Need for a policy re-think

THE landmark decision of the Supreme Court annulling the privatisation of Pakistan Steel Mills provides the government much-needed pause to re-think its privatisation policy. The apex court has not questioned the concept of privatisation. It has, however, pointed out the perversion of the process by corruption and also found the decision to privatise the PSM lacking a national consensus. Rightly, therefore, it has asked the government to convene the Council of Common Interest (CCI) within six months to ascertain the views of the nation on the issue. The corruption part of the process needs to be looked into immediately by the government so that the guilty are unmasked and given exemplary punishment. The Supreme Court’s directive to the government to take the case to the CCI, however, requires threadbare attention and all its ramifications need to be brought to the fore for all to see. The CCI is a constitutional body and is responsible for formulating and regulating policies in relation to all undertakings, projects and schemes of such institutions, establishments, bodies and corporations, industries, projects and undertakings owned wholly or partially by the federation or by a corporation set up by it. What it means is that no government has the right to sell or privatise anything that is owned by the federation on its own before obtaining the opinion of the CCI which is assumed to reflect the opinion of the nation.

It is obvious that this constitutional clause had been included in the basic document by its authors to safeguard national interests. But what national interests do get affected either way by the sale of the PSM? To start with, it is a strategic asset of the nation set up wholly by the taxpayers’ money. Secondly, even if it is appropriate to hand it over to a private buyer, would it be advisable to sell 75 per cent of its share to a consortium of three companies, two of which are foreign? This aspect needs to be examined in the context of the recent refusal by the US, the champion of free market economy, to hand over the management of some of its ports to a Dubai-based company. One also recalls how perturbed Washington was when China expressed its interest in buying the US oil and gas giant Unocal. Privatisation yields beneficial results if undertaken within the broad national socio-economic parameters.

If at all it is necessary to privatise entities like the PSM, the OGDCL, the PSO, the SSGC and the SNGC, all wholly state-owned, one could always go to the stock market and divest their shares in reasonable parcels over a period of time or sell them to local private consortia if they can demonstrate the ability to manage them. Let foreign investment come into our export sector, but let us be careful to the point of being accused of being overly nationalistic when foreigners come in to buy our major financial assets like banks and basic utilities like power units. There are many arguments one can give in defence of this line of thinking but suffice it is to say here that let us not get easily swayed by the catchy phrase ‘it is not the business of the government to be doing business’. Just imagine what the government would have done to cope with the sugar and pulses crises if there were no utility stores in the country.

Education: lopsided emphasis

THE Higher Education Commission might be serious about its plan to increase the number of doctoral graduates who have earned their degrees in Pakistan to 1,500 a year. But how can it hope to achieve this and other ambitious goals when the foundations of education are so weak in the country? This year’s Pakistan Economic Survey admits that at 2.9 per cent, Pakistan has one of the lowest enrolment rates in higher education. What it should have also made clear is that the school drop-out rate is considered to be one of the highest in the world, and not just in the region. Some time ago, Education Minister Javed Ashraf Qazi put the figure at 45 per cent (the Survey says it is 39), but according to independent estimates, it is closer to 50 per cent. With these appalling figures, it is worrisome that the approach to improving access to education at all levels is not even-handed. Investing heavily in the higher education sector, without taking adequate promotional measures at the lower levels, will ultimately bear lopsided results, and only a handful of students (concentrated in the cities) will benefit.

These factors should have been kept in mind while setting goals for higher education. It is in the rural areas, where the bulk of the population resides, that schooling is at its worst. Besides the phenomenon of ghost schools in the rural hinterland, the problems of chronic poverty, crumbling infrastructure, long distances, scarcity of teachers and gender biases keep children from getting a decent education. The picture assumes alarming dimensions when it is considered that the under-18 age group constitutes more than 50 per cent of the total population of Pakistan. Without proper schooling and encouragement at the primary level, very few in this group will make it past the secondary school level, let alone advance to university. It is only by starting at the bottom that the government can hope to achieve the results it desires at the top level.

Dealing with human traffickers

IT IS difficult to understand why the police in Islamabad did not register a case against the truck drivers who were apprehended bringing 60 children from Sargodha to Islamabad last week for trafficking. The police were quick to show up when the truck met with an accident near Islamabad, and discovered the children, who were being brought to the federal capital to work as beggars. The interior ministry was alerted well in time and informed of the traffickers’ modus operandi: they regularly shift children from one city to another to avoid being caught. But there are no signs of any investigation, let alone prosecution of the offenders. This lends credence to the widely held belief that the police take bribes to protect the offenders. That Pakistan is a source as well as a transit area for human trafficking was once again highlighted early this month, this time in the US State Department’s report on human trafficking for 2006. The report may have spoken of the government’s effort to curb the menace by setting up an anti-trafficking unit in the interior ministry, but not enough is being done in terms of preventive and punitive action against those involved in this heinous practice. According to the interior minister last month, the government investigated 765 cases of trafficking, out of which 448 were filed for prosecution and 92 persons were convicted.

While the government may be committed to dealing with this problem, it needs to strengthen its efforts and consider changing the relevant laws that would expedite the trial of offenders in trafficking cases. It is imperative that harsher punishments be awarded to those involved in this ignoble crime. Much of the government’s focus is on checking international human trafficking and, as a result, little attention is paid to trafficking within the country. Both call for equal attention and exemplary punishment.

National security redefined

IN an earlier article on the subject of national security, I suggested that we must implement a comprehensive national security policy taking into account its military, economic, diplomatic and internal dimensions in an optimum mix, rather than focusing exclusively on the military dimension as has been our wont during most of our history.

The purpose of this article is to assess in the light of the information contained in the budget for 2006-07 and the Pakistan Economic Survey 2005-06 whether we are practising a comprehensive concept of national security or whether we are still executing our national security policy mostly in military terms.

Let us see what the Pakistan Economic Survey 2005-06 tells us about our national security policy in the past. We can then examine the implications of the budget for the fiscal year 2006-07 for the future of our national security.

A careful study of the Pakistan Economic Survey 2005-06 leaves one in no doubt that historically speaking our policymakers, whether under military or civilian governments, have over-emphasised the military dimension of national security to the neglect of the economic dimension, particularly human resource development which provides the foundation for the process of sustainable economic development.

We have consistently overspent on the military under the false assumption that this would strengthen national security while the economic development sector was denied the resources necessary for a sustainable high rate of economic growth. Consequently, we have performed far below our potential in the economic field. It is noteworthy that whereas the per capita incomes of Pakistan and South Korea were more or less the same in the early sixties, the latter has joined the ranks of developed countries with a per capita income of over $16,000 as against $847 for Pakistan.

Further, despite the propaganda campaign launched by the government, there has not been any marked improvement in the management of the economy under it compared with the performance of preceding civilian governments. This is borne out by the fact that the average per annum GDP growth rate during the period 1999 — 2006 under the present government was 5.2 per cent, (despite the favourable external circumstances in the aftermath of 9/11) as against the rate of 4.6 per cent achieved during the 1990s under civilian governments, notwithstanding the economic sanctions imposed on Pakistan in October 1990 in May 1998.

The marginal improvement in the GDP growth rate during the period 1999-2006 was mainly due to exogenous factors including the lifting of economic sanctions, massive inflows of foreign economic assistance and record levels of remittances by Pakistanis abroad after the U-turn in our pro-Taliban policy and our entry into the international coalition against terrorism rather than any significant improvement in the management of the economy.

Admittedly the economy has recorded higher growth rates during 2005-06 and the preceding two years but at the expense of serious internal and external imbalances in the form of a high current account and budgetary deficits and a high rate of inflation. But, unfortunately, our economic fundamentals remain weak as seen in our low national saving and investment rates (16.4 per cent and 20.0 per cent of GDP respectively in 2005-06). It must be underscored that national saving and investment rates are the key determinants of economic growth. In comparison, India and the fast growing economies of East Asia save and invest about 30 per cent or more of their GDP annually.

Consequently, our GDP growth rate of 8.6 per cent in 2004-05 declined to 6.6 per cent in 2005-06 with a trade deficit of about $11 billion and a high inflation rate. By way of comparison, India achieved a GDP growth rate of 7.7 per cent with an inflation rate of 4.2 per cent during 2005.( Interestingly, the latest issue of the Pakistan Economic Survey, while giving the economic and social indicators, conveniently omits mentioning the figures for 1991-92 when Pakistan under a civilian government achieved a GDP growth rate of 7.7 per cent.)

The litmus test of economic development of a country lies in the improvement in the quality of the people who inhabit it. It is in this sphere that our most serious failure lies and for which both the military and civilian governments bear responsibility. Our expenditure on education was only 0.8 per cent of GDP during the 1980s but rose to 2.3 per cent during 1990s. Following the military takeover, it declined to 1.6 per cent of the GDP in 2000-01, and thereafter gradually, increased to 2.1 per cent of the GDP in 2004-05. India, on the other hand, has been consistently spending more than four per cent on education. The situation is equally bad in the health sector where the expenditure as percentage of GDP declined from 0.7 per cent in 1990s, to 0.5 per cent in 2005-06.

The relatively low allocation of resources to human resource development in Pakistan, both under military and civilian governments, has been accompanied by an inexorable increase in defence expenditure in absolute terms.

The defence expenditure increased from Rs143 billion in 1998-99 to Rs241 billion in 2005-06. In fact, the defence expenditure in 2005-06 would be closer to Rs280 billion if one were to add military pensions to it as was done before the military takeover of October 1999.

Let us now see whether the budget for 2006-07 would change the situation for the better.

From the point of view of national security, a positive feature of the 2006-07 budget is the welcome jump in the Public Sector Development Programme to Rs385 billion (excluding Rs.50 billion for earthquake reconstruction activities) as against Rs. 313 billion allocated for this purpose in the revised budgetary estimates for 2005-06. However, it remains to be seen whether the actual development expenditure during the next fiscal year will meet the target or fall short of it. The past experience in this regard generally has not been encouraging.

The increase in the interest rates on savings should help raise the national savings rate to some extent. However, even the new higher interest rates do not adequately reflect the high scarcity value of the capital in our economy, especially if one takes into account the current high rate of inflation. Our national savings rate, because of this reason and because of government encouragement of to ostentatious expenditure both in the public and private sectors is likely to remain far below that of India and the fast-growing economies of East Asia.

Given the low level of the savings rate, which will have a restraining effect on the national investment rate, it is doubtful that the economy would reach the GDP growth rate target of seven per cent set for 2006-07.

The latest budget provides for only a marginal increase in the allocation of resources to education and health. The national expenditure on education and health as percentages of the GDP, therefore, is likely to remain at very low levels as in the past.

On the other hand, the defence budget has been increased to Rs250 billion, which in actual fact, is likely to be over Rs320 billion during 2006-07 if one adds the military pensions and takes into account the tendency of the actual defence expenditure to exceed the amount allocated in the budgetary estimates. This shows that our leadership and policymakers continue to operate on the basis of a uni-dimensional interpretation of the concept of national security focusing mostly on its military aspect.

Even more disturbing from the point of view of national security is the tendency exhibited by the present leadership to resort to the use of force in dealing with political issues that must be resolved first and foremost through political means. The way the government has handled the situation in Waziristan and some areas of Balochistan merely shows that our leaders have not drawn the right lessons from our own national history.

The direct involvement of armed forces in handling such issues will not only vitiate the political atmosphere in the country and aggravate the feeling of provincial disharmony but also result in the loss of prestige and respect of the armed forces in the eyes of the people at large.

To conclude, it appears from the latest developments that the mindset of our national security planners remains unchanged. They continue to focus mostly on the military dimension of national security. In the process the country has lagged far behind other nations in the race for economic development.

The domination of the military establishment has debilitated other institutions of state and encouraged authoritarianism and one-man rule. Repeated suspensions of the Constitution have robbed the document of its sanctity. We are, thus, on a slippery path which can only lead to a disaster in the long run.

The country cannot afford to go on in this manner. Our leaders and the intelligentsia must wake up to the dangers confronting our nation and understand that nobody is indispensable. The principle of supremacy of elected institutions must be firmly upheld. The armed forces must withdraw to the barracks and operate strictly in accordance with their constitutional role, eschewing any involvement in politics.

The economic system must be made more humane while efforts should be stepped up to accelerate economic development. Our diplomacy should aim at defusing tensions in external relations and minimising the risk of an armed conflict by formulating a coherent regional policy. Above all, we need to learn that national security can be safeguarded only by a cohesive nation of well-educated and healthy people upholding the Constitution, the law and the principle of merit in a democratic system, rather than by heaping advanced weaponry on an impoverished and malnourished nation under a authoritarian rule.

E-mail: javid_husain@yahoo.com