Higher prices, lower wages

SUGAR prices in Pakistan are very high now because of high world prices, says Jehangir Tareen, minister for industries, production and special initiatives. Instead of coming up with some special initiatives to solve this problem, he is singing the same old song of high world prices. And to add to that, a foreign newsagency report says that London sugar prices are touching the highest in 15 years. We are paying high prices for a number of imported items including oil for some time now, with its multiplier effect on prices as a whole.

The minister also says the sugar mills paid Rs 40 for 40 kilos of sugar cane last year, while this year they had to pay Rs 70. Prices and wages should go together if the consumers are not to suffer excessively, particularly in a country where 30 per cent of the people live in extreme poverty. But the two are a world apart in Pakistan. In fact, as the world prices of essential goods rise and hit the domestic industry and hurt exports, the economy slides down, wages come down further and unemployment increases.

In addition, between the price of such goods being in dollars and the tax paid on their imports in rupees, there is a vast difference for the consumer because of the extent of devaluation in Pakistan which makes the dollar cost Rs 60 while in India it costs Rs 44.1 after it had risen in a year to that rate from Rs 43.7. So the Indians get the same imported goods 35 per cent cheaper and the government there has greater scope for taxation if it wants to tax any essential import.

Now that Pakistan plans to import 800,000 tonnes of sugar it has come up with a 15 per cent sales tax on sugar, which is delaying the customs clearance for the initial 50,000 tonnes. What the vastly different exchange rates of the rupee mean is that the higher world prices of sugar will make that commodity more costly in Pakistan and the higher imported cost in rupees will make the taxes heavier even if the imports are exempt from the basic import duty.

When the world price of sugar is high, it is readily passed on to the consumers. But what the government does not realize is that the high world prices of essential goods enhanced by the heavy devaluation of the rupee and the local low wages, which is less than one-fiftieth of the US wages, cannot go together. So the poor consumer does without such essential goods or buys the adulterated substitutes and falls sick following malnutrition and when he seeks treatment, he eventually finds that medicines too are adulterated or of lower potency than the ones he had paid for.

Mr Tareen says the mill owners paid last year Rs 40 for 40 kilos of sugar cane, while this year they had paid Rs 70. But the fact is not all the sugar mills paid Rs 40. Many in Sindh paid far more. While the cane prices are going up, its sucrose content is going down. Those who go to the utility stores in Islamabad, particularly the women, complain that the sugar sold there has a very low sucrose content and that they have to suffer insults at the hands of the utility store employees as well as content with the grossly substandard sugar.

Mr Tareen says that the import of sugar by land route between the two Punjabs will cut the transportation costs, while its import by sea via Karachi will make it costly. The Indian sugar dealers also agree with that view. But the Indian sugar exporters complain that not enough railway wagons are available and the railway system as a whole is not equipped for large-scale transportation of sugar or other goods from India.

But so far, trade in essential goods with India like vegetables and live animals for meat has benefited central Punjab and other areas in the province where such goods reach in plenty. Now far more trucks will have to be used for the import of sugar instead of depending only on the meager railway facilities.

Will the situation get any better for supplies from India after the Khokhrapar-Munabao railway line comes into operation by the end of the month? But Rajisthan in the south does not produce as many and as much goods as the Indian Punjab does. We will know the situation better only after the long abandoned railway line becomes functional again.

Pakistan is clearly a country where growers and producers prevail and of the middlemen who make far too much money. They can raise sugar cane prices from Rs 40 to Rs 70 for 40 kilos or the manufacturers raise their prices and increase their profits but the workers can’t demand cheaper essential goods or higher wages, so the rich get richer and their political clout increases, while the poor become poorer and suffer gross malnutrition and other pangs of poverty.

What is striking is that there are too many contradictions in our economic policies or their objectives, which breeds an air of uncertainty or unpredictability, particularly in the fiscal sphere. Since the tax revenue collection is far short of the expanding official needs and what the nation of 160 million people requires, the CBR tries to strike hard in new areas for larger resources. And the businessmen are not ready to spare more revenues easily and fight back as they are large in number and tend to join hands readily when it comes to resisting additional taxation.

Mr Salman Shah, advisor to the prime minister for finance, says the listless Monopoly Control Authority marked for its excessive passivity will function as a competition-promoting agency. In fact that was the ultimate aim of the authority when it was set up. By blocking monopolies or monopolistic tendencies in the economic sector it was to promote competition between various industries and trading groups. That did not come to pass as the monopolists or those with such tendencies were too powerful or influential.

It was also said that in the early stages of a growing economy some liberties would have to be provided to the investors to encourage more of them to come forward. Hence, the authority continues to exist like many other official institutions barking against the monopolists but not biting. However, it recently fined 18 cement companies for overpricing their products. We should have seen more of such penal action earlier and not merely holding out empty threats to them. When the culprits knew the government will not take adequate action against their monopolistic practices, they indulged in more of that merrily.

What we have is a free market but without a fair competition, which is the essence of the free market. We have a free market along with open or hidden cartels. And the free market is getting larger and larger with hapless consumers getting a raw deal.

The consumers are not organized or united and do not enjoy the protection or patronage of the government except in words. The Pakistan Medical Association says that over half the pharmaceutical products in Pakistan are below the potency claimed by the manufacturers. They include some of the drugs produced by Pakistani companies under franchise from foreign pharmaceutical firms. When diseases arising out of drinking impure water and adulterated food are treated with drugs having lower potency, the diseases get worse and do not get cured.

Normally, such practices prevail when medicines are in short supply but we have such adverse conditions even when the supplies are plentiful. This has become the norm in a country which is trying to export more and more of pharmaceutical products which can backfire.

The free market in Pakistan is expanding following the official policy of deregulation, liberalization and privatization. The pace of privatization is gaining momentum in a big way and liberalization and deregulation is also rapidly advancing. This is a matter of faith that the government has reposed in the private sector and now the latter should respect it and honour its commitments faithfully in return for the large benefits they are getting under these policies.

It was said earlier that the people had little to choose between the rapacious private sector and the inefficient and corrupt public sector. Now that the privatization is making rapid gains the rapacity of the private sector should be held in check in the business and industry and the officials should be better regulators. The free economy without effective regulation can be like a jungle.

We do not want such a situation to prevail as more and more of the large public sector units get privatized and go into the hands of businessmen and industrialists with vague promises of a better deal for the people at large. The KSE 100 index is touching the 11,000 mark setting yet another record. The rich who hold the shares, more so the members of the KSE, are far richer for that. The ordinary man is not any better for that except what he gains indirectly through the mutual funds, which hold some of these shares.

What is in for the common man in this ‘hoop-la’ is what he wants to know. He may be told he will gain eventually through the trickle-down process. In the past too, little of the trickle-down took place, in spite of large loans from the World Bank and Asian Development Bank at concessional rates, but hardly anything like that took place.

Will the trickle-down be any better now through the orgy of very high prices on the KSE? Now the government has reached an agreement with international lenders to critically evaluate the role of regulatory authorities through a detailed impact assessment exercise. Their performance is to be improved and they are to create a real competitive environment in the country.

The government has also agreed to issue a policy statement about what it wants to achieve from a regulatory environment in the local market. The World Bank and the Asian Development Bank have taken note of the fact that quite often when a secretary of a particular ministry retires he is made chairman of a regulatory body set up by the ministry making the regulatory body itself utterly ineffective.

The bureaucrats do not give up their hold easily on any lucrative assignments, however contrary may be their domination to the functioning of such regulatory bodies.

Silver lining in Dhaka clouds

IT was a sea of humanity. Tens of thousands of Bangladeshis converged on Dhaka early this week after trudging along for four days from different parts of the country.

This was their long march, like the one in China that had led its people to throw out the Chiang Kai-shek government to bring in communist rule. Here, in Bangladesh, people wanted change. They wanted the Khaleda Zia-Jamiat-i-Islami coalition to quit and pave the way for fresh and fair election.

I saw on their face the same glow as I had found in the wake of the birth of Bangladesh some 35 years ago. Their slogan then was “Jai Bangla.” This time it was liberation, the return of democratic and pluralistic society — the country’s ethos. There were signs of strain and scepticism but pride was writ large on everybody’s face. I had no doubt that they would find a solution to repair their fractured society.

At the end of the march itself, I saw the beginnings of a rapprochement of sorts. Opposition leader Sheikh Hasina announced to end the boycott of parliament. She promised to place before the house the opposition demands of a new chief election commissioner, the release of detainees and the end of draconian, suppressive laws. Hasina’s gesture was endearing.

There was a wave of relief in the country because it had been living for decades in the shadow of conflict between the two ladies — Khaleda Zia leading the Bangladesh Nationalist Party (BNP) and Sheikh Hasina heading the Awami League. Their differences might be ideological but their hostility was destructive. It had cost the nation dearly.

So much was dependent on the settlement between the two that Bangladesh, although averaging an annual growth rate of six per cent, has little future without orderly politics. Already a bomb blast here or an extra-judicial killing there has become an almost daily occurrence. Terrorism was an integral part of the country’s scene. According to a white paper published by a civic group called the committee to eliminate the criminals and collaborators of 1971, over 10,000 incidents of violations of human rights of the minorities — both religious and ethnic — occurred in Bangladesh during the four-year Khaleda Zia regime. The police did not record even one tenth of them. The editor of the white paper said he was able to record only one-tenth of the incidents as many people did not come forward to record their complaint fearing further repression. What shook the nation were some 500 bomb explosions on a single day, August 17, not only in Dhaka and Chittagong but even in the remotest corner of Bangladesh.

People suddenly woke up from their deep slumber. For the first time they felt that their country was in the midst of terrorism and that they had been indifferent to the activities of criminals and terrorists. The government puts the blame on “a neighbouring nation.” Khaleda Zia says sarcastically: “If the explosives came from across the border, the government must take up the issue with that country.” The real danger is that a substantial part of the bureaucracy and police are mixed up with those who indulge in violence. Belatedly, the government has begun action against terrorists but the real culprits still enjoy the support of extremists in the BNP and the Jamiat.

Terrorists are instruments of the two parties and they cannot afford to blunt them. Accordingly, anti-Indian propaganda has got a new edge. The government imagines it can divert the people’s anger for against the failure to deal with terrorism to New Delhi. True, anti-India feelings are more palpable than before. But this is because the ruling BNP has made New Delhi a whipping boy. The coalition believes that the anti-India sentiment will give the two parties more votes.

Elections are only 10 months away. New Delhi is looking at the developments helplessly. Woefully, some in the government of India have put their faith in Khaleda Zia’s son Tariq — the Sanjay Gandhi of Bangladesh politics. Little do the pro-Tariq elements realize that he was burning the midnight oil for getting the BNP back.

Left to Khaleda Zia, she would like Bangladesh to be an independent East Pakistan. But the liberation spirit pervades too strongly in Bangladesh to make this possible. However, her alliance with the Jamiat, a fundamentalist political formation, gives the BNP a veneer of Islam which has some pull. Still, the liberal streak in a Bangladeshi Muslim has always pulled him back from fanaticism. Even when East Bengal was part of Pakistan before December 1971, it seldom got swept off its feet because of religious frenzy. This temperament was the real cause of Dhaka’s distance from West Pakistan and ultimately responsible for the parting of ways.

I asked a top BNP minister why his government was against India. “You are so pro-Awami League that you do not allow us to think differently,” was his reply. Whether this is true or not is a matter of opinion but Dhaka makes no secret of its preference for Islamabad over New Delhi. Khaleda Zia is undertaking bilateral trips to Pakistan and India in March, visiting Islamabad first, to show where her heart is.

No doubt, the Jamiat has polluted the atmosphere and has made Bangladesh more anti-India than before. But what seems to have stalled the Jamiat’s onward march is Washington’s fiat to change the portfolio of a Jamiat minister who was inducting his cadres in the Bangladesh countryside. Khaleda Zia did not even inform the Jamiat before changing the portfolio of the minister. It shows the extent of influence America wields in Bangladesh. Still she needs the Jamiat for the next polls — for the crucial eight percent votes it wields.

Which one of the two ladies will win at the polls is difficult to say at this time. After the long march, the people’s tilt towards the Awami League alliance is becoming visible. Yet, there is no doubt that dark clouds are again gathering in the political horizon of Bangladesh. There is terrorism, corruption and bigotry. The atmosphere is thickening. The only ray of hope is ethical journalism which, though limited, is beginning to make its mark.

One example of it is that of The Daily Star, which celebrated its 15th anniversary a few days ago. It has led the campaign against fanaticism and parochialism. In its anniversary issue it said on its front page: “After a long, dark age of autocracy, Bangladesh had just emerged into a democratic environ. Arguably, the most important general elections in the history of Bangladesh was about to take place. The institutions that work for democracy and the economy were in ramshackle conditions. Nothing could be a better time for a free, objective and independent newspaper to look at events and processes with a new air.”

The writer is a leading columnist based in New Delhi.

Shopping for health care

PRESIDENT Bush spoke eloquently last week about the need for health care reform, but his concrete proposals are not unlike his plan for Social Security last year — modest steps that affect individuals but don’t address the broader problem.

Bush wants to help individuals shop for their own insurance and pay for more of their own medical expenses with cash from individual health savings accounts. The idea is that by giving patients more skin in the game, they’ll become better consumers and drive down prices in the process.

In theory, it’s not a bad idea, but it would be foolish to pretend that any of this will come close to addressing the profound structural problems afflicting the nation’s health care system.

It’s increasingly clear that the health care marketplace, which represents one-sixth of the US economy, is not working. Nearly 46 million Americans live without health insurance, a fact that has vast social and financial implications. Those with insurance have seen their premiums rise more than 60 per cent over the last five years, and they can expect a similar increase by early in the next decade.

And across the country, rising health costs are eating away at money that cities and states might otherwise have spent on education, public works and social programmes.

The recent turmoil at companies such as General Motors is also substantially about their inability to afford health care for their current and former employees. If grumblings about health costs from Fortune 500 companies and their shareholders aren’t being heeded, one wonders just what would force Washington to take the health care problem seriously?

Last week, Bush said that “for all Americans, we must confront the rising cost of care ... and help people afford the insurance coverage they need.” But what he offered as a solution — mostly sweeteners for health savings accounts — would help only a small share of the population.

Health savings accounts are mainly attractive to healthy people who can afford to pay high deductibles and don’t suffer from expensive chronic conditions. That’s because the accounts are like IRAs for health care: They allow people to save money tax free in a permanent savings account as long as they agree to sign up for a bare-bones health plan with a high yearly deductible.

The reason they aren’t attractive to many people currently going without insurance is that two-thirds of them live at or near the poverty line. Even the president’s idea of giving vouchers of $3,000 to poor families is no silver bullet.

—Los Angeles Times

Family planning

IT is almost 12 years since a global commitment to make family planning services a reality across the world by 2015 was made at an international conference on population in Cairo.

With less than 10 years to go, world leaders are further away than ever from delivering that pledge. The nation most responsible for this reverse is the US, through its policy of refusing to provide aid to overseas organisations that provide abortion services or counselling.

The gag rule, as it is known, was introduced by the Reagan administration in 1984, rescinded by Bill Clinton in his first act as president in 1993, but reimposed by George Bush on his first day in office in 2001.

Since then, scores of clinics, many primarily providing contraception, have had to close. To its credit, Britain’s Department for International Development signalled its disapproval of the US moves by upping its support for the International Planned Parenthood Federation, a British charity providing an umbrella for national autonomous family planning associations in 180 countries.

Now the DfID went one step further, launching a separate fund aimed at replacing the lost US dollars and increasing safe abortion services. It was prompted by an IPPF report released on Monday which estimated 70,000 women worldwide die every year by resorting to backstreet abortions. Hundreds of thousands of others are left with debilitating and lifelong injuries. Restricting access does not make it go away. Time for other EU member states to pitch in.

—The Guardian, London