Control petroleum subsidy

ACCORDING to a report in this paper, Pakistan is burning through its annual budgeted petroleum subsidy at an alarming rate. The Rs140bn set aside in the budget as this year’s petroleum subsidy looks set to be swallowed in just a few months as June and July alone saw Rs72bn shelled out. Even as the price of oil drops in the international market, the issue of subsidised petroleum in Pakistan will not go away given the staggering heights to which a barrel of oil has risen. Broadly, there are two camps in the subsidy debate. The anti-subsidy camp is sceptical of subsidies because they distort the real price of products and obstruct the functioning of the ‘economic ideal’ — free markets. At a more practical level, the anti-subsidy camp points out that a subsidy has to be paid for, whether today or tomorrow. If the government borrows the money from the private sector, this reduces the capital available for investment elsewhere. In any case, the government eventually has to pay back what it borrows, which means it will have to increase its revenues, i.e. raise taxes. The other option for a government financing subsidies — the one used in the last financial year — is to essentially force the State Bank to print more money by borrowing from it, which amounts to taxing the public. More money chasing the same amount of goods in an economy fuels inflation reducing the purchasing power of the public. The subsidy camp, on the other hand, argues that it is the moral duty of the state to protect its poorest and ensure their survival. Moreover, higher petroleum prices have a dampening effect on growth today as petroleum is a key input of the economy.

That is the theoretical picture. Inevitably, reality is slightly more complicated. Most prominently, the petroleum pricing mechanism used here is opaque and often subsidises those in the petroleum supply chain rather than the public. Two examples suffice. One, the dealers’ commission and the oil marketing companies’ margins are tied to the price of oil even though the cost of physically supplying petroleum products is not dependent on how much those products cost. Two, the local refineries continue to charge a deemed duty on locally refined petroleum products seven years on from what was intended as a special, one-year concession to enable the refineries to upgrade for competition in a deregulated market. The commission, margins and duties were reduced at the beginning of this month, but they need to be further rationalised. Subsidies straddle the divide between politics and economics and of necessity have to be resolved with an eye on both. But even politicians and economists would agree that petroleum subsidies should not be used to subsidise those in the petroleum supply chain.

Justice and vendetta

GOING by what responsible members of the grand coalition have been telling us, President Pervez Musharraf’s impeachment could be followed by his trial on a wide variety of charges, including financial corruption, murder and sedition. Ayub, who along with Mirza abrogated the 1956 constitution, got away without being subjected to accountability because he resigned after the popular revolt. Yahya fell victim to the 1971 war and Bhutto to judicial murder. Ziaul Haq died in an air crash, and then followed a charade in which Benazir Bhutto on the one side and the Sharifs and their allies in the military on the other made a mockery of the rudimentary concepts of justice. The accountability process launched by the military government after the Oct 1999 takeover also lacked honesty, for it was used as an instrument of persecuting selectively those not on the regime’s right side. We know now how some leading politicians, including Aftab Sherpao, Rao Sikander and Faisal Saleh Hayat, were forgiven because they broke ranks with their party. The issue now assumes importance because if Musharraf is tried he will be the first president-general to stand in the dock.

In case Musharraf goes on trial, the judicial process should not only be transparent, it should be free from any trace of political vendetta. To repeat a cliché — justice should not only be done, it should be seen to be done. Against this principle we see leading PPP and PML-N members making statements that constitute downright propaganda rather than a serious attempt at accountability. In an interview with a British newspaper, Asif Ali Zardari accused the president of siphoning millions of dollars of American aid, while other leaders have come out with grave charges in a manner that appears they have already held Musharraf guilty. It is ironical that the author of the NRO is now being targeted by the beneficiaries of the infamous law. Not only did the NRO enable politicians of all hues to cleanse their often dirty hands within the country, it also facilitated the ‘whitening’ of millions of dollars stashed away in foreign banks. Would anyone blame the people for being cynical about the credentials of those who lead them whether in civvies or in khaki?

Environment is important

THE Sindh Environmental Protection Agency (Sepa) has come in for severe criticism on account of its poor performance. Solid waste management, treatment of industrial and domestic effluents, hospital waste management, marine pollution and vehicular emission, management of water and land resources, oil and gas exploration and the operation of power plants are areas in which Sepa is expected to play an effective regulatory role. This it has failed to do. A recent report attributes this failure to the lack of resources which is said to be impeding its functioning. It appears there is also a serious dearth of human resources in this regulatory authority along with financial and logistical constraints. Seventy per cent of the sanctioned posts of technical personnel and field officers in the agency have been lying vacant while those present cannot fulfil their duties due to poor working conditions and lack of resources.

Given these conditions, how can this agency perform its functions? Thus it has been reported that the failure to submit cases of environmental rules’ violations to the environmental protection tribunal on a satisfactory scale is due to failure on the part of the monitoring and prosecution sides. In the absence of technical and legal experts — only four directors and six assistant directors are available against the sanctioned 11 deputy directors’ and 20 assistant directors’ posts — the watchdog body cannot perform its functions which are of a specialised kind. Who is to blame? An official anonymously blamed the high-ups in the agency for their lack of perseverance and for not pressurising the Sindh Public Service Commission (SPSC) to speed up the recruitment process which is painfully slow.

Steps should be taken to expedite the process and hire the required professionals. Sepa needs experienced and technically qualified people. Even its head has traditionally been a non-professional since the body was set up in the 1980s. This is representative of the problem of hiring individuals based on their political clout rather than their qualifications and experience. It is a pity that environmental issues are not among the top priorities of the government. To some extent this problem can be remedied by making the appointments merit-based. After all, the state of the environment is basic to economic development, public health and the quality of the ecological elements that determine the future of our country.

An errant satrap?

IF there were any doubts in the minds of the new set of Islamabad policymakers, Prime Minister Yousuf Raza Gilani’s recent visit to Washington should have dispelled them. The Americans — not just the White House and those working in the government but also those who operate in the various think tanks — are worried about the direction in which Pakistan is headed. This is not a worry about an errant satrap who needs to be disciplined. The worry is about the impact on the United States of a Pakistan that has gone out of control.

A consensus on important issues seldom develops in the United States. The Americans are naturally argumentative but when it concerns matters affecting their security they quickly fall in line. The most recent example of this was the remarkable consensus that developed after the 9/11 terrorist attacks. In the initial phase of the American response to that event, President George W. Bush’s approval ratings went into the stratosphere, unmatched by any president in recent history.

The Americans wanted their government to act to achieve two ends: to punish the perpetrators of the attacks and to ensure that a similar assault on America never occurred again. Neither objective has been achieved and the reason why that has not happened is not attributed to the failure of public policy; the blame is being laid at Pakistan’s doorstep.

There are several parts of the case that is being built against Pakistan. The most important of these is the perceived failure on the part of Islamabad to get the extremists out of the tribal belt bordering on Afghanistan. These people are seen to be operating without any checks by the Pakistani state. Islamabad seems to have abandoned any serious attempt to enforce its writ in these areas. The US worry is not that such a development will hurt the security, perhaps even integrity, of the Pakistani state. What bothers those in policymaking and policy-influencing positions in Washington is that leaving the tribal areas alone is creating a dangerous situation for America’s operations in Afghanistan.

For two months in a row, America has lost more soldiers in Afghanistan than in Iraq. This is clearly unacceptable and Islamabad is being blamed for the sharp increase in violence. There is also the belief that if another terrorist attack is perpetrated against the United States, it will be planned and executed by Al Qaeda now operating out of the tribal areas. Obviously, this too troubles Washington.

Where is all this leading? I have been to several think tank meetings in the last few weeks. Some of these are engaged in developing position papers for the two candidates for the American presidency. In those position papers America’s Pakistan policy is a central issue. While there is agreement on what is considered to be the ‘fact’ of Pakistan’s responsibility for the worsening situation in Afghanistan, there is still some doubt as to why certain things are happening. Are the Pakistani authorities playing on both sides of the road? Is there so much incompetence in Islamabad that different actors are proceeding on their own, following their own narrow agendas?

The direction of the evolving American approach will depend on how these two questions are answered. If some of the acts unacceptable to the Americans and to the rest of the world are being perpetrated with the knowledge of those who run the Pakistani state, then there will be one kind of response. If it turns out that the problem is a case of system failure then the response will be of a different kind. In the first case, Pakistan will be punished in some way. In the latter, the Americans will begin to develop some ideas about the management of the Pakistani state. Since my own impression is that what is happening is the result of the confusion that prevails among those who govern, it might be useful to reflect on what kind of advice Islamabad will be given.

In spite of the promise made by President George W. Bush in his second inaugural address that his administration will work hard to bring democracy and liberty to all parts of the world — particularly to the world’s Muslim countries — he and his close associates have begun to have second thoughts. The exercise of democracy, wherever that has happened, has not produced encouraging results for the Bush government.

Elections brought Hamas to power in the Gaza Strip. It strengthened Hezbollah in Lebanon and in Pakistan it has weakened the authority of the state. Since extremists can’t be controlled by a weak state, it might not be in the American interest to direct the Muslim world towards fair elections, a fair press, a vibrant civil society and democracy in general. In fact, Washington may begin to support the rule of a strong man in countries in Pakistan’s situation. Given this change of heart, what should be the Pakistani stance?

Like a number of other modern economists I have also wrestled with the question: what is the most appropriate political system for bringing economic growth to backward societies? Having worked on China for a number of years and having watched the extraordinary economic progress made by the East Asian countries, I came to believe that limiting democracy until sustained growth was achieved was perhaps the right strategy to adopt.

It is for this reason that for a few years after General Pervez Musharraf assumed power in Pakistan, I thought that he would be able to repeat in his country what a number of strong leaders in East Asia had achieved in theirs. That did not happen. There had been a misreading of the history of East Asia by me and others who also thought that strong leadership delivers economic progress in the early phases of development.

That happened in those countries since their initial conditions were very different from those in Pakistan. The East Asians had much higher levels of human development than Pakistan has achieved even after 60 years of independence. Income and asset distribution in those countries was much more equitable than in Pakistan.

Limiting democracy in a situation such as Pakistan’s does not promote the development of political institutions that are needed not only for the evolution of democracy but also for economic progress. The East Asian approach won’t work for Pakistan. Therefore, even if the American pressure for going the democratic route eases for Pakistan, the country should not reverse its course.

Meltdown in the Arctic

ICE at the North Pole melted at an unprecedented rate last week, with leading scientists warning that the Arctic could be ice-free in summer by 2013. Satellite images show that ice caps started to disintegrate dramatically several days ago as storms over Alaska’s Beaufort Sea began sucking streams of warm air into the Arctic.

As a result, scientists say that the disappearance of sea ice at the North Pole could exceed last year’s record loss. More than a million square kilometres melted over the summer of 2007 as global warming tightened its grip on the Arctic. But such destruction could now be matched, or even topped, this year.

This startling loss of Arctic sea ice has major meteorological, environmental and ecological implications. The region acts like a giant refrigerator that has a strong effect on the northern hemisphere’s meteorology. Without its cooling influence, weather patterns will be badly disrupted.

At the same time, creatures such as polar bears and seals face major threats. Similarly, coastlines will no longer be insulated by ice from wave damage and will suffer erosion, as is already happening in Alaska.

Other environmental changes are likely to follow. Without sea ice to bolster them, land ice could topple into the ocean and raise global sea levels, threatening many low-lying areas.

What really unsettles scientists, however, is their inability to forecast precisely what is happening in the Arctic, the part of the world most vulnerable to the effects of global warming. “When we did the first climate change computer models, we thought the Arctic’s summer ice cover would last until around 2070,” said Professor Peter Wadhams of Cambridge University. “It is now clear we did not understand how thin the ice cap had already become — for Arctic ice cover has since been disappearing at ever increasing rates. Every few years we have to revise our estimates downwards. Now the most detailed computer models suggest the Arctic’s summer ice is going to last for only a few more years — and given what we have seen happen last week, I think they are probably correct.”

— The Guardian, London

OTHER VOICES - Sindhi Press

Impeachment of president

Kawish

THE political scene in the country is once again precarious. The controversy between the coalition partners, which started from the reinstatement of the judges, reached a climax with the decision of the impeachment of President Musharraf. After two days of talks, it was decided that all four provincial assemblies through resolutions would ask the president to take a vote of confidence from parliament, and after the impeachment the judges would be restored according to the Murree Declaration.

The presidential camp has started working on a counter strategy and is engaged in consultations with legal experts and political advisors. This conflict between the president and the coalition has raised ... questions. The president has decided to fight back rather than seek an honourable exit. Certain options are under consideration. Will this result in genuine democracy or will Article 58-2(b) be used, destroying the democratic process? Uncertainty prevails....

The ruling coalition has mentioned taking action for impeachment under Article 47 while the president is talking about using constitutional provisions. Both camps are talking about constitutional provisions, but will they really be used? The need of the hour is for the constitution to be implemented in letter and spirit. This sensitive situation requires both camps to take a clear path as uncertainty will be detrimental to the economy.

We would like to remind both parties to resolve the issue while keeping the national interest supreme rather than on the basis of personal enmity. The only solution lies in taking the constitutional and democratic path which will counter the adventurism of anti-democratic forces. Recently, these undemocratic forced were rejected by the masses. But they have gained support with the passage of time. The government has lost a golden chance. At this stage such forces would encourage the president to take actions which might pave the way for an undemocratic set-up....

President Musharraf has been talking about strengthening democracy which in practice means honouring the mandate of the people. Since people have given this mandate to the political leadership, it should be honoured.

...All matters should be resolved within the constitutional provisions. In case of impeachment it should ensured that all the members express their free will.... The presidency should also avoid any such action which does not justify the claims of Musharraf about strengthening democracy. — (Aug 11)