eight t o 10 mil l ion underemployed people. New government must be ready to face the music. Unemployment crisis has toppled the dynasties of most of the Middle East region in the ongoing waves of Arab spring. It may have bad consequences in the near future.

COVER STORY

22

Geo-Political Challenges
To achieve national consensus on the i mp ort ant na ti onal i ss ues would be a paramount challenge in t he days t o come. Working relations with MQM (law & order situation, expected change of governorship), Baloc histan na ti onalists (margina liza tion process in shape of socio-economic isolation, political discrimination) and to some extent wi th Khy ber Pa k ht unk hwa on c ertain conflicting real ities (war against terrorism, drones and construction of water reservoirs) would be needed to tackle with coll ective political wisdom and spirits of accommodation.

Geo-Strategic Challenges
Pak istans geographical positi on ha s multidimensional strategic nature. Pakistan is gateway to Central Asian Countries and shortest connected se a corridor which needs to be opti mally uti lized without indulging with ongoing greater game around our soil. We have abundant opportunities and numerous hurdles. Expected US withdrawal from Afghanistan would bring paradigm shift in our notions of security and stabi lity. Chinese premier Li Keqiang has recently visited Pakistan for finalizing the handing over

formalities of Gawadar Port. It would be game changer in the national economy and further enhance our strategic importance in the region. Bilateral cooperation in the fields of peaceful nuclear energy between Pakistan and China would s peed-up. Pak-Russia strong bilateral relations would be beneficial for both countries, for our stra tegic presence in t he CIS and maintaining strategic equilibrium in the region. The government may face tough reaction fr om t he US esta bl ish ment and Saudi Arabia/GCC cl ub on the burni ng i ssue of Pakistan-Iran gas pipel ine. It has been kept back burner for so many years but all of sudden na tional political maneuver ing i n the last regime carried us at the wolf door. The PMNN lead government will face the two imminent scenarios, either: endorsing Pakistan-Iran gas pipeline and facing the dragons fury i.e. US, Saudi Arabia/GCC along with tough time at IMF & World Bank forums, no supply of energy resources at deferred payments a nd BIG NO to any substantial socio-economic assistance of project. Or, discarding the Pakistan-Iran gas pipeline and becoming a strong contender of socio-economic bounties, geo-political stability and geo-st rategic cushion. The government must negot iate w ith the US on the much n eeded Pa k- US fr ee mark et ac ces s, establishment of economic free zones along wi t h sup pl y o f ci v i l nu cl ear p l ant s. Spirits of romance and honeymoon with India must not be dreamed at once. Elections in India are goi ng to be held in 2014. So, making inroads on I ndian front woul d not produce any substantial results before 2014. Bilateral must be pursued with BRICS (Brazil, Ru ssi a, Indi a, C hina and Sout h Afri ca). On the iss ue of death and l ife, i.e. terrorism and drones, the government must initiate composite national dialogue with all the major stake holders in the political arena and military junta t o rea ch at one point agenda. Meaningful talks with Taliban within and out of the territory must be chalked-out. US led drone policy has been proved counterpro ducti ve i n t he war theater. The new go v ern ment may c o nv i n ce t h e U S esta bl ishment for the sup ply of dro ne technologies for indigenous response to any violation of sovereignty in the days to come.

Concluding Remarks
Issues are too big to resolve which need bold steps and s trong political commitment. People are hoping that Sher (lion) will eat the high ratios of unemployment, discrimination, denial of social justice and poverty. Let us hope for the best because Mian Nawaz Sharif, the new Prime Minister has a strong cha racter.
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12

ENERGY

June 2013

Long-term solution requires focused attention. Pakistan cannot sustain flawed judgment in taking of a final decision in this regard. It is exorbitantly expense nigh impossible to convert present energy giving units into one with different source of energy production. It will require virtual revamping of the entire existing set up. However, government should look into the possibility of setting up energy units with LNG (Liquefied Natural Gas).
Ya smeen Ali
In Pakistan, depending on yo ur pl ace of residi ng , th ere i s no el ect ri ci ty from six t o twenty hours a day. Whereas it has hi t ha rd t h e l i v es o f t he comm on man, mak ing i t impossibl e t o funct ion on day to day basi s, i t h as al so br ought down pr oduc ti on i n i nd ust ri al se c to rs d rast i cal l y, c ost i ng cont racts and jobs of millions across the count ry. If we look at the iss ue- t wo r easons emerge. First , t he demand is far greater t ha n t he s upp l y. Pa k i st an i s ju st no t p rod uc ing en ough o f it to go arou nd.
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Second, the gov ernment i s fa iling in payi ng dues to pow er generation com panies thus giving rise to the phenomenon of ci rcula r d eb t. Th i s i s ba s ic al l y p i l in g up o f government dues out standing to t he power su ppl ying uni ts thereby di sab ling th em f ro m co v eri n g t he ir ov erh ead s an d p rod uci ng /i mpo rtin g power. Onc e th is debt is paid off, t he IPPs can pay off t heir p et ro leu m i mpo rt ex pens es and st art p roduci ng at opti mum l evel. The IPP s a t c u rren t are res po n si b l e t o pr o v i de el ectr ici ty to ha lf of our countr y. As the governm ent did not pay i ts debt so now t hey are charging or demanding higher per un it prices from the consumers. This hike i n elect rici ty p rices i s af fec ti ng no t onl y our l ocal industr ies and homes but is a lso

af fecti ng o ur exports of manuf actur i ng go ods. The go ver nment must i nterven e and pay out t he cir cula r debt. Or pr ovi de subsidy o n electrici ty. Most of th e syst ems h ere run on eit her gas o r co al, i.e. t hey are t hermal syste ms. B ot h Gas and Coal are considered scarce an d expens ive c om mo di ti es f or electr icity producti on. We lack hi gh quality lo wer en d grid s t ha t are u se d t o c arry el ect ric it y fr om p ower ho uses t o th e ulti mate consumers vi a grid st ations . The infra st ructure i s old a nd deter iorated. The sy ste m i s u na bl e to s ust ai n ex t re me weather conditions hence most of the grids shut d own at ext rem e temperatur e or either com pletely stops working. WAPDA is facing huge li ne losses due to ele ctr ici ty

June 2013
There will be no honeymoon period for the Nawaz Sharif Government. The test of his government will be to provide immediate relief t o the people. Nawaz Sharif needs to put t ogether some sharp plans to address this pressi ng issue. short-term plans should be combined with long-term ones. Some short term steps to address t he situation are: Line Losses & reasons must be l ooked into & steps must be taken to correct t he same, incoming government MUST look i nto discrimination of electricity distribution. W hy is Punjab (more pa rticula rly) and in pa rticular Lahore, Faisalabad & some othe r cities facing power outrage for 16 hours a day, whereas this is reportedly not happening to this degree i n other provinces. Upgrade Grid Stations; government must convert inefficient gas plants to efficient ones in order to conserve electric energy. In areas where over 80% of bi lls are being pa id must not suffer power outrage as sharply as in areas where they are no t. This wi ll not only encourage t imely payment of bills but will also be seen as being i n the spirit of fairness. Long-term sol ut ion requires focused attention. Pakistan cannot susta in flawed judgment in taking of a final deci sion in this regar d. It i s exor bit ant ly exp ense nig h i mposs ible to convert present energy giving units into one with different source of energy producti on. It will require virtual revamping o f the enti re exist ing se t up. Howeve r, gov ernment should look into the pos sibil ity of setting up energy units with LNG (liquefied natural gas). I am told this is cheaper in terms of setting up and operational costs . LNG is che ap (comparatively).Very cheap. Qatar is t he bi ggest producer/exporter for LNG and can export gas in liquefied form anywhere in the world and focus on the places where the state earns the most income for the gas. The i dea at first was to ship LNG by boat to t he US , which was supposed to he lp meet the d emand o f hun gry Americans, but the continuously low natural gas prices in the US means that it is more profi table for Qatar to

ENERGY

13

t h eft or i l le gal u sa ge o f el ec t ric i t y. Th en al so, we fa c e t h e v ery rea l pr oblem of for eign investors being shy to i nvest b ig buck s i n Pakista n ow i ng to the soc io-p oli ti cal-corrupt system.

suppl y i ts gas elsewhere, e.g. the Uni ted Kingdom, India , Japan and other countries in south-eastern Asia and Europe. Demand for Qatars l iqui d gas increased immedia tely in Japan after the ear thquake on Ma rch 18 supplying gas over such a distance through a sy st em of pipe l ines would be practi cally impossible, especially when there is more than just dry land be tween the two locations. In add it ion to t hese distant pla ces, some neighbors of Qatar have also shown an interest in buying gas from the count ry, e specially Bahrain, Dubai and Abu Dhabi. Four of the six GCC countries Saudi Arabia, Bahrain, Kuwait and the United Arab Emirates are importers of natural gas a nd only two are exporters Qatar and Oman. As the gas exports of Oman are ca 10% of the gas exports of Qatar, there is no doubt that Qatar is the most influential supplier of natural gas in the region. There i s no reason to fear that Qatar will run out of gas any time soon. The country has the thirdlargest na tural gas deposits after Iran and Russia Qatar owns 14% of the total gas reserves of the world. Qatar has enough gas for more than 200 years at current production quantity. The incursion of foreign investment will depend on a conducive atmosphere directly linked to political and socia l stabili ty of the countr y. Corr uption must be che cked to encourage it - with incentives. Nawaz Sharif will be well advised to review and down size the massive increase of Rs. 5.82 per unit price of electri city by the caretaker government. This ste p i s being te rmed as fa c i lit ati o n fo r i n co min g dispensation. In a sit uation where due to unavailability of gas & electricity the business comm unit y is st ruggling t o do business , com mo n man i s st ru ggl ing t o manage expenses, the step is se en i n direction of lowering Nawaz Sharif government popularity ev en befo re b ei ng s wor n t o o ff ic e!
The writer is a lawyer and author of A Comparative Analysis of Media & Media Laws in Pakistan. Her twitter handle is @ yasmeen_9

ECONOMY

TERMS OF THE DAY


Portfolio
Pool of investments, collection of samples of an artist or other creative person, or group of complementary or supplementary products marketed together.

1. Remembrance of what has been heard, seen, or otherwise experienced, such as that of an advertisement, commercial, or demonstration. See also recall test. 2. Removal or withdrawal of a contaminated or defective good from sale by its manufacturer or producer, either voluntarily or when forced by a watchdog agency. Sometimes a good (such as a motor vehicle) is recalled af ter it has been s old, for rectification, e xch ange , or refund. 3. Revocation of a judgment on a question of fact or a question of law.

14

SECURITY

June 2013

Not the same old

model of security
M Sae ed Khalid
A basi c raison d et re of state is to provide security to its citizens, internally as well as on its frontier. Most sta t es d evo te a large proportion of their budget t o d ef en c e a nd f or maintaining law and order. The United States, which accounts for nearly a fifth of the worlds GDP, spends enormous sums on internal and externa l se curity. Half of its federal budget is spent on d efence . The nex t b iggest economies, China and In dia are s tead i l y incr easing t hei r defence bu dgets. Pa kist an being a much sma ller country, its economy cannot match I ndia . It has followed the aim of maintaining a credible d eterrent i n convent io na l forces and a matching deterrent in nuclear weapons. Critics of Pakistans defence expenditure argue that its weak economy cannot sustain current share of defence spending. They want to increase budgetary provisions for economic and soc ial se ct or dev elo pm ent. These demands are to be viewed in the context of our regional security needs. India , Iran and Afgha nist an are devoti ng mor e, not l ess resources to enhance their defence capability. Pa kista ns nucle ar assets are the cause of anxi ety to some countries and they are said t o have conting ency pl ans to defang our nuclear arsenal on the pretext of i ts g oi ng under the contr ol of jihadi st elements. This h as add ed anot her di men si on to t he c onven ti onal needs of deterren ce and v igilance and in case of need to defend our installations. In the prevailing threat scenario, it is not feas ibl e to ignore our primary security needs to make fun ds avai l ab le f or o th er na tiona l needs even if they are of hig h priority. But that does not s top us from scrutinizing whether we are getting value for money allocated to defence. Secondly, are efforts being made to prune wasteful expenditure? War has taken a new connotation after 9/11. But the armed forces, as an i nstit ution had diffi culty i n acknowledgi ng that the good and the ba d Taliban stand for the same goal. Pakistan has often been called a security state implying that defence takes precedence ov er ever yt hi ng el se and th e defen ce establi shment ha s an overridi ng v oice i n shaping the countrys foreign policy. This may be changing as the armys doctrines on India and Afghanistan show signs of modification. The army ch i ef s recen t st ate ment s highl ighting the threat from Pakistani Taliban and allied outfit s are sig nifi cant. General Kayani wants to make it clear t hat armys outlook on militant groups ha s undergone an important change. If the war on militancy is our own war, the entire methodology must be revi ewed. Ther e s houl d be a t wo-pr onged effort t o improve intelligence, and to better react to terrorist attacks. Unfortunatel y, the militants are roaming around freely carrying weapons and explos ives all over the countr y. This requi res deploy ment of peop le in pla i n

Economic Affairs | www.economicaffairs.info

June 2013

SECURITY

15

Time has come to crackdown on madrassahs known for training militants. Many countries resort to counter inte lligence and covert operations. They train agents to carry out covert operations without letting non-state actors to create training camps. Pakistan must act on lessons learnt the hard way as there is no room for complacency after losing 40,000 lives in terror attacks on its soil
cl othes to spot suspici ous cha racters on publ ic transport and i n public pla ces. An armed guard or two outsi de a mosque or shrine cannot pr event a terrorist attack . Even more disturbing is the way security personnel react to attacks. In most cases, the terrorists a re abl e to inflict damage before escaping. They are able to hit their targets with impuni ty. Thi s stat e of affairs ca n be controlled by better training security staff in response techniques. The public officials and legislators should be given training in raising their level of threat awareness and methods t o sav e thei r l ives when under attack . It is worth recalling t ha t Pr esi dent Ronald Reagan had a narrow escape due to his presence of mi nd, i n a n a ttempt to kill him in Washington DC. He was hurt but acted intelligently to avoid more bullets. Lying in hospital bed, he was able to tell hi s wife Nancy rather pr oudly : ho ney, I duc ked . The secur ity forces and intelligence se rvices ha ve to fig ure out better ways to detect , int ercept and respond to terror attacks. In short, a new kind o f capacit y building i s needed to succeed against people who send their foot soldie rs to kill and get killed, while the ringleade rs are di recting operations from the relative security of their caves, and sometimes from hideouts in the urban areas. It is not clear what impact greater public awar eness c an ha v e on detec ti ng t he whereabouts of terrorists and their handlers. Strict methods may l ead to accusations of running a police state but individual freedoms may have to face some erosion to ensure the col lective safety of a ll. Ti me ha s com e to cr ack do wn on madrassahs k nown for training militants. Many countries resort to counter intelligence and covert operations. They train agents to carry out covert operations w ithout letting non-state a ctors to create training camps. Pakistan must act on lessons learnt the hard way as there is no room for complacency after losing forty thousand l ives in terror attacks on its soil .
Th e wr iter is a form er a mbassador of Pakistan to Argentina, Belgium and the European Union.

Dent in remittances feared: Saudi declares 30,000 Pakistani workers illegal


Pakist an can get a mas sive blow to its remittances as Kingdom of Saudi Arabia (KSA) has decl ared 30,000 Pakistani expatriates illegal immigrants following new employment law Ni taqat , accordi ng to Saud i media reports. It has been learnt that KSA announced that 30,000 Pakistani immigrants have been found illegal and the y would be depor ted soon. According to the new l aw, the KSAs government declared that any work or job, different from the one declared on visa would be considered illegal. Saudi Arabia has termed the latest mov e a mea sure to prov ide employment to locals. It is t o be note d t hat approximately 500,000 Pakistanis working in Saudi Arabia have been faci ng probl ems due to stri ct empl oy men t ru l es i n t he co unt ry. Ana l yst s suggeste d to up com in g government that the Embassy of Pakistan in Riyadh should contact the Saudi government immediately to resolve this issue as it could cause substantial losses to the na tiona l exch equer i n t erms of rem i tt ance s. It is worth adding that KSA government earlier announced deferment of imposition of this law for three months and asked illegal expat riates to se t tl e thei r i ss ues, b ut su rpr i si ng ly before t he expi ry o f t his deferment they have stated 30,000 Pakistanis illegal, which is a clear violation of deferment which was announced by Saudi Arabias King Abdullah last month. It is yet to be known that whether Saudi aut horiti es woul d deport t hese i llegal Pakistani expatriates or i mprison them. Meanwhi le, remittances in 10 months of the current fiscal year 2012-13 have shown a growth of 6.37 percent or $692.83 million when compared with $10, 876.99 million received during the same period of last FY, accor din g to State Bank of Pa k ista n. Significantly, the inflow of remittances in July-April 2012-13 alone from Saudi Arabia was $3,371.59 million while i n April 2013, the inflow of remittances from Saudi Arabia was $392.28 million. It shows that probable deportation of 30,000 Pakistani expatriates from Saudi Arabia could bring the abovementioned figures down.
Economic Affairs | www.economicaffairs.info

16

REPORT

June 2013

FEELS LIKE A MILLION DOLLARS


Performance portfolio in Pakistans

accountability
Muhammad Bilal Khan
The economic situation of the count ry is extremely bad down owing to the mal governance and bad or no policies i n the PPPPs five years term. The stories of Bhuttos glory and Benazir Bhuttos sacri fice couldnt feed and sat isfy peopl e. Tha t wasnt enoug h t o answer unbridled inflation, deteriorating law and order si tua t io n, ev er- risi ng c rimes , rampant corruption, increasing unemployment, growing injustice, l oom ing energy crises and l ots of other problems emanating from administrative lapses involving mal governance. The irony of the matter is, in spite of all this unpleasantness, NA B managed to perfor m well i n 2012. NA B recei v ed 7, 565 com p lai nt s, completed 392 inquiries, filed 95 references, and r ecovered Rs. 25 Bil lion: Says Bureaus Annual Report. The Nationa l Acco untabi lity Bureau (NAB) released its annual repor t 2012 - a
Economic Affairs | www.economicaffairs.info

watershed year in the history of the bureau. The report says, on the enforcement side of NAB activities recoveries throug h Vol untary Return (VR) and Plea Bargain (PB) amounted to Rs. 25 Billion. Despite constraints and deficits in Human Resource quality and quantity, mega corruption cases are being prosecuted as best as possible. The NA B worked wi th Bureaucracy for t hei r re-st ruct ur i ng , str eng th eni ng of regulatory mechanism, and for removal of rule viol ations to prevent corruption in planned pr ocu rem ents and pr oj ects. N umerous committees of bureaucrats were formed in all major area s of gov ernance t o i mpr ove performance on sustainable basis. Rs1.5 trillion worth of projects and procurements worth Rs1.5 trillion were processed to save over Rs200 Bi llion, invol ving pl anning and pretendering irregularities. The bureau processed 7889 complaints, completed 392 inquiries and filed 95 references i n the accountability courts. The influx of complaints increased during the year as the or gani zat ion received 7,565 com pl aints

reaching a total of 9353 complaints, including the backlog of 1788. The report further reveals t hat t he Bureau authorized 232 fresh inquiries in 2012, raising pendency to 978 including the backlog of 746 inquiries. A total of 392 inquiries were finalized (including closures and conversion into formal investigation), whereas, 586 inquiries remained under com pl etion, sai d the report, adding th at th e B ur eau aut ho rize d 86 ne w investigations, thus reaching to a total of 379. Out of total investigation cases, 147 have been finali zed whi le the remaining 232 are under process, said the annual report that is a statutory requirement. During 2012, the NAB also recommended placement of 192 accused on the Exit Control List (ECL) through the Ministry of Interior. The burea u al so fi led 95 reference s in th e Accountability Courts, making a total of 719 cases, including 624 cases already pending in the trial courts. The year 2012 also saw the start of an induction and training programme of over 250

June 2013

REPORT
It i s the funct ion of businessmen to make maximum profit. It is the function of the states Regulatory mechanism to control the level of profit. In Pakistan we see that the Regulatory mechanisms a re either nonexistent or have collapsed under pressure from political and business interests. Focus on the politicians by an agency such as NAB is unrealistic in the current heavily pol i t ic ize d env iron ment o f Pa k ist an. Focus on the Bureaucracy was the best starting point in the given environment. These are the regulators of the state and need to be given support and independence from political and financial pressures. T he legislative and Regulatory structures of the State need to be reviewed to remove discretionary and service anomalies. The report says that in order to allow greater autonomy to Regional Bureaus and ensure speedy process of decision making, the Chai rman, NA B, ha s delega ted suffi cient operational as well as administrative powers to the Director Generals of Regional Bureaus. The NAB report highlighted the role of Chairman Admiral (Retired) Fasih Bokhari who set priorities of prevention as a mechanism to precede enforcement, emergent and quick recovery of looted money, mega cases to be accorded priorit y and interaction through meetings with stakeholders. The report further indicates that a series of presentations by US Embassy to Senior Management of NAB and Prosecutors was organized during February and March 2012. These presentations provided an opportunity to benefit from the investigation techniques of FBI and Department of Justice used in the field of Investigation and Prosecution in intricate cases. Dur ing the preceding year, the NA B Interna tional Cooperation W ing (ICW) held number of meetings with foreign delegates to strengthen international cooperation for anti corruption as per United Nations Convention Agai nst Corruption (UNCAC) cha rter and to arrange foreign trainings for NAB officials to st rengthen their i nvest igation ski lls and capacities. Twenty five meetings were held with the embassies of USA, UK, UAE, Switzerland, Canada, Germany, Ma laysia, China, Japan, Australia and European Union. According to the annual report, the year 2013 has been titled Consol idation Year so as to consolidate the initiatives and strategy form ul ated by Mr. Fasih Bok hari during the last year, with specific reference to awareness, prevention, training, development and welfare measures for employees. The 2012 annual report 2012 covers the achievements, s hortfalls, statistics and way forward to eliminate corruption a nd corrupt practi ces.

4 17

NAB worked with Bureaucracy for their re-structuring, strengthening of regulatory mechanism, and for removal of rule violations to prevent corruption in planned procurements and projects. Numerous committees of bureaucrats were formed in all major areas of governance to improve performance on sustainable basis. Rs 1.5 trillion worth of projects and procurements were processed to save over Rs200 Billion, involving planning and pretendering irregularities
new investigators for NAB to be trained by a mix of l ocal and foreign faculty. The annual report says that in this year the traditional emphasis on Enforcement as a primary tool gave w ay to prevention as a primary tool for accountability; as is the case in most developed countries of t he world. form er Cha irman NAB Admiral Re tired Fasih Bokhari in his comments says that for 65 years and t hroug h 59 different legislations Enforcement as the primary anti-corruption tool has not worked. Pak istans absolute corruption index has remained unchanged at 2. 5/10 si nce t he st art of Transpa renc y International Cor rupt ion Perception Index. Pakistans corruption is therefore, not party, event, or form of gov ernment specific. The constant corruption index is a clear indication of major system flaws i n Consti tuti onal, Legisl ative, Regul atory, and Gover nance structure The Prevention framework started in March 2012 is in compliance with the United Nati ons Conv enti on against C orr upti on (UNCAC). It is based on the international ly recognized nexus between the Bureaucratic, Political, and Private Sector interests that lead to Grand Corr uption when and i f they join hands to work in an exploitative framework. It is the job of agencies like NAB to not allow this collusion to happen. The separation of these three interest groups is essential to curb corrupt practices that can reach the levels of mega corruption. Restructuring of the states governance system and regulatory mechanisms is the key to redu cti on of corr upt ion. The report says that focus on the Private Sector is not the best starting point because this is the sector that is the engine of growth.

Dismissed
NAB chief sent packing
The Supreme Courts decision w as ne arly three years in the waiting, but its order was short and decisive. A five-judge bench on May 28 declared National Accountabi lity Bureau Cha irman Admiral (retd) FasihBokhari s appointment null and void and directed the government to swiftl y appoint a new chief for the anticorruption watchdog. The ben ch headed by Ju sti ce Tass aduq Huss ain Jilani and com prising Justice Anwar Zaheer Jamali, Justice Asi f Saeed Khan Khosa, Justice Amir Hani Muslim and Justice Muhammad Ather Saeed announced its decision i n a short orde r. The order stated that the criterion for appointing the NAB chief was not followed in accordance with Rule 6 (i) of the National Accountabi lity Ordinance 1999. For the reasons to be recorded later in t he detailed judg ment, we hold and declare that consultation in the appointment of c ha irman NA B was no t made i n accordance with Section 6 of the National Accountability Ordinance 1999 and the law declared by this court. Consequentl y, this consti tuti onal petit ion is allowed, the impugned appoi ntm ent of B okha ri i s declared to be without lawful authority and is set aside wit h immediate effect. The federal government is directed to make fresh appointment without further loss of time, the apex court bench ruled in its short order. Bokhari is the third chairman of NA B sent packi ng t hrough a judicial v erdict. Earlier NawidAhsan was removed as NA B chi ef in December 2009 a nd Justice (retd) Deedar Hussai n Shah was disqua lified i n March 2011. Former leader of the opposition in the National Assembly Chaudhry Nisar Ali Khan had petitioned t he apex court on October 22, 2011 seeking a declaration against the appointment of Bokhari as void ab initi o (illegal from the beginning), saying it was not made by President Asif Ali Zardari in consultation with the leader of the house (prime minister), leader of the opposition or the chief justice. In his petition, Chaudhry Nisar had not raised any objection to the eli gibi lity of Bokhari as NAB chairman and only disagreed with the proposed nomination of President Zardari.
Economic Affairs | www.economicaffairs.info

18

ECONOMY
years i s a bad signal for foreign investors. Generally speaking, a persistent fiscal deficit of less than 2% is considered healthy where has a fiscal deficit of higher than 4% of GDP over a l ong period is a sign of caution for investors. Pakistan has had a persistent fiscal deficit of around 6.8% of GDP for last five years. This deficit increased to 8.5% of GDP in 2012 primarily due to circular debt crisis, public sector enterprises mounting loss es, hi gher i nt erest pa y men ts and fl ood. Countries with growth in real GDP are heavens for foreig n investor s. Economic growth in Pakistan had been averaging around 3% during the last 5 years which is deemed to be slow. Primary reasons behind the slow growth have been the energy crisis along with floods in two consecutive years and security co nce rns. Moreover, wi th i ncr easing population putting stress on the per capi ta income, Pakistan is having a general social and political unrest. Though the government is targeting GDP growth of 4.3% during FY13, it looks quite optimistic scenario considering structural problems like energy crisis l oss, making public sector and fiscal side policies. Thou gh some ana l yst s con sid er upcoming government of Pakistan to revive economi c acti vity, persi st ent growth in economy needs a number of str uctural reforms. Pakistan has been unable to bring structural reforms for long andhas consistently shown resistance towards reforms, which is also indi cated by the decline in rank of our country to 112th position in the most recent Economic Freedom Index (the index has had a positive correlation with economic growth). Depreciation of Pakistani rupee, about 45% during last 5 years, has been a big reason behind decline in business confidence and i nv est ment i n Pak ista n. A t ilt towards consumption and lack of investment has lead

June 2013

When Investing Becomes Gambling

Naukhaiz Saleem
Though Pakistan proffers a hu ge po tent ial for i nternationa l investors, many com pa nies have l atel y been pulling their o perations out of t he country primarily due to security and economic concerns. I would like to look at some of the important economic indicators which foreign (both direct, indirect and portfoli o) investors pore over before investing in a country. Ironically, most of these indicators give a red signal to those keen on i nvesting in Pakistan The most important ratio investor s study i s the fiscal deficit to GDP ratio. Most of the emerging economies suffer from huge fiscal defi cits due to huge gov ernment spen di ng an d sub sid i es al on g wi th weaknesses in tax collection. Though fiscal defic it is not ba d for an econom y, a persistently high fiscal deficit over several
Economic Affairs | www.economicaffairs.info

to a stress on external account of Pakistan, which in turn has impacted the domestic currency. Despite continuous increase i n remittancesover years, negative trade balance has kept its pressure on the current account. Though the current account deficit of around 2% in 2012 can arguably be considered mana geabl e, it can cause problems going forwa rd if there is no t foreign di rect investment and government keeps funding it with debt. Any country has to borrow domestically or from foreign sources to fund its persistent fi scal deficit. A country with debt levels of more than 65% of GDP is considered a matter of concern. Pakistans debt to GDP averaged around 65% during last 5 years which is a matter of concern for the economy. Though debt to GDP of advanced economies averaged 106% during 2012, a high debt leve l of emerging economies is considered more fatal than it is for advanced econom ies. It i s important to mention that external debt to GDP is only 28% while the remaining is being financed domestically. Foreign reserves of the government indi cate liquidi ty in the system when they are compared to the trade flows and short term debt. Traditionally, reserves of worth mor e tha n 3 mont hs of imports were considered adequate. By this rule, Pakistans reserves of $US61 million in 2012 adequately covered 3 months of imports worth US62mn of im por ts. However, owing to i ncr easing important of debt levels, another ratio of reserves to short term debt provides a good insight to liquidity position of the country. Short term debt is 3.5% of official reserves of Pakistan which indicates s ome liquidity problems for the country.
Naukhaiz Saleem, CFA is a fund manager, investment analyst a nd entrepreneur who tweets at @na ukhaiz a nd b lo gs a t naukhaiz .com/blog

June 2013

EDUCATION

19

Human z
the only way forward
Khaula Khalid
Great civilization flourished when its philosophies were base d on acqui siti on of k n o w l e dg e . The Me so p ot am i an s, t h e Greeks, t he Romans, the Muslims and the modern West attained their heights through seeking know ledg e and advancing education. Qarawiyyin University founded in 859AD was t he first instit ution of hig her learning which eventually led to the founding of great universities like Al-Azha r (972AD), O xford ( 1167A D), Cambr idg e (1209AD), Har vard (1636AD) and othe rs. The Muslim civilization ruled the world for over 1000 years base d on its contributi on to the growth of k no wled ge and ed uca t io n. Th e ba si c inspiration was through the first verse of the Qur'an "Read in the name of your Lord who cr eated" and the Prophet Muha mmad's command that "Acqui sition of knowledge is obligatory for every Muslim male and female". The colonial period had its toll on the na tions of the East i n terms of education. Pa kista n is one of the countri es t hat has suffered in this regard and continues to have its share of problems due to lack of education. This has led to intolerance, extremism and a narrow worldview and is becoming the chief cause for underdevelopment. After 9/11, the globa l scenario took a 360 degree turn. The war on terrorism affected the global political scene and Pakistan was not an exception. Being a frontline state, we were in a tight spot. I believe that it is t he lack of education and wakefulness that such acts of terrorism crop up recurrently he re. The HDI (Human Development Index) value for Pakistan

Education augments a persons thinking and perspectives. A person when educated is au fait with his rights in addition to his obligations. People fall prey to malicious groups who brainwash them owing to the lack of true religious erudition. Killing innocent people and shedding their blood is utterly in opposition to the teachings of Islam. Islam is a religion of peace, love and harmony like all the other religions of the world
i n 2012 sta nds at 0.515 (i n t he low HDI categor y), which ranked the country at 146 out of 187 countries and territories. In Pakistan, t he l it eracy rate is on l y 58% w hi ch d emon st rates t ha t roug hl y ha lf of ou r population is untaught. Education augments a persons thinking and perspectives. A person when educated is au fait with his rights in addi tion to his obl igations. Peopl e fall prey to malicious

groups who brainwash them owing to the lack of tr ue rel igious erudition. Ki lling innocent people and shedding thei r blood is utterly in opposition to the teachings of I slam. Islam is a religion of peace, love and harmony like all the other religions of the world. No religion gives its blessings to the followers to commit such i nhumane acts. The last se rmon of pro phet Muha mmad (PB UH) in 622AD especially focused on human rights a nd the UN cha rter of human rights, 1945 i s derived from the same principles. The madrassah system hasnt been held accountable in the past that led to a certain way of upbringing and a certain l imited view of Islam. Their syllabus was never che cked; such is the slackness of our governing elite. Moral devel opment is impor tant and t he previous gover nment ha snt taken t heir educational development into account. People shouldnt be so deprived of their basic rights that they have no other alterna tive but to stand up against the state. It is down to the lack of education that some people blindly follow fanatics who make them commit such inhumane crime as suicide bom bings. We ought to educate our people and make them familiar with the actua l teachings of I slam. We need to develop our human capital and for developing hum an capital, first we need moral development and values. We need to address the core issues in order to end militancy. Only capturing or killing militants may not help because militancy is the name of thinking and you cant simply kill thinking. Through our personal conduct a nd subse quent actions, we shoul d se nd this message to the whole world that Muslims and Pakistanis are not terrorists. We, like all other nations want to see the world as a peaceful and a better place for our generations to come.
Economic Affairs | www.economicaffairs.info

20

FASHION

June 2013

Fashion Week
More Than A Pretty Footnote

Artists are the gatekeeper of truth. We are civilizations radical voice. Paul Robeson
Afrah Jamal
There was a conference on counter-terrori sm underway in Hyderabad as fa shion week was winding down in Lahore. One of the presenters, a Dutch with a PhD and a thesis on t he effects of fear on social behavior had indicated resilience as part of the counter-terrorism strategy. We had a fashion show, does that count? I later asked Dr. Ma rk De che sne who was i n town recently. If he was startled, he did not show it. Two thing s have been t rendi ng on twitter since April 2013. Fashion week finds itself i n the same time slot as politics a nd as pol itici ans perfect t heir str ut on t he political ramp, the fashionistas have taken to the red carpet and desi gner-wear fl oods the catwalk. Though fear overshadows both ev en ts , p eop l e ref us e t o l et t h e claustrophobic environment dictate their social calendar. The famed fashion week which started from Karachi and c oncluded in Lahor e represents the beautiful bubble that exists in the midst of ma dness and mayhem and mirrors the resilient core of a nation. The existence of this oasis when every sector has suffered set-backs from tourism and film t o sp or t s is an enc ou ra gin g s ign . As designers gathered to put their best foot forward, their elegant statements and edgy vision define their regions stylish new trajectory. The industry is young and to go from being a mere blip on the local map to a substantial presence in the international arena , it needs a well designed roadmap and a proper platfor m. Pantenes Br idal Couture Week (BCW) runs for three day s, has six shows and comes twice a year. For a city like Karachi, a hairs tri gger away from viol ence, prolonged outages and shutter down st rikes, putting together a show of this magnitude is a major achievement. For the fashion industry that gets a chance to honor Pakistans contribution to couture while keeping the dazzling spotlight on the best and the brightest from its ranks, it is an iconic victory. This year t he B ridal Couture Week featur ed 18 desi gners and 14 H au te Couturiers. The parade of models floating by incl uded cricketing legends, film/stage performers, TV actors and a news a nchor; their presence was hailed by cheers and gave t he show some add ed p izzazz.

1 http:/ /www.rcci.org.pk/wp-content / uploads/ 2012/12/gtopti.pdf 2 http:/ /www.ebuzztoda y.com/pantene-bridal-coutur e-week-2013-pbcw-maliha-sheikh-13015/ 3 http:/ /www.brecorder.com/pakistan/busi nes s-a-economy/114948-pakistan-10th-larg est-market-of-gold-fpcci-c hief.html

June 2013
Sumptuous designs by seasoned players like Deepak Perwani, HSY, Lajwanti or Nadya Mistry graced the walkway. For some, like Zaheer Abbas, thi s would be a first. For others like Tabassum Mughal whose ma jestic creation got to take not one but two turns down the runway the second time because her model Ayaan Ali snagged best dressed on red carpet award, it is a chance to be part of an ensemble cast of trailblazers out to ta ke on the desi gn worl d by storm. They i ncluded Nadda S. Aadamjee, Imraan Rajput, Mussarat Bushra and 10 others chosen to feature one piece in a special segment. The resident social media team was required to be on their toes ready to spin the few desi gner faux pas into 140 characters or less . But there w erent many misses. Earlier, a models predicament on the ramp had been sk illfull y covered up by an impromptu dance routine by her partner Tipu, giving chiva lry a memora ble little cameo. But for a society, dealing with a spiraling economy and escalating extremism where does such pageantry fit in especially given the deeply conservative r oots? There are many reasons for enlisting vanity-fair in the counternarrati ve. Bridals, according to Shanaz Ramzi GM Publications & PR at HUM Network Ltd, falls into neither prt nor couture. The ramps were not willing to give it a place. More than three years have passed since BCW introduced bridal couture to the mainstream. Since then t here has been a waiting line for designers a nd o pen i ng s fo r mak e- u p art i st s , choreographers and entertainers. The event i s beamed to thirty or so countries. This time i t was available online via the magic of live streaming. An international clientel e awaits beyond the gates who can now avail the cyber services (style360l abelestore) to view and/or order. Pakistan ranks among the top 10 textile exporters of the world and as sales skyrocket, the increased visibility ensure that its vibrant fashion scene gets global recognition. These are promising indicators of growth and a step towards prosperity if only in select sectors. A portion of the show was dedicated to Nadi a Chottanis jewelry collection out to showcase the lost splendours of Empress Noor Jehans Haveli alongside the debut of Maliha Sheikhs designs known for incorporating trace elements of Sindhi heritage with a contemporary twist. Pakistan reportedly lacks gem cutting/polishing facilities and is forced to export gems in raw form, losing revenue. On the bright side, the gem/jewelry export business has spiked to 16.99 percent and 138.73 percent respectively during first eight months of current financi al y ear.... (Asad Naeem Business Recorder)

FASHION

21

Tending to the cultura l roots helps in building up the Pakistani brand. The infusion of patriotic fervor came in the form of the national anthem that made a sudden appearance from the second day onwards. It continued when Fuzon a popular band took the stage driving the shrieking volunteers wild. That many were later overheard wondering who they were just cheering for underscores the importance of promoting local talent above all else lest their voices get lost in the din of cultural invasion. Also, choreography heavily reliant on Indian music interferes with the process of crafting a distinct identity devised under that Made In Pakistan banner. Bollywood does not need our patronage. Pakistan does. Ironically Indian designers Anjalee and Arjum Kapoor marched to the beat of X-Men First Class and Pirates of The Caribbean, though their bright looking collection stayed on the fringes of bridal wear. The month long festivities dedicated to fashion makes it much more than a charming little foot-note in the style directory. The brief conversation with Dr. Dechesne assigns it as part of the resilience narrative.
The writer is Columnist fo r Daily Times. She can be reached at afrahjh@hotmail.com

Economic Affairs | www.economicaffairs.info

22

OPINION

June 2013

Security &
Ambassador Javid Husain

balancing the unbalanced


Economic growth is a function of investment. Other things remaining the same, the higher the national investment rate, the higher would be the growth rate of the economy. For raising our current low level of national investment rate (13% of GDP) to 25% of GDP or above, which is necessary for a respectable GDP growth rate, we should raise our national saving rate as much as possible so as to reduce our dependence on loans from international financial institutions and donor countries for financing our development programmes. A high degree of dependence on external loans for financing our developmental activities can be extremely risky for the country as it gives foreign governments and IFIs a handle to control our national decision making in the fields of national security, foreign policy and economy

Mian Nawaz Sharif, after the convincing victory of his party in the general elections, was right in assigning top priority to the economy of the country in his public comments. This wa s h ard l y su rp ri s i ng considering the mess in which the outgoing PPPled government has left the economy. Long hours of load-shedding and gas shortages a re a daily reminder of the severe energy crisis from which t he countr y is suffering. The econom y has virtually stalled with hardly any improvement in the standard of living of the people. Instead, the problems of widespread poverty, and high rates of unemployment and inflation have broken the back of the common man. The social and physical i nfrastructure of the country is in a deplorable state. We are nowhere near the attai nment of t h e m i l l en ni u m d ev el op men t go al s. On top of that, the federal governments ability to overcome these serious problems is se verely cir cumscribed by the high l evels of budgetary and external account deficits. Because of the hig h leve l of na tiona l debt, we have reached a stag e w here debt se rvicing claims almost two-thirds of the net federal revenues. Accordi ng to the budgetary estimates for the current financial year (2012-13), the net federal revenues were expected to be Rs1775 billion whereas t he tot al d e b t

Economic Affairs | www.economicaffairs.info

June 2013
servicing liability was estimated to be Rs. 1140 billi on, that is, about 64% of t he net federal revenues! In add ition, t he tota l al loca ti on of resources to the defence sector worked out to be Rs793 bi llion including Rs. 545 bi llion allocated explicitl y to defence, Rs . 98 bi llion provided for military pensions and reportedly another amount of Rs150 billion provided for defence elsewhere. Thus, the total budgetary allocation for debt servicing and defence alone amounted to Rs1993 billion exceedi ng by far the net federal revenues and leaving nothing for runni ng th e ci vil admin istr ati on or economic development. The fact that we have been using loans at high rates of interest for financing our current expenditure year after year is a sure recipe for getting into a debt trap. It is true that economic progress can take pla ce only in an environment of peace and securi ty, both internal and external, where the investors and entrepreneurs are prepared to take the risk of investing their resources with the certainty of getting back an attractive return. But this condition alone is not sufficient to generate high growth rates that our country needs for enhancing the welfare of the people and acquiring a respectable pos ition i n the comity of nations. Econo mic gro wth i s a fu ncti on of investment. Other things remaining the same, the higher the national investment rate, the hi gher would be t he growth rate of the economy. For raising our current low level of national investment rate (13% of GDP) to 25% of GDP or above, which is necessary for a respectable GDP growth rate, we should raise our national saving rate as much a s possible so as to reduce our dependence on loans from i nternational financial institutions and donor cou nt ries for fi nanci ng our development programmes. A high de gree of dependence o n ext erna l lo ans fo r fi na n ci ng ou r developmental activities can be extremely risk y for th e count ry as it gives foreig n governments and IFIs a handle to control our na ti onal decision making i n the fi elds of national security, foreign policy and economy. Obviously both the government and the people have a role to pl ay in raisi ng our national saving rate which was as low as 10.7% of GDP duri ng the last financial year. Just to put the matter in proper perspective, Chinas national saving rate is estimated to be about 50% of GDP which enables it to achieve a high national investment rate and consequently a hi gh economi c growth rate. Even Indi as national saving rate is above 30% of GDP. Thus, a national programme of austerity is a must if we wish to achieve a high economic growth rate like a dignified nation and not as a nation with a begging bowl in its hand. This is where the PML (N) leaders in the government at the centre and in the provinces would have to set an example of simple life style in their personal l ives and avoid wasteful expenditure in the ir st yle of governance . O f course, besid es practicing austerity, the government would have to introduce specific policy measures to encourage people to save and invest as much as possible. The fi rst t est o f the new federal gov ernment of the country would be in t he bu dget to be pr esented to the Nationa l Asse mbly. Obviousl y the government must put an end to the present practi ce i n which t he budgetary allocations for debt servicing and defence exceed the net revenues of the federal government. Some drastic measures

OPINION

23

would be required to restore fiscal stabi lity to the federal governments fi nances. For t his purpose, the new government would have to take urgent steps to raise the tax-to-GDP ratio to over 15% from the current level of a bout 9% by widening the tax base, el iminating tax exempt ions and i mprov ing tax col lection through reform of the FBR. Simultaneously, the government must undertake steps to eliminate t he drain of res ou rc es du e t o c or r up t i o n a nd mism anagement of stat e enterpr ise s like WAP DA/PE PCO, railway s, PIA, etc . The increased resources which become availabl e through higher collection of tax revenues, elimination of waste and corruption in state enterp rises, and avoi da nce of waste ful expenditure should be di verted mostly to developmental activities rather than increase in t he d efen ce ex pendi tu re. W e must remember that the more resources we allocate for defence, the le ss would be available for economic development. Over-empha si s on defence at t he expense of economic devel opment would weaken a country economically and expose it to internal and external dangers in the long run as happened to the Soviet Union. On the ot her ha nd , neglec t of t he ess e nti al requirements of nat iona l secur ity would expose a countr y to serious threats in the short run. The test of a leadership is to strike the right balance between the requirements of security and development by practicing the concept of comprehensive security in which development and se curit y are treated as integral components of the national security policy. The writer is a former ambassador to the Nethe r lands, Sout h Korea and Iran

Culture

TERM OF THE DAY ECONOMY

Broadly, social heritage of a group (organized community or society). It is a pattern of responses discovered, developed, or invented during the group's history of handling problems which arise from interactions among its members, and between them and their environment. These responses are considered the correct way to perceive, feel, think, and act, and are passed on to the new members through immersion and teaching. Culture determines what is acceptable or unacceptable, important or unimportant, right or wrong, workable or unworkable. It encompasses all learned and shared, explicit or tacit, assumptions, beliefs, knowledge, norms, and values, as well as attitudes, behavior, dress, and language. See also organizational culture.

24

NEWS IN BRIEF

June 2013

in

Brief

Pakistan to give wheat to Iran for power


Pakistan will export of 100,000 tonnes of wheat t o Iran to sett le the dues for electricity supplied to the countrys energystarved border areas. The shipment of 100,000 tonnes was to have been delivered to Iran in mid-February but was delayed by preparations for Pakistans May 11 election. The wheat is being given to Iran against the outstanding payment of $53 m illion for electricity supplied to Pakistani border areas from the Iranian grid, ministry spokesman Mohammad Ashraf said. The interim cabinet has approved the decision and exports will be initiated as early as possible. The European Union and the United States have imposed toughened sanctions meant to discourage Tehrans nuclear programme, which they say has a military purpose. Iran rejects that claim, saying it s programme a ims at the peaceful product ion of electrici ty. Western sanctions do not target food shipments, but financial measures ha ve frozen Irania n companies out of much of the global banking system, hindering payments for imports, on which Iran relies for much of its food.Electricity from Iran costs Pakistan around $3 million a month and is supplied to towns near the Iranian border, including the port city of Gwadar.

Kuwait to hit 4 million bpd by 2020


Kuwait O il Company, a subsidiary of the government owned Kuwait Petroleum Company, has set a target o f 4 million barrels per d ay (m bpd) by 2020. The countrys current capacity is approximately 3 bpd with an additional 200,000 bpd produced from the divided zone with Saudi A rabia currently. The t arget i s expected to be reached mostly by development pl ans in Nort h Kuwait with some d evel opments in th e di vided zone as well. To achieve the 4 million ta rget , we aim to produce 3.65 mbpd from Kuwait and 350,000bpd f rom the di vided zone, sa id Sami al-Rushaid, c ha i rman and mana gin g di re ct or of KOC . Som e of t he increase will come from t he developm ent of heavy oil, we are pla nning to produce 60,000 bpd of heavy oil by 2017 and 2018, but some will also come from the Jurassic light oil which is coming out with gas, we expect to produce around 400,000 bpd of light oil from the Jurassic by 2020, he added. Going beyond i ts 2020 deadli ne, al-Rushaid stated that the company plans to have production capacit y plateau at 4 mbpd from 2020 to 2030. Generally speaking, what we will be seeing from 2020 to 2030 will be more of what we call t he unconventi ona l, heavy oil and Jurass ic l ight oil. Dev eloping the new fiel ds in Kuwait will not be an easy task . It is a very complex reservoir, it is deep, has high pressure, high temperature fractured and has H2S, it has everything and dealing with that i s one of the main cha llenges. However we are making very good progress on this so far, he said.
Economic Affairs | www.economicaffairs.info

SECP
Issues a Sahara Insurance Company Ltd
The Securities a nd Exchange Commission of Pakistan (SECP) has issued a lice nse to Sahara Insurance Compa ny Limited (SICL), a wholly-owned subsidiary of Employees Old-a ge Benefi ts Institution (EOBI), al lowing it to conduct non-life insurance business in the country. It has been after a gap of four years that the SECP has given license to an insurance company. Last time, it issued license to an insurance firm was in 2009 and that was to a life insurer. Following the registration of the SICL, the total number of active non-life insurers has reached 40, while the total number of active insurance companies (life and nonlife), incl udi ng Pak ista n R einsuranc e Com pany Li mited, now sta nds at 50. With continuing emphasis on social insurance, EOBI decided to incorporate SICL with the primary objective of providing health insurance coverage to EOBI pensioners aged between 60 and 70. In addition, accidental death and disability coverage wi ll be provided to Pakistanis working abroad.

June 2013

NEWS IN BRIEF

25

Borrowing by Govt crosses Rs1 trillion


The borrowing for budgetary support finally crossed the Rs1 trillion-mark, while the government suddenly increased its borrowing from State Bank speeding fast towards half a trillion rupees. The State Bank reported that the borrowing for budgetary support rose to Rs1.042tr during ten months and 10 days of the current fiscal. However, this is still less than the borrowing of Rs1.076tr made last year during the same period. The expected fiscal gap of about 4 per cent of GDP in the budget could not be controlled to its limit which might be around 8pc at the end of the cur rent fi sc al. This large fiscal gap demands large size of borrowing s l ike prev ious year when the fiscal gap was ov er 8pc. The size of the budgetary borrowing is almost same with fractional difference. The borrowing from State Bank rose to Rs454bn; it was Rs424bn during the same period last year.The growth rate of monetary expansion for this period was 9.86pc while the growth rate was 9.06pc last year. The government has so far borrowed Rs631bn from commercial banks; the amount was Rs624bn last year. The biggest difference was noted in the credit off take by the private sector which shrunk to record low this year in the 10 months. The private sector credit off take during this period was just Rs92bn compared to Rs235bn last year. Even the last year was not significant for economic growth and participation of private sector. The poor amount o f credi t of f take by t he pr ivate se c tor refl ects th at the econ omi c growt h coul d be even l ower th an l ast yea r. The current fiscal could prove the worst year for the economic growth in the last five years. While the high hopes are attached with the new incoming government, it would not reflect in the current fiscal that is to be ended on June 30.

Iran offers insurance to Indian refiners


PIA to induct 12 narrow body aircraft in its fleet
Pakistan Inter-national Airline (PIA) is in an urgent need to induct new aircraft in its fleet to meet demand and capacit y; this was di scl osed at t he 56th Ann ua l General Meet in g of PI A. Managing Director PIA Junaid Yunus said the Airline was in the process to acquire 12 narrow body fuel efficient aircraft in its fleet which would enable the Airline to offer better services to its customers and would have savings with regard to fuel costs and maintenance costs, as presently the Airline fuel cost was around 60 percent a s compared to the industry average of 35 percent. Hussain Lawai senior m ember PIA Board of Di rectors sai d good news was very soon i n first phase PIA would be getting four newer narrow body aircraft on lease from its own resources and no further loans would be obtained. He said a complaint cell would be esta bl ished wit h act ive pa rti cipa ti on of sharehol ders. PIA shareholders appreciated present management's role in maintaining the airline operations with a fleet constraint and other factors affecting the airline especially inconsistency and frequent change of management. Iran has offered insurance for Indi an refiners to boost it s crude sales. US and European Unio n sanc ti ons aimed at choking the flow of oil money into Iran and forcing Tehran to n eg ot i at e c u rb i n g i t s c o n t ro v e rs i a l n uc l ea r programme slashed i ts crude exports in half in 2012, costing it as much as $5 billion a month. The sanctions have forced refiners in India, Irans second-largest oil buyer, to reduce imports because India n insurers have sai d they can no longer cover refineries that process Iranian crude. They (Iran) said the y can provide i nsurance for our refineries, said one of the sources, after a meeting between Indian O il Minister Veerappa Moily with his Iranian counterpart Rostam Qasemi. We had a fruitful meeting...Our meetings are about the energy sector, Qasemi told reporters, without elaborating. Qasemi is on a three-day visit to India from S unday to woo New Delhi for stepping up oil imports and invest in the Opec-members oil and gas s ector. Two refiners Hindustan Petroleum Corp, and Mangalore Refinery and Petrochemicals Ltd halted Iranian oil purchases in April due to insurance problems. India cut imports of Irani an oil by 26.5 per cent in the fiscal year which ended March 31, and had reduced shipments by 56.5pc in April, according to data from trade sources. Iran also offered to ship gas to India in liquefied form via Oman, they said. Iran does not have the technology to l iquefy gas so they have asked India to use Oman for liquefying the gas for further supplies to New Delhi, said a second source. Both of us expressed our desire to continue with business with each other. We need to nurture business with them...there are problems which will be sorted out, said Moily after the meeting. India has asked Iran to participate in tenders seeking oil supplies for its strategic storage being buil t at two places with a combined capacity of 18.55 million barrel s by 2014.Reuters
Economic Affairs | www.economicaffairs.info

France blacklists 17 countries for handling foreign aid


France has drawn up a blacklist of 17 c ountries in cluding Switzerland that do not help investigate foreign aid fraud, banning th e u se of their banks to help distribute development funds . Aides to development min ister Pascal Canfin were unable to say how much French foreign aid cu rrently tran sits via b anks in the countries featured on the n ew b lacklist.The b lacklist expands on an alreadyestablished register of eight non-cooperative states and territories that already includes Botswana, Brunei, Nauru , Guatemala and the Philip pines. It adds Switzerland, Lebanon, Panama, Costa Rica, th e United Arab Emirates, Dominica, Liberia, Trinidad an d Tobago, and Vanuatu.The officials ju stified the m ove by s aying th ere was a lack of transp are ncy in the nations on the list, adding that poor and developing countries were often the main victims of fraud. The aim is primarily preventative, to put pressure o n these countries by publicising this list to progres s towards more transparency, they said.

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NEWS IN BRIEF

June 2013

CCP fines dominant urea manufacturers around Rs 8.6bn


The Competition Commission of Pakistan (CCP) fined two dominant urea manufacturers around Rs 8.6 bi llion on unreasonable price increase and the matter was currently subjudice. The CCP said this case was instructive in the industry offered huge subsidy of a round Rs 23.75 billion in only one year. The companies maintain t hey transferred this subsidy by keeping their prices lower than the international price. Import, thus cannot give domestic manufact urers any competition and in any case urea is imported only to meet the shortfall and since government has to absorb its cost to make urea available at an affordable price to farmers, there is a little incenti ve left to import, Ms Rahat chairperson of CCP said. Whatever the peculiar reasons may be, it is clear the subsidy offered has only skewed the market and has not reached the intended beneficiary. It has impacted not only the price but even made the availabilit y of the product scarce, she said. The domestic industry has the installed capacity to meet the local demand, which is constrained by suppl y of gas. Parties hiked the price upto 86 percent in a year, whereas gas curtailment, which was the major ground taken behind such price increase impacted only 27 percent of production of the entire industry, there was also not much change in input costs. The 2 dominant companies together availed Rs 15 billion of subsidy in one year (still higher than the penalty imposed). One of the companies doubled its net profit from Rs 11 billion to Rs 22.5 billion. The Commission imposed the maximum penalty i.e 10 percent of the turnover taking into account significance of urea for an agri-based economy.

Indonesia ready to invest in power projects

'Pakistan can attract $5b in foreign investment'


KARACHI: The Overseas Investors Chamber of Com merce and Industry (OICCI) e xpects that the new government can prov ide right environm ent and support to Pakistan's economy and the country can attract as much as $5 to $6 bi llion in foreign direct investment annually. The chamber is optimistic that the incoming government will set a clear and focused direction to address key issues of governance, security, energy and inconsi stent policy im pl ementation, which in the recent past has severely affected i nflow of foreign d irect in ves t men t i n t he co unt ry. In a statement the OICCI President Kimihide Ando sai d that as the country moves towards a smooth t ransi tion of power at the Centre a nd in provi nces, Ando sai d the ongoing democrat ic proc ess is creati ng a posi ti ve i nterna ti onal percept ion, which i s partially reflected i n the increasi ng forei gn portfolio invest ment i n the country's stock market. This window of opportunity can be used to ch an nel lo ng er term FD I t o bol st er t he manufactur in g and i nfrastr ucture sec tor for sustained business a cti vities, which will cause an increase in employment and economic growth, he suggested. Seeing the country's potential, he expressed confide nce th at a few bol d eco nomic policy initiatives by the new government can dramatically change the economic situation.
Economic Affairs | www.economicaffairs.info

Foreign exchange reserves rise to $11.62bn


Pakistans foreign exchange reserves rose to $11.62 billion i n the week ending May 24 from $11.43 billion the previous week, the central bank a nnounced on May 30. The r eserves held by the State Ba nk of Pak ista n stood at $6. 56bil lion, after increasing 2.83 percent from $6.38 billion in the pr evious week, wherea s th e reserves held by commercial banks surged by 0.17 percent to $5.059 bi llion as com pa red wit h $5.05 bil lion i n th e pr ev io us week . Remi tt ance s f ro m Pakistanis abroad rose 6.37 percent to $11.57 bill ion in the first 10 months of the FY-2012-13, from $10.87 bi llion in the same period last year. The fiscal year runs from July to June.

SCB unveils digital banking vision in Pakistan


Standa rd Chartered Bank announced its digital banking vision aimed at enhancing the cu st omer bank ing experience in Pakistan. This is part of the Banks global focus on Digitisation-socialising personal banking and extending customers digital lifesty le i nto bank ing. Bank l aunc hed Breeze, its award-winning Mobile Banking application, making Pakistan the second market in the MEPA region where this appli cation i s available. Breeze Mobil e banking is designed to address the needs of globally connected customers who a re on-the-g o, tech-savv y and who v alue transaction freedom and conveni ence.

Amb ass ado r of Rep ub l i c o f Indo nesia t o Pa kista n, Bur ha n M uhammad ha s sa i d tha t hi s priorities were to enhance economic cooperation between Indonesia and Pakistan and to connect the business c ommunit ies of two count ries, which woul d further st rengthen mut ua l link age s b etween t wo Muslim countries. He highlighted that during his v isi t to Isl ama bad Cha mber of Comm erce and Industry (ICCI). He sa id tha t the Indonesia-Paki stan Preferential Trade Agreement (PTA) was a landmark development in the bi lateral hi story of two countries which will not only raise bilateral trade volume but also open doors f or Pa k i sta ni busi ness men t o penetrate i n the emerging Asean market. The Ambassador apprised that t here was some del ay in t he enforcement of PTA as notification ha s not been iss ued yet. He sa id that in thi s connection he wil l also v isit J akarta to meet Indonesian Trade Mini ste r. He st ated t ha t besides economic and commercial c oo pe rat i on , Ind on esi a al so intended to invest in power projects as wel l as Pakistan can get benefi t of Indonesia n expertise in coa l sector for produci ng electricity. He said that Pakistan and Indonesia are also negotiating to start a project of C oal Power Pl an i n Ka rachi for generati ng ele ctr ic ity by using domestic coal while the rest will come from Indonesia. He sai d that Indonesi a and Pa kista n have ha d a remarkable history of brotherly relationship and two countries have enjoyed sound and steady commercial interaction since last several decades. He said tha t President of Indonesia, Susilo Bambang sent him to Pakistan for i mproving the trade and economic l inks between the two count ries.

June 2013

27

Economic Affairs | www.economicaffairs.info

28

INTERVIEW
President and CEO of National Bank of Pakistan Dr. Asif A Brohi

June 2013

Portfolio
Dr. Br ohi has rich experience i n all disciplines of contemporary banking. His dynamism and professional deep insight is a great source to promote the banks busi ness a nd to maintain and improve its present position among the domestic industry. He joined the ba nk in 1984 a nd held numerous Seni or Ma nagement positions at the Regional and Head Office l eve l. Dr. Broh i, pr io r to becom ing President of the NBP, was serving as Chie f Operating Officer and Head of Commercial & Retail Banking Group of NBP, and ca rries rich experience in all spheres of banking spanning over almost three decades. In the past, he has been the head of Banks Operations Group, Strategic Planning Group, Information Techn olog y Gro up, Cu ltur e Chan ge P ro gramme Gr ou p an d Trai ni ng . Pr io r to joi ni ng NB P, he was Assis tant Professor of Mana gement, taught in v arious Universiti es i n the Unite d S tates of America. He holds a Bachelor s Degree in Law, a Masters Degree in Literature from the Univ ersity of Sind h, a Masters Degree in B u s i n e s s Adm i ni st rat io n from USA and a D oc to rate i n P u b l i c Administration fr om Ka rach i Uni versi ty.

NBP performing
despite challenges
Interview
Maria Khalid
The energy sector projects are o ur t op pr i or i t y because the entire country is facing a serious crisis of energy followed by m o u nt i n g circular debt that has brought the industrial development into a stand still. The ba nk is a lso planning to extend its financing to the energy se ctor. The financi ng of energyrelated project is on the top priority of NBP. So far, some 10 wind energy projects have been initiated in the country, of which seven have been financed by the NBP. Of these se ven, five have a lready c o m m e n c e d operat io ns an d t wo mo re are ex p ec t ed t o becom e operational shortly. On the whole, as much as financing facility worth Rs 125 billion had been extended to the energy sector.

What is your strategy to strengthen the core banking application of NBP?


The Nati onal Bank ha d successful ly implemented core ba nking application in its main branch to provi de 'superb' cus tomer services, beside s ensuring efficiency across t he bank ing functions. This core banki ng application aimed to strengthen NBPs internal banki ng sy stem. After the successful launch of the main branch, the bank i s pl anning to introduce core banking application in all its branches. According to the plan, core banking appl icati on will be implement ed i n 250 branches over the next four months. We have already com pl eted a pilot project of online system and at present, with 1, 300 online branches, the bank has become the country's largest bank with 100 percent online branch network.

How do you see the demand of business community for a cut in SBP policy rate?
2012 was a difficult year for commercial ba nks because of persistent reducti on in discount rates that significant ly impacted the net interest income of all banks. Any furthe r reduction in policy rate will bi nd to have negative impact on inflation and as wel l as n et i nc om e of b ank s. Under a decli ning int erest rate scenar io, the ba nk was redefining its

Economic Affairs | www.economicaffairs.info

June 2013
against gol d, ha ve grown by 51 percent whereas the growth in agricultural loans was 30 percent during 2012. Total agriculture and consumer loans stood at Rs 131 billion at the end of December last year.

INTERVIEW
home remittances?

29

The NBP currently has 29 overseas branches and the Bank is planning to set up a branch in Sri Lanka to f acilitate trade and industry. Talks with the central ba nk of Sr i Lanka are in final stages. The NBP will also set up a branch in Russia very soon. You ma y know that the NBP is also su cce ssfu ll y o per ati ng fou r branches in Afghanistan and six i n Cen tral Asi an Rep ubl ics. E v e r y ot h e r b an k i s i ntroduci ng Isl ami c ba nki ng pr oducts. Is NBP m aking any strategy to make achievements in this flourishing sector? Like all other commercial banks, the NBP is also revitalizing i ts Islamic banking operations. With the opening up of 1 5 new d esi gna ted Isl am ic b an kin g b ranches thi s ye ar, the total number of such branches would rise to twenty three.
busi ness model and at present, while most comm ercial banks are investing heavil y in government securities, the NBP has effectively kept it s fresh i nvest ment in gov ernment securities at a minimum level and is trying to fulfill the demand of the private sector.The bank is planning to offset the impact of low interest rate by expanding (its investment) in hig h-yield and l ow-risk product s, low-cos t deposit mobilization branch expansion and a reduction in non-performing loans (NPL) a nd you will witness posi tive resul ts from this quarter onwards.

What are the NBPs preferred areas for investment?


Whil e m any l ocal ba nks preferred to invest i n gov ernment se curi ties , t he NBP witnessed a significant growth i n advances loca lly as well as i nternationally. W ith an increase of 25 percent, total advances grew to Rs 657 billion by the end of December last year from Rs 525 billi on in December 2011. NBP achieved a massive growth in lending to farmers: the bank achieved its target for this fiscal y ear by di sbursing Rs 52 bil lion on account of a gricultural credit di sbursement during July-April of FY13. "The (bank's) overall investment had surged to Rs 343.5 billi on a t the end of December last year, up from Rs 319.5 billion at the end of December 2011.

NBP is the leader in home remittances business and this is also an area of top priority. The NBP has agg ressiv ely exten ded it s remittance correspondence base across the globe with the aim of facilitating overseas Pakistanis. Cumula tively, the NBP has struck agreements with 30 leading overseas remitting partners. Stri king a major strategic move, the NBP created a se parate independent group na med G l o ba l H om e R em i t t an ce s Management Group in 2009 to focus on inward home remittances business.

Do you have any plan to further expand the NBPs branch network?
Yes, we are planni ng to set up 55 new branches across the count ry, i ncluding 40 convent iona l and 15 of I slamic banki ng. We are focusing on rural areas--we have decided to open more branches in less developed areas, instead of urban areas, out of 40 branches, as many as 30-32 branches would be established in r ural areas.We will also gradually expand the ba nk' s foreign operatio ns. The NBP currently has 29 overseas branches and the Bank is planning to set up a branch in Sri Lanka to facilitate trade and industry. Talks with the central bank of Sri Lanka are in final stages. The NBP will a lso set up a branch in Russia very soon. You may know that the NBP is also succe ss ful ly operatin g fou r br anc hes i n Afghanistan and six in Central Asian Republics. Every other bank is introducing Islamic banking products. Is NBP making any strategy to make achi evements in this fl ourishing sector? Li ke all other commercial banks, the NBP is al so revital izi ng it s Isl amic ba nk ing operations. With the ope ni ng up of 15 new designated Islamic banking branches this year, the total number of such branches would rise to twenty three. Recently, Mr. Zubair Haider has joined NBP as the head of Islamic banking and I hope that he would provide new impetus to NBP's Islamic banking services.

Has NBP introduced any products to facilitate the masses in general?


Advance sal ary, consumer gold and agriculture loan are three ma in products of the NBP to facilitate masses, particularly people i n rural areas, who have previously been deprived of banki ng facilit ies. A sig ni ficant growth has been witnessed in agriculture and consumer loans over the past few years and at present, the NBP has the largest market share in terms of agriculture and consumer loans among domestic commerci al ba nks. Consumer loans, let me share, especially

What role is the NBP playing to facilitate


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30

WORLD

June 2013

Armed to the teeth


A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.
The Second Amendment to the US Constitution
Economic Affairs | www.economicaffairs.info

June 2013

WORLD

4 31

Sabria Balland Chowdhury


The Second Amendment to the US Constitution is the backbone of the entire gun control or rather, the lack of gun control debate which ha s pa rticu larly been an i ss ue i n the spotlight in recent times even more so than before. The December 2012 mass shootings of 20 children and 6 adults in an elementary school in Connecticut by a crazed shooter was supposed to be the tipping point in the gun control debate but very sadly, even this most horri fic and tragic of incidents has not been the cause of any successful gun control legislations in the US as ha s been seen in the past in Great Britain and Australia. One of the main reasons for this is si mpl y t he in terp ret at io n o r rath er misinterpretation of the fa mous Second Amendment to the US Constitution. Although written in 1791, when it was believed that arming t he ci tizenry against a tyrannica l government was necessary, it is st ill used today in rhetoric and unfortunately in practice as the right to carry arms for the protection of individuals and their families. There is also some romanticism and nostalgia in this love of bearing arms which dates back to the days of the pioneers and the opening of the West in order to defend themselves against Native Amer i can s, ba ndit s and wild ani mal s. Ho weve r, th i s rom ant ic i sm and nosta lgia which is well-eng rained in the American mindset and cult ure is kept well alive and notoriously politically strong by the National Rifle association (NRA), which has strong interest groups among Congressmen and protects the arms industrys interests comm erci ally. It is the let hal mixture of a cult ure w hich feels the constant need to protect itself against enemies and the highly potent lobbying of the NRA which has made

the US the most armed country in the world. Toda y, i t i s es ti mated th at t he law enforcement age ncie s and th e military possess four million weapons while American ci vilians poss ess 310 mil lion ass or ted weapons, including assault weapons which are found i n the batt lefields of Iraq and Afghanistan. To add to these shocking facts, approximately 50% of all gun sales involve pri vate se ller s and do no t requi re any background check. This l eads to the nightmares that have resul ted in the hig h school shoot ings in Col om bin e i n C olor ado, Vi rgin ia Tech Univ ersity in Virginia , the Sikh Tem ple shootings i n W isconsin and the elementary school shootings in Sandy Hook, Connecticut, just to name a few incidents. More young people each year are killed and m aimed by gunfi re in the Unite d States than all US casualti es i n Iraq and Afgha nistan pu t together and gun homicides is one of the biggest causes of death among t he youth. There are 30,000 g un r elated deaths in the United States every year. The statistics and life stories are chilling. Recently, a two year old girl was accidentally shot and killed by her five year old brother by his own personal gun. In April in Tennessee, a four year old boy shot and killed a 48 year old woman. A few days later, a six year old boy w as acci dentally shot by another four year old. Parental responsibility is no doubt an issue in cases such as the se but a great deal has to do with the gun culture in America and the interests of the NRA which seeks to arm its members with guns in order to protect cit ize ns from wha t it calls go vernment ty ranny. There are no doubts th at t his intense ly strong lobbying by the NRA has imbedded itself into the American culture well enough to actually have people believe that they must arm themselves to the teeth

i n o rde r t o p rot e c t t h e ms el v e s from.themselves. The horrifi c resul ts are tha t t he continual spiral of deaths caused by homicides and accidents due to guns increases, with no hopes of any legislations being passed by the C ongress which controls the selling and purchasing of guns in any way. The startling response of the Conservatives and the NRA after the Sandy Hook shootings was far from one whi ch advocates gun controls. Rather, t he argument suppor ted mor e guns in schools, even a rming teachers in order to defend t heir students against any attacks. Under such circum stance s, how can any i ntelligent and sound decisions be made in constructing a safe society? President Roosevelt had said, The only t hing we have to fear i s fear itself. This statement could not be more appropriate for t he gun cult ure which has fri ghtening ly materialized in the United States. Between misinterpreting the Second Amendment and l osing complete perspective of its place in a set period in history, the aggressive lobbying of the NRA and citizens fear of not being able to protect themselves against violence (yet in the process causing it also), the vicious cy cl e of the lack of gun control continue s fiercely and more and m ore innoce nt lives are lost.

Economic Affairs | www.economicaffairs.info

32

EDUCATION

June 2013

The positive effects of education are not limited to lowering fertility rates. Universal access to education is the key ingredient for Pakistan to transform demographic transition into demographic dividend. The population of Pakistan is growing at a soaring rate of 1.8 and is projected to reach close to an astounding 300 million by 2050

Capturing the
demographic dividend through education
Mehnaz Aziz
Cur rent de mo grap hi cs changes in Pak istan pose an interesting scenari o of tough chall enges coupled w i th e nc our a g i ng opportuniti es. Pakistan is experiencing rapid growth in population with slow decline in fertility and mortality rates. A lot is written on the effect of demographic changes on economic growth. Declining fertility and mortality rates due to improved health care and awareness, a process known as demographic transition, leads to a bulg ing population of youth ready to work and save. This demographic transition
Economic Affairs | www.economicaffairs.info

i f channelled to product ive avenues through relevant policy interventions will lead to rapid economic growth - an outcome know n as demographic dividend. Sathar, Royan and Bongaarts in their latest book Capturing the Demographic Dividend in Pakistan published by Popula tion Council, 2013 has addressed key areas to focus, in order to capture this v aluable demographic divi dend. Key areas i dentif ied were education coverage and reproducti ve healt h awareness. Call it a cha llenge or opportunity ; policy makers can ha rness t he power of Pakistans increasing cohort of population in their prime years to f uel ec ono mic gro wth . Ot herwi se , i f uncontrolled, this rising population tide will c ause agit ati on, unrest, v io len ce and

political/civil conflict. Impor tant policy questions here a re; How to control the unsustainable growth of population through voluntary measures? How to se cure the demo graphi c div idend by building capacity and increase productivity of thi s new young population? Are the present infrastructure, industry and economy capable of abs orbi ng this increasi ng tide of w orking population? The a nswer to all these policy questions is linked directly or indirectly to the provision of quality education. Internationally the strong connection between education and population wellbeing is recognized and well documented at all stages of development. The next few decades are crucial for Pakistan as the majority of population will be of working

June 2013

EDUCATION

33

ECONOMY
TERM OF THE DAY

Resolution
1. Formal authorization or expression of an a ction, decision, intention, opinion, transaction, etc.
age and he nce we need to start planning for i ts wellbeing no w. Investm ent i n education is the need of the time and our focus area should be pri mary educat ion with particular attention to girls education. The most direct impact of education (particularly girls education) is on lowering fertility rates. Educated women are found to have low fertility rates. In t he case of Pa kista n i ncreased investm ent in girls education and wider outr each of family pl anning awareness will direct ly lower fertility rates. As per the most recent Demographic and Health survey of Pakistan the fertility rate of educated women is 2.3 but for uneducated women it is a striking 4.8. Also the median age of marriage for educated women is 6 years older than for uneducated women. The positive effects of education are not l imited to lowering fertility rates. Universal access to educa tion is the key i ng redi ent fo r Pak ista n to transfo rm demographic transit ion into demographi c div idend. The population of Pa kista n is growing at a soaring rate of 1.8 and is projected to reach close to an astounding 300 million by 2050. A major proportion (49%) of this 300 million will consis t of young people (24 - 64). This working age population cohort will be a catalyst for future growth, if educated and provided the employment opportunities to serve the country. In 2050, close to 59% of this bulging working age population will be women. Considering the present female literacy rate of only 38%, in working age population (2064), a large portion of t he worki ng age pop ula ti on (62%) is a burden on t he economy. This trend will continue to 2050, where t he pro portion o f uneducated female s in work ing age population are nearly double t han males. Realizing the current sad state of education provision for females and to ensure the productive and acti ve involvement of this large portion of future population, there is an urgent need to invest heavily and on pr iority basis in girls education. The futur e of Pak ista n is heavily dependent on the provision of equi table education to all and i s in line with the mandate of article 25 A. The need of time is investment in primary education and to achieve provision of education for everyone as a basi c human right. The c hang ing demographic of Pakistan is a double edged sword. If not used in a productive and right way to spur future economic growth, it will hu rt Pak ista n soc ially, p oli ti cally and economically in the future. To harvest the f ru i ts of lo ng t erm human capi t al develo pment, we shoul d act now and develop a nationwide education strategy. Post ei ght een amend ments we see a disparity in quality and provision in all four provinces - A National Counci l to ensure st andard s an d in co ord in atio n wit h implementation in Provinces. Also a district based accountability mechanism is the need of the day. The ball is in the court of the new government post May 2013 elections t o ensure t hat the prom ise s made i n manifestoes see the light of the day. Any e du cat i o n po l i cy to c ap t ur e th e demographic dividend has to be incl usive of all four provinces.
Th e autho r is the found ing direc tor of Childrens Global Network and is the member of th e G lob a l Age nda C ounci l for P aki sta nmeh nazakb eraziz@gmail.com

2. Proposition put before a me eting of stockholders ( s ha rehol ders ) or the di rectors of a firm for di sc ussi on, a pprova l or adoption. Resolutions are of four common types: (1 ) El ecti ve ( se e el ecti ve re s o lu t i on ), (2) E x t r a or d i na r y ( se e extraordinary resolution), (3) Ordinary (see ordinary resolution), and (4) Special (s ee special resoluti on). 3. Appropriate disposition of a complaint or protest throu gh pres cri bed or s ta n da rd pro ced ures . 4. Sharpness or clarity of a monitor, printer, or scanner i mage , expressed in an appropriate unit: pixels per inch (PPI) for monitors, dots per inch (DPI) for printers, and samples per inch (SPI) f o r sc an n e r s . F o r photographic.

Economic Affairs | www.economicaffairs.info

34

REPORT

June 2013

PAK ARMY

Sharifs cosying up to India

watching
Reuters
Cha udhr y, a former air vice marsha l. The questi on is: will the army give Sharif the freedom to do w hat he wants? The top source of potential friction is his aim to boost trade and t ies with India. Sharif's policies towards India will be heavily scrutinised, but there are signs the military may be slightly more amenable to overtures than in the past. In 1999, the army torpedoed Sharif's attempts to improve relations by secretly sending soldiers disguised as militants to capture Indi an outposts in the heights of Kargil, in the north of Indian-administered Kashmi r. When Sharif tried to fire Pervez Musha rraf, his then-chi ef of army st aff, Mu sharraf t ook p ower i n a co up.

Pa k ist an 's all-powerful mi litary overthrew Nawaz Sharif 14 years ago and hustled him off into exile in handcuffs. Now he's back as prime minister-elect, with the army watching his e very move, especially steps planned to ease tension with archrival India. Sharif's Pak istan Musli m League Nawaz (PML-N) won 124 of 272 contested seats in this month's parliamentary election. Its nearest rival, the Pakistan People's Party (PPP), won just 31 in the first democratic handover of power since independence in 1947. But Sharif is inhe riting an almostbroke nat ion that has been ruled by the military for more than half the 66 years sin ce then. It i s wracked by a Tali ban insurgency, sectarian violence, daily power cuts and spi raling unemployment among its 180 million people. Pakistan has so many problems that h e n eeds th e h elp an d supp or t of everybody, including the army, said Shazad

The army wanted to know if Sharif could unite Pakistan's four provinces, each most likely headed by a different party, to rein in militancy, said Major General Mahmud Durrani, national security adviser under the previous government
Sharif ha s promised a n inquiry into t he Kargil invasion. Most officers be lieve t hat is a poli tical move aimed mostly at containing Musharraf, who is now under house a rrest i n the capital, rather than a pla n to punish senior officers. Sharif was at pains to absolve the military of bl ame for his overthrow at a recent news conference. I never had any trouble with the army. The coup was staged

Economic Affairs | www.economicaffairs.info

June 2013

REPORT 35

by one single person, he said. The rest of the army was not taken into confidence . We have to work together. Officers say they are watchi ng three t hi ng s c lo se l y: th e fo rmat io n o f a commission to investigate the 1999 invasion; who replaces the army chief in November when his term expires; and how Sharif plans to tackle mil itants, especially the Pakistan Taliban. The a rmy distinguishes between good Taliban - who do not attack Pakistani security forces and fig ht i n Afghani stan and bad Taliban, who have killed tens of tho usands of sol diers and civ ilians in Pakistan. Sharif favours talks with the Pakistani Taliban. Many in the military believe this co uld h elp address some ind ivid ua l griev anc es but t hey do not want any compromise on t hi ngs l ike cha nging the Pakistani constitution. The army wanted to know if Sharif could unite Pak istan's four provinces, each most likely headed by a di fferent party, to rei n in mi litancy, sai d Ma jor General Mahmud Durrani, national security adviser u nd er th e pr ev i o u s go v ern men t . No sl i nk i ng b ack to ba rrac ks Pakistani militants have, alleged ly, previously enjoyed the backing of the army. That has changed, officers insist, although elem ents with in t he military are st ill sometimes accused of supporting militant groups. India blamed elements of the Pakistani security forces for supporting gunmen who attacked the Indian city of Mumbai in 2008, somethi ng Pa k ist an str ongl y denied . Durrani said attitudes to I ndia were

slowly changing, meaning that top officers are unlikely to stand in the way of Sharif's outreach this time. For Pakistan to move ahead, it needs peace with India, he said. But the military will not just s link back to (the) barracks. It still has a lot of input on foreign policy a nd needs to be weaned off that gradually. The current army chief, Ashfaq Kayani, obliquely refers to India as an external threat in speeches but also now mentions the internal thr eat of militancy - a significant change in rhetoric. The army is now enlightened enough to understand the significance of peace with India, one highranking officer said. Everybody wants the Kashmir issue to be resolved. But any changes w ould need to be slow and be matched with concessions from India, cautioned Durrani and Chaudhry, the for mer air vice marsha l. It's a fallacy to imagine that foreign policy can be changed ov ernight, Chaudhry said. Can you wish away the problems with India? Can you wish away the problem of Kashmir? Sharif may also benefit from divisions between generals over t he contr oversial extension of the term of the chief of army staff, said analyst Ayesha Siddiqua, who has written extensively about t he Pa kista ni

The past five years had shown that while the military remained the most powerful force behind the scenes, it no longer wanted to take direct power, said retired Lieutenant General Talat Masood

military. Kayani has served two three-year terms, sowing dissent among some of those who had been in line to move up the ranks, she said. Kayani's term is up in November, and Sharif will at least nominally have to approve his replacement. He had signalled he would accept the mil itary's recommendation, she said. "I t seems like he's learned from his past mistakes," she said. "He might use the Kargil commission (of inquiry) as a political t ool to g et some space to negotiate wit h India ." Sharif had three hours of tal ks with Kay ani on Saturday. "T he army chief and Nawaz Sharif expressed their determination to fight terrorism," an English-language daily quoted a PML-N official as saying. "Mr Sharif also praised the army's role in strengthening democracy and provi di ng securit y during the election." The past five years had shown that whi le the military rem ained the mo st powerful force behind the scenes, i t no l onger wanted to take direct power, sai d retired Lieutenant General Talat Masood. Musha rraf, the last military dictator, was in detention. Generals had been hauled u p before Pak ista n's feisty courts and accused of vote-rigging, cor ruption and extrajudicial killings. " The army d oes n ot ha v e t he monopoly on power it once did," Masood s aid. "T he p erf orm anc e of t he l ast government was pat hetic, but the army d id n' t st ep i n - t he jud ic iary di d. "

Economic Affairs | www.economicaffairs.info

36

AGRICULTURE

June 2013

Pakistan needs to draw from lessons Nepals crop insurance


Pakistan can tackle climate change vagaries with insurance cover
Saleem Shaikh
Farmer Sa rsw at i Bhetwal in Nepals remote scenic mountain valley had all blessings in the first year of her cr op insu rance . She survived the freak frost in January t hi s year that ruined her standing potato crop, just twothree weeks before harvest. Had my crop been not insured, I would have s uffered recoverable fi nancia l losses, plunging me i nto a po ss i bl e deb t tr a p a n d l eaving me unable to prepare for the next crop, said Bhetwal, the 47-year-farmer in Lamdihe scenic mountain village of Duli khel town, about 30 k m (18.64 miles) southeast of Kathmandu, Nepals capital. C ro p in suranc e i s p ur ch as ed b y agricult ural produce rs, i ncluding farmers, ranchers and ot hers t o protect the mselves against either the crop losses due to natural di sasters, such as frost, hail, drought, and floods, or the loss of revenue due to declines i n the prices of agricul tural comm odi ties. The t wo general categories of crop insurance are called crop-yield insurance and crop-revenue insurance. Sarswati Bhetwal says in November last y ear she had culti vated pot ato on ha lf a hectare that cost her NRs. 15,000 ($176.5) and insured it with a private insurance company. 1,125 ($13.25) of m y investment in the crop and equal amount was paid by the government as a premi um. And, after crop damage assessments, the insurance company pa id t o me 80 percent of th e damages or NRs. 12,000 ($141) within a month of th e d ama ge, she tol d th is scri be. This payment from the insurance cover means a lot for Ms. Bhetwal. In Nepal, potato crop is sown in October and harvested by end of January. This amount [paid by an insurance firm against the crop losses] enabled me to sow garlic and cauliflower crop in February. I hope profit from these vegetables after their harvest in May will be financially helpful, she s aid with delight obv ious on her face. Around 35 to 40 farmers have suffered economic losses due to potato crop damages caused by the fr ost in mid-Janua ry when temperature dived below -2 all of sudden that lasted for over 10 days. Sarswati Bhetwal says she

Economic Affairs | www.economicaffairs.info

June 2013

AGRICULTURE

37

Arjun B ahadur, a pota to far mer in L amdi he sceni c mo unta in village a t Dhulikhel tow n about 3 0 km ( 18.64 miles) southeast of K athmandu, Nepals c apital city - checks damag ed po tato plant stand ing in his potato field devastated by the r ecent fro st

never witnessed frost in her life as devastating as this years. The frost obliterated pota to crops on hundr eds of hectares in her and several other adjoining villages. Local government agriculture officials Dhuli khel town say while they are yet to estimate the damages, initial situation pains a horrible situation of damages to potato and other winter vegetable crops. Arjun Bahadur, another potato far mer in the village, suffered esti mated NRs. 14, 35,000 ($1,588) worth financial losses as he lost his entire potato crop on 4 .5 hectares to the freak frost. Left high and dry, the tenant farmer now plans to obtain m oney from a priv ate m oneylender against hi s two-room house a s col lateral. Yet , he will have to pay higher rate of interest, possibly over 20 percent per annum. I really need to borrow to pay rent to farmland owner, buy essential farm inputs for next vegetable crops to recover the financial losses if, God forbid, there is no unfavourable weather condit ions , Bahadur sa id whi le uprooting damaged potato plants with sickle. Local farmers say Sarswati Bhetwals crop insurance experience has brought good lessons for them. Now, we hav e learnt enough that by dint of crop insurance we farmers can survive crop failures caused due to bad, unpredictable weather conditions, 40-year-old Bahadur said. He confessing that downpla ying importance of crop i nsurance ha s cos t t hem a l ot. Meanwhil e, Sarswati Bhetwalsays are farmers come to her to get know about more details, procedures a nd benefits as well as help in getting their crops insured to avoid

financial losses. Ive noti ced i nterest among farmers about crop insurance is r ising , she says. Bed Mani Dahal, environmental scientist at the Kathmandu University said during last few years the weather has become increasingly erratic, unpredictable and unpromising for mountain farmers, whose crops have become hig hly vulne rable to rainfall variability and rap i d ly ch an gi ng cl i mat e pa tt ern s. The crop insurance, however, can help farmers a voi d financi al loss es due to erratic weather patterns and keep the farming activity continue unaffected, whi ch can otherwise

disrupt food supply in the local market and spiral up the grain and vegetable prices, the environmental scientist sai d. Nand Kishor Agrawal, coordinator of the Nor way-funded Hi malayan Climate Change Adaptation Programme (HICAP) launched by the Intern ationa l Centr e for Integrated Mount ain De vel opment (I CI MO D) sai d weather scientists i n Nepals meteorological department may have predicted the cold snap, but t hat information was not convey ed to farmers. Understandingly, there is an a pparent lack of communication or an i nteraction gap between the governments weather scientists, extension department off ici als an d the farmers, which must be br idg ed to help farmers mitigate damage from extreme events with i mproved, timely weather forecasts, Agrawal said. In Pakistan, farmers are also gripped by similar conditions due to changing weather patters, scarce, erratic rainfalls and need such protective measures to help the m stave off impacts fr eak weather events in shape of na tur al di sast ers on t heir livel ih oods. Insurance, Pakistani government officials say, may be one way of coping wit h the enormous social, economic consequences of such extreme weather events. Zafar I qba l Qadir, for mer cha irman of the National Disaster Management Authority (NDMA), in Islamabad, sa id the NDMA has already hammered out a pla n to introduce national di saster risk insurance. It aims to eventually make it mandatory for Pakistans entire population to be insured against disaster risks, he added.

A wo ma n farmer pulls a plastic w ater pipe to sup ply wa ter to vegeta ble f armland in Pa nityanki p icturesque mountain vi llag e of K avrepal anchowk district, some 35 kms from Ka thmandu, N epals c api ta l ci ty Economic Affairs | www.economicaffairs.info

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AGRICULTURE

June 2013
insurance effort is how the poor will be able to afford premiums for insur ance cover. "T his matter ha s also com e under discussion and it has been now decided that premiums for those who can't afford will be subsidized and full premium for t hose living below the poverty line will be pa id by the government," Qadir said. Independent climate change and disaster experts said that although this is a welcome mov e, it remains to be seen whether t he NDMA would be able to effectively implement its plan. In the past, we have seen the launching of good initiatives with much fanfare. But these then remain on paper only. What is seriously needed is a mechanism that allows for disaster mitigat ion and adapt ation proj ects to be implemented in a true spirit, sa id Sattar Zangejo, a di saster management expert who has worked with Oxfam International, the U.N. Development Programme, Australian AID and Plan International. Across Pakistan, t he devastating 2010 deluge caused agriculture and infrastructure damage worth over $84 million, while floods i n 2011 cos t the na tio nal exch equ er an estimated $63 million, according to the federal finance ministry. Economic damages from 2012 years torrential monsoon rain during the first three weeks of September were estimated at $35 million, according to the NDMA. -

A farmer covers h is v egetable crop to avo id fr ost attack in Lam dihe scenic mo untain villa ge at Dhul ikhel to wn - abo ut 30 km (18.64 m iles) southeast of K athma ndu, Nepa ls ca pital

A pilot phase of the programme, to be implemented starting any time this year with funding support from t he World Bank, will extend free or subsidi zed insurance to those judg ed the count rys poo rest and mo st vulnerable. Eventually, officials hope farmers, livestock producers and others will be included as well, said Ahmad Raza Sarwar, directorgeneral of the National Insti tute of Disaster Management in Islamabad. Sarwar told this scribe over phone that the size of the i nsurance premiums each person or fa mily might pa y i s sti ll being negot iated with insurance fi rms, as is the amount of coverage. Some details of the insurance have been worked out and more are sti ll being worked out among the disaster management authority, the Ministry of Climate Change, the Finance Mi ni stry, and the Federal Economic Affa irs Division, but authorities are confident it will soo n be com pleted, sa id offici als i n the Pak ist ani cl imate cha ng e min ist ry sa y.

The insurance, developed after extensive consul tations wi th i nsurance com panies, fina ncial regula tors, banks, busi nesses and i nternational fina nci al institutions, aims to cover the risks posed by the climate-induced na tural disasters tha t are becomi ng more frequent in the country. Meanwhile, Zafar Iqbal Qadir said the World Bank will set aside around five percent of th e developm ent funds t he Bank ha s comm itted for Pakistan for the nationw ide insurance project. According to the World Banks Country Partnership Strategy (CPS) document, the Bank ha s committed $ 5 billion to Pakistan for 30 uplift projects over several years. The pro gramm e, which t he disaster management author ity say s would be the big gest insurance venture of its k ind in the world, aims to eventually cover Pakistans 180 million people for the loss of human lives, livelihoods, shelter and livestock. But one early question raised about the

Crop insurance is purchased by agricultural producers, including farmers, ranchers and others to protect themselves against either the crop losses due to natural disasters, such as frost, hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities
Economic Affairs | www.economicaffairs.info

Sarswati Bhetwal, a 47-year- farmer shows a potato- fill ed bucket in Lamdih e scenic mountain v ill age Dhulikhel town - about 30 km (18.64 miles) southeast of Kathmandu, Nepals capital city - standing in her potato field destroyed b y the recent frost