Pakistani capitalist still flouts the laws on minimum wage of the labour
By Adnan Adil
These are trying times for the Pakistan labour as hundreds of thousands of industrial labourers have lost jobs owing to severe energy crisis and hyperinflation of food prices for consecutive three years that have undermined the real wages. The labour laws are not being implemented and there is a practical ban on the trade union activity as labour leaders are being booked on criminal and terrorism charges for conducting union activities.
During the last three years, more than 500,000 labourers working in the manufacturing sector have become jobless with the closure of factories and mills owing to acute shortage of gas and electricity. The labour in the Industrialised regions of Punjab, including Lahore, Gujranwala, Faisalabad and Multan, are the hardest hit due to the suspension of gas supplies to the factories for three to four days per week during the winter season. This is happening at a time when food prices have skyrocketed by 50 to 100 percent and more than 80 percent of the country’s population living in poverty or below the poverty line is gasping for the survival.
Politicians are playing to the gallery by making politically correct statements and manipulating print and electronic media to present their humane image while the fact is their actions are strangulating the working class. Since 2008, the economic policies the federal and provincial governments have adopted are elitist in nature and reflect the skewed priorities in favour of the big landlords, big traders, industrialists and the upper middle class at the cost of the labour and the poor. One example is heavy taxation on essential food items, such as Rs23 per kilogramme sales tax on edible oil and 15 percent sales tax on sugar.
Another example is the scandalous increase in the prices of sugar where the government colluded with and facilitated big sugar industrialists and traders to fleece the consumers at will on the excuse that international prices of sugar had gone up, thereby justifying the rise in the domestic prices of the commodity. In contrast, the same business class that charges international price for its product pays its labour only a fraction of what the labour is paid in those countries, for example Brazil which is another big producer of sugar, with whom the comparison is made. Moreover, the Pakistani capitalist flouts the country’s laws on minimum wage for the labour and makes it work in inhumane working conditions in violation of the international labour laws as enshrined in the ILO conventions, which the state of Pakistan has ratified but not implemented.
All the government policies and actions -- taxation measures, spending priorities, and legal enforcement -- are heavily skewed to the disadvantage of the working class. The government has money to build luxury projects, including motorways, flashy airport terminals and parliament lodges and to sustain over one-billion-rupee per month loss to the national airline but it does not have funds to launch public transport, build decent bus stations, public schools and low-cost houses for the working class. Similarly, legislation has been made to the detriment of the labour. More than 70 percent of the 53 million labourers work in the informal sector, which is outside the scope of any labour law. Thus, the employers have been given a free hand to exploit and oppress these workers, including farmers, fishery workers, home-based industrial workers and domestic servants. They have no social protection available to themselves, howsoever meagre they may be, including old-age benefits under the EOBI scheme and the medical facilities under social welfare hospitals.
While the politicians belonging to all the major parties, the PPP, the PML-N and the MQM, make tall claims about the welfare of the people and the plight of the poor, they have not introduced a single law in the national or provincial assembly to the benefit of the working class. Instead, the legislation has been introduced to harm the interests of the labourers. Under the 18th Amendment, all matters relating to the labour have been transferred to the provinces thus putting the future of more than half a dozen labour federations and big trade unions working at all-Pakistan level in limbo.
These trade unions work at organisations like Wapda, Civil Aviation Authority and Pakistan Railways. Workers of these organisations are working throughout Pakistan and have one central labour union. With the portfolio of labour transferred to provinces, it is not clear what would be the method for the registration of workers’ federations and big trade unions formed all over the country.
Although labour laws apply only to the formal sector, they too are not implemented. No mechanism exists for their implementation. More than 80 percent of the industries are not paying the fixed minimum wages to their workers. A majority of the labour is working on contract basis, which deprives them of registration with the labour department and some social security benefits. As a result, only five percent of the total employed labour is registered with the social security institutions like EOBI.
In 2003, a draconian step was taken by the provincial governments, banning labour inspections of factories and mills though it was provided in the Factories Act 1934. This policy was in violation of ILO Convention No. 81 which is endorsed by the Pakistan government. This restriction is still in force in Punjab province. Practically, a restriction has been placed on the formation of trade unions at factories and implementation of the labour laws, in blatant violation of the Constitution and the ILO Conventions.
One excuse presented to justify the bar on labour inspections was that labour inspectors indulged in corruption and were receiving bribes from the owners, thus harming the environment for private investment. However, labour leaders maintain that in the presence of a registered trade union at a factory, labour inspections are helpful in the enforcement of relevant labour laws such as payment of minimum wages to the labour, issuance of social security cards, granting of EOBI facility, monthly and annual vacations to the employees, education facilities for the children of the labour, toilets at factory premises, fair price shops for the labour and concessionary food at factory’s canteen for the labour. Ban on labour inspections has deprived the industrial labour of all these facilities in most cases.
The Punjab Labour Department has discouraged the registration of labour unions since the induction of PML-N-led provincial government in 2008. Between 2008 and 2010, only 14 new trade unions have been registered in the province and the workers who attempted to make unions were harassed in the name of security. All the office-bearers of the new unions were booked in criminal cases and they were expelled from the job. In Punjab, anti-terrorist legislation has been invoked against the office-bearers of at least three union workers during the last three years. The Punjab IRA-2010 raised the prerequisite strength of the labour at a factory from 10 to 50 to form a union, thereby depriving millions of workers at the small and medium enterprises of their fundamental right of the freedom of association.
Above all, a nexus exists between the administration, businessmen (or capitalists) and the politicians against the working class. Businessmen provide money to the politicians to contest the elections, line the pockets of government officers and influence the politicians to appoint pliable officers on the plum positions. In return, politicians and government officers help businessmen to mint money by exploiting the labourers at will and sell their goods at exorbitant prices to fleece the common man. The statements and posturing of the politicians is sheer falsehood to fool the public.
Jan 31, 2011
Of spins and turns
Textile spinning industry calls for diplomatic pressure on India to release 1m cotton bales it ordered last year
By Shahzada Irfan Ahmed
The country’s textile industry, already reeling under pressures of all types, is now confronted with the challenge of meeting shortage of cotton required for its consumption. The deficit caused by crop destruction due to floods has worsened after India’s reluctance to release one million bales of cotton booked by Pakistani importers in August/September 2010. It was expected that the booked cotton will start arriving in December last but this did not happen.
Players in Pakistan’s textile industry believe that Indian government made an undue intervention in the free trade mechanism and imposed a non-tariff barrier for no genuine reason. They also disagree with the argument that India resorted to a tit-for-tat reaction once Pakistan imposed restriction on export of onions to the country via land route. Their point is that onion export has been discontinued only through Wahga route and there is no let up in the activity via sea. Secondly, onion export has led to its shortage in the local market and escalation in prices. Whereas, India has produced surplus cotton this year and set a target of exporting 5.5 million bales.
There was no issue till the Indian government issued a direction in December last that only those who register themselves with the Textile Commissioner and then the Office of Foreign Trade would be allowed to export cotton from India, says Anis ul Haq, Secretary All Pakistan Textile Mills Association (APTMA). This, he says, seems to be a planned move to make execution of previously booked orders difficult as Indian merchants were allowed to even register through email. There was no requirement of producing documentary proof of having a confirmed export order in hand.
Anis says within weeks merchants registered export orders of around 15 million bales at which the Indian government decided to allow export on first come first serve basis. He tells TNS, now people who were swift in registering are selling the orders in the market on premium.
Anis says the real issue, in their view, is that the cotton prices have increased incredibly over the last couple of months. Its price was 90 cents per lb when the orders were booked in November last but today they are hovering around $1.5 per lb. “It’s quite probable that Indian merchants want to sell the cotton available with them at current rates by canceling previous orders. Even if they want to do that, we are ready to sit with them and work out a middle way,” he adds.
He says APTMA had demanded of the government of Pakistan and India and take up and solve this issue at diplomatic level. International arbitration is not possible as India does not stick to the terms of International Cotton Association (ICA). Anis says India is facing criticism from all over the world for subsidising its textile sector and facilitating merchants at the cost of farmers who are committing suicides in thousands every year. “The benefits of rise in cotton prices has not benefited the farmers as it were the merchants who procured the commodity when the prices were low,” he adds.
The Indian government’s intervention has made it possible for the textile industry to procure cotton at prices 30 percent less than the international price. This is against the interest of the growers whereas in Pakistan, the cotton growers were offered rates higher than export parity rates by APTMA, he adds.
In the current scenario, Pakistan has no alternative plan as US and the Central Asian States have already sold their cotton. Australia and Brazil have cotton crop in April but this time there are fears that a lot of cotton crop will be destroyed due to the recent floods in that country.
Estimates of textile ministry put the sector’s demand at 15 million bales per year. This year’s production stood around 10.7 million. To date, around 1 million bales have been imported and the current deficit hovers around 3 million bales. The industry had planned to plug this shortage by importing 1 million bales from India and the remaining from countries like Australia and Brazil once they have their crop ready. Pakistan is not importing cotton from India for the first time and has brought in similar or larger quantities than that withheld currently.
APTMA Chairman, Gohar Ejaz, tells TNS that they are hopeful that the country will have bumper crop in the next season. The all-time high prices in the global cotton market will encourage the growers to cultivate more and more cotton this year. He says India must realise that Pakistan is under pressure this time and a similar situation can arise there in future. This is quite probable as 100 percent cotton growing agricultural lands are fed by irrigation water in Pakistan whereas 70 percent cotton growing area in India is rain-fed, he says adding: “A drought or abnormal rain pattern can cause severe cotton crisis in India.” If they extend help to Pakistani textile industry in time of need, they will receive similar treatment when they are in trouble,” he says adding: “the issue at hand needs immediate attention as India has started selling the withheld stocks.”
With cotton buyers like US and China on shopping spree there’s no shortage of buyers. But India must fulfill its commitments rather than go for greater profits. Gohar tells TNS that the unprecedented escalation of cotton prices in the world has benefited the growers in the cotton-growing regions of Pakistan. He says the prices have shot up from Rs3500 per maund to Rs11000 maund and there seems to be no let up in the spiral till coming June.
Gohar says the cotton price surge has been a blessing for cotton growing areas like Sahiwal, Multan, Bahawalpur, etc, as Pakistan’s textile industry transferred Rs200 billion there under cotton purchase deals. He says the injection of this much money in these areas, devastated by floods, has generated enough economic activity and compensated the loss of the locals to a great extent.
Keeping in view the pace of advancement on composite dialogue between Pakistan and India, stakeholders in the former’s textile industry are a bit skeptic about a positive development on this issue. But the fact that mutual trade between the two countries has always preceded other issues leaves some hope. An amicable and immediate resolution of the issue is something needed the most at this time to foster cordial relations between the two countries.
By Shahzada Irfan Ahmed
The country’s textile industry, already reeling under pressures of all types, is now confronted with the challenge of meeting shortage of cotton required for its consumption. The deficit caused by crop destruction due to floods has worsened after India’s reluctance to release one million bales of cotton booked by Pakistani importers in August/September 2010. It was expected that the booked cotton will start arriving in December last but this did not happen.
Players in Pakistan’s textile industry believe that Indian government made an undue intervention in the free trade mechanism and imposed a non-tariff barrier for no genuine reason. They also disagree with the argument that India resorted to a tit-for-tat reaction once Pakistan imposed restriction on export of onions to the country via land route. Their point is that onion export has been discontinued only through Wahga route and there is no let up in the activity via sea. Secondly, onion export has led to its shortage in the local market and escalation in prices. Whereas, India has produced surplus cotton this year and set a target of exporting 5.5 million bales.
There was no issue till the Indian government issued a direction in December last that only those who register themselves with the Textile Commissioner and then the Office of Foreign Trade would be allowed to export cotton from India, says Anis ul Haq, Secretary All Pakistan Textile Mills Association (APTMA). This, he says, seems to be a planned move to make execution of previously booked orders difficult as Indian merchants were allowed to even register through email. There was no requirement of producing documentary proof of having a confirmed export order in hand.
Anis says within weeks merchants registered export orders of around 15 million bales at which the Indian government decided to allow export on first come first serve basis. He tells TNS, now people who were swift in registering are selling the orders in the market on premium.
Anis says the real issue, in their view, is that the cotton prices have increased incredibly over the last couple of months. Its price was 90 cents per lb when the orders were booked in November last but today they are hovering around $1.5 per lb. “It’s quite probable that Indian merchants want to sell the cotton available with them at current rates by canceling previous orders. Even if they want to do that, we are ready to sit with them and work out a middle way,” he adds.
He says APTMA had demanded of the government of Pakistan and India and take up and solve this issue at diplomatic level. International arbitration is not possible as India does not stick to the terms of International Cotton Association (ICA). Anis says India is facing criticism from all over the world for subsidising its textile sector and facilitating merchants at the cost of farmers who are committing suicides in thousands every year. “The benefits of rise in cotton prices has not benefited the farmers as it were the merchants who procured the commodity when the prices were low,” he adds.
The Indian government’s intervention has made it possible for the textile industry to procure cotton at prices 30 percent less than the international price. This is against the interest of the growers whereas in Pakistan, the cotton growers were offered rates higher than export parity rates by APTMA, he adds.
In the current scenario, Pakistan has no alternative plan as US and the Central Asian States have already sold their cotton. Australia and Brazil have cotton crop in April but this time there are fears that a lot of cotton crop will be destroyed due to the recent floods in that country.
Estimates of textile ministry put the sector’s demand at 15 million bales per year. This year’s production stood around 10.7 million. To date, around 1 million bales have been imported and the current deficit hovers around 3 million bales. The industry had planned to plug this shortage by importing 1 million bales from India and the remaining from countries like Australia and Brazil once they have their crop ready. Pakistan is not importing cotton from India for the first time and has brought in similar or larger quantities than that withheld currently.
APTMA Chairman, Gohar Ejaz, tells TNS that they are hopeful that the country will have bumper crop in the next season. The all-time high prices in the global cotton market will encourage the growers to cultivate more and more cotton this year. He says India must realise that Pakistan is under pressure this time and a similar situation can arise there in future. This is quite probable as 100 percent cotton growing agricultural lands are fed by irrigation water in Pakistan whereas 70 percent cotton growing area in India is rain-fed, he says adding: “A drought or abnormal rain pattern can cause severe cotton crisis in India.” If they extend help to Pakistani textile industry in time of need, they will receive similar treatment when they are in trouble,” he says adding: “the issue at hand needs immediate attention as India has started selling the withheld stocks.”
With cotton buyers like US and China on shopping spree there’s no shortage of buyers. But India must fulfill its commitments rather than go for greater profits. Gohar tells TNS that the unprecedented escalation of cotton prices in the world has benefited the growers in the cotton-growing regions of Pakistan. He says the prices have shot up from Rs3500 per maund to Rs11000 maund and there seems to be no let up in the spiral till coming June.
Gohar says the cotton price surge has been a blessing for cotton growing areas like Sahiwal, Multan, Bahawalpur, etc, as Pakistan’s textile industry transferred Rs200 billion there under cotton purchase deals. He says the injection of this much money in these areas, devastated by floods, has generated enough economic activity and compensated the loss of the locals to a great extent.
Keeping in view the pace of advancement on composite dialogue between Pakistan and India, stakeholders in the former’s textile industry are a bit skeptic about a positive development on this issue. But the fact that mutual trade between the two countries has always preceded other issues leaves some hope. An amicable and immediate resolution of the issue is something needed the most at this time to foster cordial relations between the two countries.
The not-so-curious case of Reko Diq
As ever, the question of who decides is more important than anything else. And as usual, those who really matter are being left out in the cold
By Aasim Sajjad Akhtar
It is amazing that what is being passed as ‘debate’ on the proposed Reko Diq mineral explorations includes almost no mention of the fact that an insurgency rages in the province which is home to the billions of dollars of gold and copper deposits that everyone and sundry is fantasising about. It would not be remiss to recall that only a few years ago Gwadar port was being touted as the next Dubai, but a combination of political strife and edgy foreign investors has put paid to that particular capitalist fantasy.
The Canadian-Chilean consortium that was given the rights by the government of Pakistan to do a feasibility study has of course verified that there are huge mineral deposits waiting to be extracted. This consortium is now in advanced negotiations to initiate the exploration process, with an expected return of over US$3 billion in the first phase. Needless to say, this would only be the tip of the money-making iceberg.
Predictably a large number of observers -- both home and abroad -- are peddling the need for Pakistan to employ the most modern technologies to harness its vast natural resource base. Inspired by the classic modernisation school of thought, this lobby argues that the net gains accruing to Pakistan are unambiguous and, therefore, the exploration license should be awarded to the foreign companies in question without delay.
On the other side of the spectrum are those -- both of leftist and rightist persuasion -- that claim that Canadian-Chilean entrepreneurs are the primary beneficiaries of the proposed project and that, in the long-term, Pakistan’s economy will become even more dependent on whimsical foreign capitalists than it already is. I submit that while there is merit in the latter position -- it might broadly be called an anti-imperialist one -- it does not quite get to the heart of the matter. For the record, the modernisationists are even less able to recognise the various and complex issues on the table.
First, at stake here are not Pakistan’s interests, as much as Balochistan’s. The standard refrain of the establishment intellectual -- and the millions of young people who have been bred on this narrative -- will be to decry this from the standpoint that ‘we are all Pakistanis’. This is true, in a manner of speaking. But it is amazing that so many otherwise intelligent people in this country still refuse to accept that to invoke the proverbial slogan ‘we are all Pakistanis’ is to deny that the Baloch -- and for that matter other oppressed nations within Pakistan -- have been subject to systematic discrimination and repression since the inception of the state.
How is it possible to plan for the mining of gold and copper in Reko Diq when much more fundamental questions about sharing power and Baloch/Pakistani identity remain unanswered? Surely, it must be recognised that in an environment where trust is non-existent, advertising the extraction of billions of dollars of mineral deposits will simply confirm to Baloch militants -- and a wide cross-section of society alongside -- that the Pakistani government is out to pillage Baloch resources.
The establishment line that resources within the boundaries of the Pakistani state cannot be considered ‘Baloch’, ‘Sindhi’, ‘Pakhtun’, Punjabi’, etc. is both legally and politically untenable. Even within the confines of the unitary state model that Pakistan inherited from the British, provinces retain control over resources such as land and minerals. Even more important is the fact that as early as 1940, separate ethnic-national groups were promised autonomy in a prospective new state. This has never happened, but is precisely what needs to happen. Harping on about resources within Balochistan being fair game to all Pakistanis reflects how little our intelligentsia appreciates the political sensitivities that must be heeded if an integrated Pakistan is to be constructed in years to come.
The second important issue that both sides have failed to acknowledge is something that I have repeatedly highlighted in recent months, namely that ‘development’ as it has come to be understood is completely incognizant of the ecological crisis that confronts humankind. Indeed, if we continue to pay only lip service to the ecological imperative, the entire edifice of human existence on the planet will come under threat. If on the one hand the Reko Diq case symbolises the contradiction between the Baloch people and the unitary state, then on the other hand it is yet another indicator that uninhibited capital accumulation is irreconcilable with sustainable use of natural resources. It should be taken for granted that, their undertaking of the formality of an environmental impact assessment (EIA) notwithstanding, the Canadian-Chilean mining companies seeking to realize the Reko Diq fortune are not particularly concerned about the long-term environmental impacts of their exploration exercise.
This brings me back to the question of neo-imperialism. The modernisationists have been making hay of the fact that the terms of the proposed exploration license guarantee the federal and provincial governments approximately half of all revenues accruing from Reko Diq between them. We are supposed to be thrilled about this, because, after all, the Canadians and Chileans have invested greatly in the project and deserve their fair share of the spoils. It is perhaps not surprising that such viewpoints become common sense in an age when debate about what constitutes progress is so constricted. In actual fact, the agreements that third-world governments such as ours sign with foreign investors these days make a mockery of the notion of sovereignty. Capital is given complete freedom to enter and exit the country at will, labour laws (to the extent that they exist) are held in abeyance, and incentives of all kinds are on offer to ensure that ‘foreign direct investment’ increases in accordance with the wishes of multilateral donor agencies. Yes, there is no local expertise available, but have we concluded that we will never have it? If that is indeed the case, surely we can drive a harder bargain with the ever-so-gracious foreign investors.
In the final analysis, the important concerns highlighted above will likely be ignored by the relevant parties. One wonders how the protagonists will deal with the very real security problems that will, in all likelihood, plague the project. Either way, if and when the mining gets underway, noone should expect smooth going. We all want development, but we want the right kind, undertaken in the right way. As ever, the question of who decides is more important than anything else. And as usual, those who really matter are being left out in the cold.
By Aasim Sajjad Akhtar
It is amazing that what is being passed as ‘debate’ on the proposed Reko Diq mineral explorations includes almost no mention of the fact that an insurgency rages in the province which is home to the billions of dollars of gold and copper deposits that everyone and sundry is fantasising about. It would not be remiss to recall that only a few years ago Gwadar port was being touted as the next Dubai, but a combination of political strife and edgy foreign investors has put paid to that particular capitalist fantasy.
The Canadian-Chilean consortium that was given the rights by the government of Pakistan to do a feasibility study has of course verified that there are huge mineral deposits waiting to be extracted. This consortium is now in advanced negotiations to initiate the exploration process, with an expected return of over US$3 billion in the first phase. Needless to say, this would only be the tip of the money-making iceberg.
Predictably a large number of observers -- both home and abroad -- are peddling the need for Pakistan to employ the most modern technologies to harness its vast natural resource base. Inspired by the classic modernisation school of thought, this lobby argues that the net gains accruing to Pakistan are unambiguous and, therefore, the exploration license should be awarded to the foreign companies in question without delay.
On the other side of the spectrum are those -- both of leftist and rightist persuasion -- that claim that Canadian-Chilean entrepreneurs are the primary beneficiaries of the proposed project and that, in the long-term, Pakistan’s economy will become even more dependent on whimsical foreign capitalists than it already is. I submit that while there is merit in the latter position -- it might broadly be called an anti-imperialist one -- it does not quite get to the heart of the matter. For the record, the modernisationists are even less able to recognise the various and complex issues on the table.
First, at stake here are not Pakistan’s interests, as much as Balochistan’s. The standard refrain of the establishment intellectual -- and the millions of young people who have been bred on this narrative -- will be to decry this from the standpoint that ‘we are all Pakistanis’. This is true, in a manner of speaking. But it is amazing that so many otherwise intelligent people in this country still refuse to accept that to invoke the proverbial slogan ‘we are all Pakistanis’ is to deny that the Baloch -- and for that matter other oppressed nations within Pakistan -- have been subject to systematic discrimination and repression since the inception of the state.
How is it possible to plan for the mining of gold and copper in Reko Diq when much more fundamental questions about sharing power and Baloch/Pakistani identity remain unanswered? Surely, it must be recognised that in an environment where trust is non-existent, advertising the extraction of billions of dollars of mineral deposits will simply confirm to Baloch militants -- and a wide cross-section of society alongside -- that the Pakistani government is out to pillage Baloch resources.
The establishment line that resources within the boundaries of the Pakistani state cannot be considered ‘Baloch’, ‘Sindhi’, ‘Pakhtun’, Punjabi’, etc. is both legally and politically untenable. Even within the confines of the unitary state model that Pakistan inherited from the British, provinces retain control over resources such as land and minerals. Even more important is the fact that as early as 1940, separate ethnic-national groups were promised autonomy in a prospective new state. This has never happened, but is precisely what needs to happen. Harping on about resources within Balochistan being fair game to all Pakistanis reflects how little our intelligentsia appreciates the political sensitivities that must be heeded if an integrated Pakistan is to be constructed in years to come.
The second important issue that both sides have failed to acknowledge is something that I have repeatedly highlighted in recent months, namely that ‘development’ as it has come to be understood is completely incognizant of the ecological crisis that confronts humankind. Indeed, if we continue to pay only lip service to the ecological imperative, the entire edifice of human existence on the planet will come under threat. If on the one hand the Reko Diq case symbolises the contradiction between the Baloch people and the unitary state, then on the other hand it is yet another indicator that uninhibited capital accumulation is irreconcilable with sustainable use of natural resources. It should be taken for granted that, their undertaking of the formality of an environmental impact assessment (EIA) notwithstanding, the Canadian-Chilean mining companies seeking to realize the Reko Diq fortune are not particularly concerned about the long-term environmental impacts of their exploration exercise.
This brings me back to the question of neo-imperialism. The modernisationists have been making hay of the fact that the terms of the proposed exploration license guarantee the federal and provincial governments approximately half of all revenues accruing from Reko Diq between them. We are supposed to be thrilled about this, because, after all, the Canadians and Chileans have invested greatly in the project and deserve their fair share of the spoils. It is perhaps not surprising that such viewpoints become common sense in an age when debate about what constitutes progress is so constricted. In actual fact, the agreements that third-world governments such as ours sign with foreign investors these days make a mockery of the notion of sovereignty. Capital is given complete freedom to enter and exit the country at will, labour laws (to the extent that they exist) are held in abeyance, and incentives of all kinds are on offer to ensure that ‘foreign direct investment’ increases in accordance with the wishes of multilateral donor agencies. Yes, there is no local expertise available, but have we concluded that we will never have it? If that is indeed the case, surely we can drive a harder bargain with the ever-so-gracious foreign investors.
In the final analysis, the important concerns highlighted above will likely be ignored by the relevant parties. One wonders how the protagonists will deal with the very real security problems that will, in all likelihood, plague the project. Either way, if and when the mining gets underway, noone should expect smooth going. We all want development, but we want the right kind, undertaken in the right way. As ever, the question of who decides is more important than anything else. And as usual, those who really matter are being left out in the cold.
Coming to a halt
Development budget is the first casualty of any economic
catastrophe that a country has faced
By Syed Bakhtiyar Kazmi
In a welcome act of cooperation, the government and opposition sat down together to agree solutions to the current financial crisis that the country is faced with today. Notwithstanding that yester generations would most likely comment that the financial crisis is a part of living memory, things are getting bleaker as the clock ticks.
From a booming economy, as we were told a few years ago, we are at a point where we have difficulty footing our fuel bill. The severity of the looming bankruptcy can be gauged from the apparent limited solutions available to the financial wizards of the joint committee. Uninformed criticism is just noise and while the critic in such scenarios may bask in glory the laurels most definitely vest with the champions who battle it out in the coliseum. Nonetheless, it is distressing to note that the sword of Damocles once again fell on the development budget.
One whole-heartedly subscribes to the dictum about living within one’s own means. However, if efforts are not made to grow the means, the options will continue to shrink, most ostensibly due to inflation alone. With a growing population and shrinking means we continue to move towards the black hole. Without a development plan and earmarking of necessary resources, there is a risk we will remain a developing nation in the foreseeable future. The pessimists will continue to argue that having a development budget alone will not take us to a developed status given that over the past many years we have contracted billions of dollars of debt and have not much to show for it. The appropriateness of the development plan and basis of selection for each project, however, is a separate Pandora’s Box.
Curiously, while there is a lot of coverage in the media on judicial and political issues, the slashing of the development budget appears to have been digested with relative ease. We live in a world of wants. World trade flourishes on the wants of the populace and favourable trade alone signifies the strength of a nation. Wants beget resources and the mere existence of resources is not sufficient in the current technologically-advanced environment.
Success as a nation in today’s competitive environment requires development of resources. The current argument on Reko Diq is an excellent example. The intent is not to undermine military strength, but in essence such strength remains dependent on financial resources. Development remains one of the most critical objectives for Pakistan.
The primary function of a government is the maintenance of an environment conducive for trade and employment supported by provision of justice. Arguably, almost all of our troubles today can be traced back to increasing unemployment and lack of trade opportunities. In hindsight, our past governments may have comprised our present for the sake of financial convenience alone. The pertinent question being, should this be allowed to continue?
In the aftermath of a devastating flood, a resource-draining unwanted war, global recession and worldwide speculation in commodities, this may have been the only option. Historically, development budget is the first casualty of any economic catastrophe that the country has faced most likely due to its inherent vulnerability to subjective decisions.
Where are the assurances that efforts are afoot to ensure a brighter future? Reducing development budget to show reduction in revenues does not require rocket science.
From the limited knowledge generally available, it can be deduced that in the light of our debt and security obligations the only way to enhance our development budget is through increased revenue. However, taxation remains a contentious issue and there is no point in singling out agriculturists. No one in the world wants to pay tax, if it can be avoided. Consequently, this will require “out of the box” thinking.
Subsidy is another Waterloo in the quest for balancing the budget. Politically motivated subsidies have generally been directed towards consumption and are in most cases a waste. While it is necessary to support the less fortunate segments of society, an across the board subsidy is undesirable. Subsidy should be targeted towards the deserving only which again requires “out of the box” thinking. In respect of petroleum prices, a mechanism to subsidise public transport as an example dedicated fueling points may have weathered the storm. Alternatively, increased custom duties and annual registration on luxury vehicles would only have targeted the rich. The war on terror should provide ample excuse to sidestep any restrictions imposed by the WTO.
While micro management is a tedious task, it is doable. In a world dominated by free markets and democracy, China is Nassim Taleb’s Black Swan. With an envious growth rate of 9.8 percent while the world struggles with recession, China is the perfect example of government’s business being business. It probably would not be harmful to study and replicate their development model; an extensively planned economy may be the final solution for us.
catastrophe that a country has faced
By Syed Bakhtiyar Kazmi
In a welcome act of cooperation, the government and opposition sat down together to agree solutions to the current financial crisis that the country is faced with today. Notwithstanding that yester generations would most likely comment that the financial crisis is a part of living memory, things are getting bleaker as the clock ticks.
From a booming economy, as we were told a few years ago, we are at a point where we have difficulty footing our fuel bill. The severity of the looming bankruptcy can be gauged from the apparent limited solutions available to the financial wizards of the joint committee. Uninformed criticism is just noise and while the critic in such scenarios may bask in glory the laurels most definitely vest with the champions who battle it out in the coliseum. Nonetheless, it is distressing to note that the sword of Damocles once again fell on the development budget.
One whole-heartedly subscribes to the dictum about living within one’s own means. However, if efforts are not made to grow the means, the options will continue to shrink, most ostensibly due to inflation alone. With a growing population and shrinking means we continue to move towards the black hole. Without a development plan and earmarking of necessary resources, there is a risk we will remain a developing nation in the foreseeable future. The pessimists will continue to argue that having a development budget alone will not take us to a developed status given that over the past many years we have contracted billions of dollars of debt and have not much to show for it. The appropriateness of the development plan and basis of selection for each project, however, is a separate Pandora’s Box.
Curiously, while there is a lot of coverage in the media on judicial and political issues, the slashing of the development budget appears to have been digested with relative ease. We live in a world of wants. World trade flourishes on the wants of the populace and favourable trade alone signifies the strength of a nation. Wants beget resources and the mere existence of resources is not sufficient in the current technologically-advanced environment.
Success as a nation in today’s competitive environment requires development of resources. The current argument on Reko Diq is an excellent example. The intent is not to undermine military strength, but in essence such strength remains dependent on financial resources. Development remains one of the most critical objectives for Pakistan.
The primary function of a government is the maintenance of an environment conducive for trade and employment supported by provision of justice. Arguably, almost all of our troubles today can be traced back to increasing unemployment and lack of trade opportunities. In hindsight, our past governments may have comprised our present for the sake of financial convenience alone. The pertinent question being, should this be allowed to continue?
In the aftermath of a devastating flood, a resource-draining unwanted war, global recession and worldwide speculation in commodities, this may have been the only option. Historically, development budget is the first casualty of any economic catastrophe that the country has faced most likely due to its inherent vulnerability to subjective decisions.
Where are the assurances that efforts are afoot to ensure a brighter future? Reducing development budget to show reduction in revenues does not require rocket science.
From the limited knowledge generally available, it can be deduced that in the light of our debt and security obligations the only way to enhance our development budget is through increased revenue. However, taxation remains a contentious issue and there is no point in singling out agriculturists. No one in the world wants to pay tax, if it can be avoided. Consequently, this will require “out of the box” thinking.
Subsidy is another Waterloo in the quest for balancing the budget. Politically motivated subsidies have generally been directed towards consumption and are in most cases a waste. While it is necessary to support the less fortunate segments of society, an across the board subsidy is undesirable. Subsidy should be targeted towards the deserving only which again requires “out of the box” thinking. In respect of petroleum prices, a mechanism to subsidise public transport as an example dedicated fueling points may have weathered the storm. Alternatively, increased custom duties and annual registration on luxury vehicles would only have targeted the rich. The war on terror should provide ample excuse to sidestep any restrictions imposed by the WTO.
While micro management is a tedious task, it is doable. In a world dominated by free markets and democracy, China is Nassim Taleb’s Black Swan. With an envious growth rate of 9.8 percent while the world struggles with recession, China is the perfect example of government’s business being business. It probably would not be harmful to study and replicate their development model; an extensively planned economy may be the final solution for us.
Politics of reconciliation, again
Are the political parties ready to trust each other one more time?
By Salman Abid
The word “reconciliation” has gained importance in our present political scenario and needs to be focused upon by the political players. In the recent past, the trend of cheap point-scoring on almost every issue has gained currency among the opposition and treasury benches in the parliament.
Serious challenges like the war against terrorism, extremism, bad governance and, above all, poverty are being confronted. It was a breath of fresh air for the people to see Benazir Bhutto and Nawaz Sharif developing a consensus in 2006 to rebuild the nation on the principal of reconciliation and signed the Charter of Democracy.
There was political wisdom in the admission of both the leaders when they said that they had acted like puppets in the hands of the establishment. Later, the assassination of Benazir Bhutto caused irreparable loss to the nation, especially to the philosophy of reconciliation. For me, it is a source of great satisfaction that President Zardari proved himself to be a torch-bearer of reconciliation inside and outside the parliament.
The coalition government comprising PML-F, PML-N, PML-Q, ANP, JUI, MQM is making their presence felt while getting their share in the power-sharing formula. At one time, we were expecting certain changes in the Prime Minister’s House since JUI and MQM had vowed to sit in the opposition benches.
Then, later, Nawaz Sharif presented his ten-point agenda to be implemented quickly or he threatened that ministers of PPP would be kicked out of the Punjab government. Here, President Zardari seems to have prevailed and succeeded in bringing dissenting partners back to treasury benches.
Everyone heaved us a sigh of relief and pro-democracy elements looked delighted. The Titanic of the coalition government was saved from sinking amid hopes that government would complete its tenure comfortably. But I have my reservations. It seems national interest is not being preferred over personal interests. This does not augur well. The power players should walk their talk because this is the only way to support the philosophy of reconciliation.
This political exercise is really significant for the political elite, but it is totally meaningless to the people of Pakistan who are facing back-breaking inflation, increasing crimes, poor health facilities, and fewer economic opportunities.
Providing relief to the downtrodden Pakistanis should be the top priority of the leaders. But the situation is just the opposite. The MQM and JUI are eager to grab portfolios of their own choice and redress of the ousting of JUI-F minister from the federal cabinet.
It would be a contradiction in the working of leadership to go on enjoying power in the provincial government and doing opposition in the National Assembly and Senate. It can be predicted that sooner or later, both the JUI and MQM would rejoin the federal cabinet and begin to enjoy the power once again.
A problem of the coalition partners is that they do not stand by the government through thick and thin. For example, at the time of enforcement of RGST and increasing of petrol prices coalition partners betrayed the PPP and left it alone. In my view, and explanation of the contradictory behaviour of the coalition government is that they lack sincerity, therefore, they are not ready to share responsibility, especially during a crisis.
It would be in the interest of the PPP as a party to minimize the difference between its speech and practice, particularly over decisions like announcement of the RGST and petrol prices. Both the decisions were withdrawn showing the failure of policy making and good governance. It is not particularly a good example for the PPP Sindh to go on compromising with its partners in the name of reconciliation only to secure the government.
The issue of accountability and transparency should be seriously addressed since this is the right way of making a positive image of the PPP among the masses. Till now, these two issues have not been properly taken up by the PPPP government.
In today’s context, creating religious harmony should also be a cause in addition to political reconciliation efforts. Apparently, this does not seem to on the agenda of political players. It is quite easy to understand that if this job remains incomplete democratic elements will be no more and militant elements will regain power.
We can hope for a better future if our political forces continue bringing forth the fruits of reconciliation like the National Finance Commission award, and 18th and 19th Amendments. The concept of reconciliation has been debated very much; it now needs to be put into practice. We should become pragmatic towards rebuilding Pakistan as a tolerant, free from corruption, economically self reliant, and a democratic and tolerant society to live in.
If we agree that the philosophy of reconciliation is a panacea for us then it should not just be the job of the government, but a duty of the civil society and intelligentsia to come forward and get engaged with the political forces by creating awareness among the masses.
By Salman Abid
The word “reconciliation” has gained importance in our present political scenario and needs to be focused upon by the political players. In the recent past, the trend of cheap point-scoring on almost every issue has gained currency among the opposition and treasury benches in the parliament.
Serious challenges like the war against terrorism, extremism, bad governance and, above all, poverty are being confronted. It was a breath of fresh air for the people to see Benazir Bhutto and Nawaz Sharif developing a consensus in 2006 to rebuild the nation on the principal of reconciliation and signed the Charter of Democracy.
There was political wisdom in the admission of both the leaders when they said that they had acted like puppets in the hands of the establishment. Later, the assassination of Benazir Bhutto caused irreparable loss to the nation, especially to the philosophy of reconciliation. For me, it is a source of great satisfaction that President Zardari proved himself to be a torch-bearer of reconciliation inside and outside the parliament.
The coalition government comprising PML-F, PML-N, PML-Q, ANP, JUI, MQM is making their presence felt while getting their share in the power-sharing formula. At one time, we were expecting certain changes in the Prime Minister’s House since JUI and MQM had vowed to sit in the opposition benches.
Then, later, Nawaz Sharif presented his ten-point agenda to be implemented quickly or he threatened that ministers of PPP would be kicked out of the Punjab government. Here, President Zardari seems to have prevailed and succeeded in bringing dissenting partners back to treasury benches.
Everyone heaved us a sigh of relief and pro-democracy elements looked delighted. The Titanic of the coalition government was saved from sinking amid hopes that government would complete its tenure comfortably. But I have my reservations. It seems national interest is not being preferred over personal interests. This does not augur well. The power players should walk their talk because this is the only way to support the philosophy of reconciliation.
This political exercise is really significant for the political elite, but it is totally meaningless to the people of Pakistan who are facing back-breaking inflation, increasing crimes, poor health facilities, and fewer economic opportunities.
Providing relief to the downtrodden Pakistanis should be the top priority of the leaders. But the situation is just the opposite. The MQM and JUI are eager to grab portfolios of their own choice and redress of the ousting of JUI-F minister from the federal cabinet.
It would be a contradiction in the working of leadership to go on enjoying power in the provincial government and doing opposition in the National Assembly and Senate. It can be predicted that sooner or later, both the JUI and MQM would rejoin the federal cabinet and begin to enjoy the power once again.
A problem of the coalition partners is that they do not stand by the government through thick and thin. For example, at the time of enforcement of RGST and increasing of petrol prices coalition partners betrayed the PPP and left it alone. In my view, and explanation of the contradictory behaviour of the coalition government is that they lack sincerity, therefore, they are not ready to share responsibility, especially during a crisis.
It would be in the interest of the PPP as a party to minimize the difference between its speech and practice, particularly over decisions like announcement of the RGST and petrol prices. Both the decisions were withdrawn showing the failure of policy making and good governance. It is not particularly a good example for the PPP Sindh to go on compromising with its partners in the name of reconciliation only to secure the government.
The issue of accountability and transparency should be seriously addressed since this is the right way of making a positive image of the PPP among the masses. Till now, these two issues have not been properly taken up by the PPPP government.
In today’s context, creating religious harmony should also be a cause in addition to political reconciliation efforts. Apparently, this does not seem to on the agenda of political players. It is quite easy to understand that if this job remains incomplete democratic elements will be no more and militant elements will regain power.
We can hope for a better future if our political forces continue bringing forth the fruits of reconciliation like the National Finance Commission award, and 18th and 19th Amendments. The concept of reconciliation has been debated very much; it now needs to be put into practice. We should become pragmatic towards rebuilding Pakistan as a tolerant, free from corruption, economically self reliant, and a democratic and tolerant society to live in.
If we agree that the philosophy of reconciliation is a panacea for us then it should not just be the job of the government, but a duty of the civil society and intelligentsia to come forward and get engaged with the political forces by creating awareness among the masses.
Project terrorism
You convert the worldview of a religious fringe into that of the state and thus you kindle the yearning for reviving a golden age that never existed
By Rashid Mahmood Langrial
As suicide bombers kill our children and blow the graves of our patron saints; as the fundamentalists not only dictate our thoughts and actions but also punish us for non-compliance; and as the insurgents challenge our sovereignty and choose for us our friends and foes, we must not forget how hard we have worked to bring this fate to ourselves and what an almost implausible set of follies we have committed to create that unique combination of permissive and precipitant factors without which a project as self-immolating as project terrorism could never hit the ground.
Project terrorism required three necessary conditions to be satisfied before it could start off: a deep sense of grievance amongst the population; societal approval of or neutrality towards violence as a legitimate instrument of grievance-settlement; and organizational structures with proven ability to overcome the problems of collective action. Absence of any of the three would render the other too inconsequential for the project to succeed. These three necessary conditions, however, needed to be underwritten by another sufficiency condition of perceived state failure in terms of rule of law and functionality of institutions.
Imagine you were the most powerful and most ambitious man in Pakistan in the year of our lord 1979 and someone from Mars promised you perpetual power and pelf provided you agreed to manage Project Terrorism under the overall direction of the Martian Headquarters. Assume that you believed that the Martians were reliable partners who commanded infinite resources and technology and were willing to do what it took to successfully undertake the project. I bet on your sanity that you would refuse to manage a project with such slim odds of success. But those were eccentric times: world was neatly divided between yin and yang and gods of ambition often nosed out those of sanity. As the fate would have it, you undertook to manage the project.
Before we go into the extraordinary story of manufacturing of the permissive trio of grievances, violence-legitimizing norms and appropriate organizational structures that prepared the soil for the growth of the ogre of terrorism, let’s recall that Pakistan of the 1970s was no different from most of the third world societies: poor, predominantly rural, with low physical and human capital base and struggling with its political institutions. While Islam was the religion of the masses and its emotional appeal was awesome, its role in most part of the country (except Zhob Division in Balochistan and southern districts of NWFP) was largely limited to the rites of birth, marriage and death.
Village imam, dependent on share of harvest of the farmers for his livelihood as he was, was seldom consulted on issues concerning the village ‘commons’. Secular power was the arbiter in the matters of the public square and shrines were the relevant players in the religious marketplace; labour and students’ unions were largely leftist-leaning; political parties, though underdeveloped due to episodic democratic history, were still well on their way to develop ideologically defined cadres and party paraphernalia with all the necessary emblems of distinct sense of mission, well-articulated agenda and rudimentary roadmaps for political action.
In such a world of terrestrial towns and lay villages, how would you go about to create such deep sense of grievance that engenders a siege mentality where one thinks of one’s world under threat from without, necessitating immediate extreme action?
You need to ensure that social sector expenditures remain low, sustaining a near-permanent state of social insecurity in terms of education, health and rule of law. Faced with relative deprivation in terms of social security, people would seek collective action to change their lot; you must ensure that there are few available political opportunities coupled with a sinister propaganda that politicians are selfish or corrupt or incompetent or three-in-one. For this purpose, political parties could be banned, politicians exiled, or imprisoned or preferably hanged; political corruption unearthed in full glare of the cameras and political workers either imprisoned or publicly beaten for deviating from the norms to be notified by the bureau of public morals and manners.
In case you cannot ban the political process altogether, you must ensure intense competition amongst the existing political elite over whatsoever little of the cake you decide to leave in the political arena and make difficult for others to enter the arena by creating entry barriers. Note of caution: the latter scenario is an inferior solution and you must avoid as long as you can.
One final step is to blame the ills on someone else’s hostility. You must rewrite the textbooks, teaching appropriate history, you must promote stories and plays that eulogise glorious past of a splendid nation, hurt in its blissful journey through a conspiracy of infidels from without and minority sects from within. You convert the worldview of a religious fringe into that of the state and thus you kindle the yearning for reviving a golden age that never existed.
Yearning for a golden age could then be used to blur the contours and colors of the world to invoke the images of a collective imminent humiliation whereby one’s culture, religion and the motherland were all in danger of sacrilege; immediate collective action was the need of the hour, both at home and in near abroad, to save one’s culture, religion and motherland. Until and unless you do that, you cannot make a nation of hundred million acquiesce to an error of judgment as great as needed for the project terrorism to find its feet on the ground.
Unfortunately, you still have just the recipe for an extremist political movement, not terrorism. You still need to justify indiscriminate violence to create a pool of sympathisers who would a) provide recruits b) bankroll the logistics and c) venerate those who fall in the path of terrorism. This requires sanction either from culture or religion.
While the Martians provide ready cash, friends from the desert offer a well-tested set of religious ideas; therefore, you decide to import a bellicose brand of religious interpretation, oil it with Martian money and start legitimising violence as a preferred tool of expressing narcissistic rage that has been carefully cultivated. Billions of US$ are invested into the propagation of the imported religious interpretation and thousands of students are taught the virtues of holy war; men of religion carve careers out of it and you, in turn, have the powerful clerks declaring use of indiscriminate violence a religious duty against a country with almost 100 percent Muslim population. The Project Terrorism has met another of its necessary conditions.
Once you have a set of grievances that justify collective duty as against individual obligation and facilitative societal norms for violence in place, you just need to build organisational structures that can enlist required human resource for the project terrorism. Market mechanisms can easily be used to build, sustain and operate the project. Initially, master trainers are needed but, thereafter, sufficient in-house capacity would be built for various tools and techniques of terrorism. The project’s implementation could be outsourced to not-for-profit organisations and business of violence, otherwise monopoly of the state could be conducted in such franchised mode at a surprisingly low cost.
While self-propelled nature of the project will bear huge payoff in terms of cost-cutting in the beginning and some of earliest milestones would be achieved well in time, this very nature would also pose serious risk in the long run. Project would eventually not only assume a life of its own, it would also select its own objectives, milestones and performance indicators.
When such a time comes, be advised to be away from the scene because the Frankenstein that you would have created does not differentiate between its parents and its parents’ enemies. Martians and their friends from the desert would go back to their respective planets but you would be condemned to live with devil in your midst. Eventually, the Frankenstein would reach the Martians and they would be drawn back to your backyard and while it would be in your interest to clear your backyard of the demons of terrorism, be wary of the webs that the Martians might weave to eliminate this first-generation Frankenstein and in the process give rise to a second-generation Frankenstein.
Tailpiece: the article draws on ex-post analysis of the phenomenon of terrorism in various disciplines of social sciences and social scientists admit that the phenomenon is only partially studied, much less agreed upon and that the findings are both tentative as well as empirically weak.
By Rashid Mahmood Langrial
As suicide bombers kill our children and blow the graves of our patron saints; as the fundamentalists not only dictate our thoughts and actions but also punish us for non-compliance; and as the insurgents challenge our sovereignty and choose for us our friends and foes, we must not forget how hard we have worked to bring this fate to ourselves and what an almost implausible set of follies we have committed to create that unique combination of permissive and precipitant factors without which a project as self-immolating as project terrorism could never hit the ground.
Project terrorism required three necessary conditions to be satisfied before it could start off: a deep sense of grievance amongst the population; societal approval of or neutrality towards violence as a legitimate instrument of grievance-settlement; and organizational structures with proven ability to overcome the problems of collective action. Absence of any of the three would render the other too inconsequential for the project to succeed. These three necessary conditions, however, needed to be underwritten by another sufficiency condition of perceived state failure in terms of rule of law and functionality of institutions.
Imagine you were the most powerful and most ambitious man in Pakistan in the year of our lord 1979 and someone from Mars promised you perpetual power and pelf provided you agreed to manage Project Terrorism under the overall direction of the Martian Headquarters. Assume that you believed that the Martians were reliable partners who commanded infinite resources and technology and were willing to do what it took to successfully undertake the project. I bet on your sanity that you would refuse to manage a project with such slim odds of success. But those were eccentric times: world was neatly divided between yin and yang and gods of ambition often nosed out those of sanity. As the fate would have it, you undertook to manage the project.
Before we go into the extraordinary story of manufacturing of the permissive trio of grievances, violence-legitimizing norms and appropriate organizational structures that prepared the soil for the growth of the ogre of terrorism, let’s recall that Pakistan of the 1970s was no different from most of the third world societies: poor, predominantly rural, with low physical and human capital base and struggling with its political institutions. While Islam was the religion of the masses and its emotional appeal was awesome, its role in most part of the country (except Zhob Division in Balochistan and southern districts of NWFP) was largely limited to the rites of birth, marriage and death.
Village imam, dependent on share of harvest of the farmers for his livelihood as he was, was seldom consulted on issues concerning the village ‘commons’. Secular power was the arbiter in the matters of the public square and shrines were the relevant players in the religious marketplace; labour and students’ unions were largely leftist-leaning; political parties, though underdeveloped due to episodic democratic history, were still well on their way to develop ideologically defined cadres and party paraphernalia with all the necessary emblems of distinct sense of mission, well-articulated agenda and rudimentary roadmaps for political action.
In such a world of terrestrial towns and lay villages, how would you go about to create such deep sense of grievance that engenders a siege mentality where one thinks of one’s world under threat from without, necessitating immediate extreme action?
You need to ensure that social sector expenditures remain low, sustaining a near-permanent state of social insecurity in terms of education, health and rule of law. Faced with relative deprivation in terms of social security, people would seek collective action to change their lot; you must ensure that there are few available political opportunities coupled with a sinister propaganda that politicians are selfish or corrupt or incompetent or three-in-one. For this purpose, political parties could be banned, politicians exiled, or imprisoned or preferably hanged; political corruption unearthed in full glare of the cameras and political workers either imprisoned or publicly beaten for deviating from the norms to be notified by the bureau of public morals and manners.
In case you cannot ban the political process altogether, you must ensure intense competition amongst the existing political elite over whatsoever little of the cake you decide to leave in the political arena and make difficult for others to enter the arena by creating entry barriers. Note of caution: the latter scenario is an inferior solution and you must avoid as long as you can.
One final step is to blame the ills on someone else’s hostility. You must rewrite the textbooks, teaching appropriate history, you must promote stories and plays that eulogise glorious past of a splendid nation, hurt in its blissful journey through a conspiracy of infidels from without and minority sects from within. You convert the worldview of a religious fringe into that of the state and thus you kindle the yearning for reviving a golden age that never existed.
Yearning for a golden age could then be used to blur the contours and colors of the world to invoke the images of a collective imminent humiliation whereby one’s culture, religion and the motherland were all in danger of sacrilege; immediate collective action was the need of the hour, both at home and in near abroad, to save one’s culture, religion and motherland. Until and unless you do that, you cannot make a nation of hundred million acquiesce to an error of judgment as great as needed for the project terrorism to find its feet on the ground.
Unfortunately, you still have just the recipe for an extremist political movement, not terrorism. You still need to justify indiscriminate violence to create a pool of sympathisers who would a) provide recruits b) bankroll the logistics and c) venerate those who fall in the path of terrorism. This requires sanction either from culture or religion.
While the Martians provide ready cash, friends from the desert offer a well-tested set of religious ideas; therefore, you decide to import a bellicose brand of religious interpretation, oil it with Martian money and start legitimising violence as a preferred tool of expressing narcissistic rage that has been carefully cultivated. Billions of US$ are invested into the propagation of the imported religious interpretation and thousands of students are taught the virtues of holy war; men of religion carve careers out of it and you, in turn, have the powerful clerks declaring use of indiscriminate violence a religious duty against a country with almost 100 percent Muslim population. The Project Terrorism has met another of its necessary conditions.
Once you have a set of grievances that justify collective duty as against individual obligation and facilitative societal norms for violence in place, you just need to build organisational structures that can enlist required human resource for the project terrorism. Market mechanisms can easily be used to build, sustain and operate the project. Initially, master trainers are needed but, thereafter, sufficient in-house capacity would be built for various tools and techniques of terrorism. The project’s implementation could be outsourced to not-for-profit organisations and business of violence, otherwise monopoly of the state could be conducted in such franchised mode at a surprisingly low cost.
While self-propelled nature of the project will bear huge payoff in terms of cost-cutting in the beginning and some of earliest milestones would be achieved well in time, this very nature would also pose serious risk in the long run. Project would eventually not only assume a life of its own, it would also select its own objectives, milestones and performance indicators.
When such a time comes, be advised to be away from the scene because the Frankenstein that you would have created does not differentiate between its parents and its parents’ enemies. Martians and their friends from the desert would go back to their respective planets but you would be condemned to live with devil in your midst. Eventually, the Frankenstein would reach the Martians and they would be drawn back to your backyard and while it would be in your interest to clear your backyard of the demons of terrorism, be wary of the webs that the Martians might weave to eliminate this first-generation Frankenstein and in the process give rise to a second-generation Frankenstein.
Tailpiece: the article draws on ex-post analysis of the phenomenon of terrorism in various disciplines of social sciences and social scientists admit that the phenomenon is only partially studied, much less agreed upon and that the findings are both tentative as well as empirically weak.
RGST, an open and shut case?
The solution does not lie in replacing a tax code with another,
but strict implementation of existing tax laws
By Huzaima Bukhari and Dr. Ikramul Haq
The Finance Minister, Dr. Abdul Hafeez Shaikh, while addressing the members of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in Karachi on January 22, 2011, claimed that “elements who do not want to see the documentation of economy have financed and supported an anti-Reformed General Sales Tax (RGST) campaign”. He alleged that “anti-RGST campaign is a conspiracy against the efforts aimed at documenting the economy and despite removal of all disputes, RGST has not been implemented”. Dr. Hafeez requested all Pakistanis, who want self-reliance, to support RGST Bill. It is presently pending in National Assembly after adopted by the Senate. While defending the RGST, the Finance Minister said “some people” were afraid of it only because they did not want documentation of their businesses”.
The Finance Minister is campaigning for RGST whereas the fact is that we have already VAT-mode consumption tax in Pakistan, levied under the name of Sales Tax Act 1990. It is strange that instead of removing distortions in the existing law by withdrawing unnecessary exemptions and taking to task the corrupt officials responsible for its non-enforcement, the Finance Minister is pleading the case for yet another tax code. The solution does not lie in replacing a tax code with another, but strict implementation of existing tax laws without any concessions and exemptions.
In 2001, we destroyed income tax law by promulgating Income Tax Ordinance 2001, adjudged by the apex court in 2009 PTR 23 (S.C. Pak) as a law that was hurriedly enacted and carelessly amended. The new income tax law has not helped in generating more revenue but has created more litigation. In this backdrop, there is justification in repealing Sales Tax Act, 1990. It is not a stumbling block in the way of documentation of economy. The real problem is lack of will to implement the existing tax laws.
The main reason for non-documentation of economy is existence of unholy alliance between tax evaders and unscrupulous tax officials. Pakistani tax experts have been repeatedly pointing out that the country would be much better off with across the board single-stage simple sales tax (at a low rate of 3pc to 5pc) without any exemption -- this is the case in Singapore and Japan, two highly developed economies. However, vested interests in Federal Board of Revenue (FBR) and elsewhere prefer the present situation: complex rules and cumbersome procedures coupled with legal loopholes and unfettered discretionary powers -- creating ideal conditions for corruption to thrive. The Finance Minister needs to re-examine his revenue-generation strategy taking these facts into account.
We are facing serious problems like high inflation, burgeoning fiscal deficit, unemployment, poverty and low-economic growth. Our survival now lies in eliminating all kinds of wasteful expenditure, boosting economic growth by diverting funds lying in unproductive sectors to productive areas through a rational tax policy, promoting tax culture, enforcing the existing laws and combating tax evasion with an iron hand.
The Finance Minister has yet not unveiled the fundamental features of taxation policy, if he has devised one. His emphasis on RGST -- without taking into account the entire economic matrix of Pakistan -- is totally misplaced.
Of late, besides IMF and other donor agencies, all and sundry, including the US and Western diplomats posted in Islamabad, are advising us to levy VAT as a main instrument for documentation of the economy. They know little about our peculiar milieu -- rich persons pay millions as charity but are not ready to pay a single penny as income tax due to complete distrust in the government that wastes taxpayers’ money. Common people are paying taxes heavily but in return do not get basic social services like education, health, transport, and even clean drinking water.
Many independent thinkers stress that from pure economic point of view, leaving aside the political dimensions of the conflict, a public debate is needed to justify levy of VAT at 15 percent in the prevalent economic conditions. They apprehend that this imposition would be a final blow to the country’s critically sick economy and would lead to more inflation, recession and poverty.
Taxation is a potent instrument to shape and influence the socio-economic polices of a country. Though the concept of an ideal tax system for a country is linked with the peculiar characteristics of its economy, tax policy is usually assigned the four functions in the stated order in a typical developing economy: resource mobilisation, resource allocation, distributive justice, and stabilization.
Resource mobilisation: The first and foremost objective of tax policy is to raise resources for administration and development. Taxes are the main instrument for transferring resources from private to public use. By designing an appropriate tax structure, resources can be raised from those who are holding them idly or squandering them on luxury consumption. In Pakistan, we need higher revenues from the rich who are holding wealth but not employing it for productive purposes. Pakistan needs not only reintroduction of progressive taxes like inheritance tax, wealth tax, gift tax, capital gain tax -- abolished by military dictators -- but also higher VAT at 23pc to 25pc on luxury items. We should slash the existing GST rate of 17pc to 10pc on commonly used items but withdraw all kinds of exemptions. If revenue leakages are stopped and tax policy is rationalised, current tax to GDP ratio of 9pc can jump to 18pc in just one year.
Resource allocation: By imposing high tax rates on luxury goods and other low priority items (such as motor cars, air conditioners etc), the government can discourage the consumption and production of such items, ensuring in the process, release of resources for high priority sectors. Conversely, production of necessities of life and employment-oriented industries can be encouraged by offering tax concessions or even subsidies.
Distributive justice: Distributive justice or economic justice is an important function of tax policy. Economic justice relates largely to distribution of tax burden and benefits of public expenditure. It is a component of the broader concept of social justice, which encompasses, besides distributive justice, such questions as treatment of women and children, ethnic and religious tolerance in a society. Tax policy is a democratic method to influence the distribution of income and wealth on desired lines. The main ingredients of this policy can be (a) progressive direct taxation of income, wealth, and property transactions, (b) taxation of commodities (customs duty, excise levy, and sales tax) purchased largely by high-income groups, and (c) subsidies (negative taxation) on goods purchased by low-income groups.
Stabilisation: Initial development efforts are generally marked by inflationary tendencies in an economy. Inflation, if uncontrolled, may thwart all development plans and bring misery to the poor. A reasonable degree of price stability should be the primary concern of a government’s economic policies. The overall level of economic activity in an economy depends upon aggregate demand, relative to capacity output. At times, the level of aggregate demand may be insufficient to secure full employment of labour and other factors of production. At other times, aggregate demand may exceed available output at full employment level. Government intervention in both the cases becomes essential to correct such disequilibria in the economy.
Reduction in taxes during deflation would leave greater disposable incomes with the people, giving a boost to aggregate demand. The reverse is true in times of inflation. Dr. Hafeez Shaikh and other economic wizards must prepare a long term tax policy first and then fit in it RGST at a reasonable rate conducive for economic growth, not its retardation; and avoiding a possible tax rebellion.
but strict implementation of existing tax laws
By Huzaima Bukhari and Dr. Ikramul Haq
The Finance Minister, Dr. Abdul Hafeez Shaikh, while addressing the members of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in Karachi on January 22, 2011, claimed that “elements who do not want to see the documentation of economy have financed and supported an anti-Reformed General Sales Tax (RGST) campaign”. He alleged that “anti-RGST campaign is a conspiracy against the efforts aimed at documenting the economy and despite removal of all disputes, RGST has not been implemented”. Dr. Hafeez requested all Pakistanis, who want self-reliance, to support RGST Bill. It is presently pending in National Assembly after adopted by the Senate. While defending the RGST, the Finance Minister said “some people” were afraid of it only because they did not want documentation of their businesses”.
The Finance Minister is campaigning for RGST whereas the fact is that we have already VAT-mode consumption tax in Pakistan, levied under the name of Sales Tax Act 1990. It is strange that instead of removing distortions in the existing law by withdrawing unnecessary exemptions and taking to task the corrupt officials responsible for its non-enforcement, the Finance Minister is pleading the case for yet another tax code. The solution does not lie in replacing a tax code with another, but strict implementation of existing tax laws without any concessions and exemptions.
In 2001, we destroyed income tax law by promulgating Income Tax Ordinance 2001, adjudged by the apex court in 2009 PTR 23 (S.C. Pak) as a law that was hurriedly enacted and carelessly amended. The new income tax law has not helped in generating more revenue but has created more litigation. In this backdrop, there is justification in repealing Sales Tax Act, 1990. It is not a stumbling block in the way of documentation of economy. The real problem is lack of will to implement the existing tax laws.
The main reason for non-documentation of economy is existence of unholy alliance between tax evaders and unscrupulous tax officials. Pakistani tax experts have been repeatedly pointing out that the country would be much better off with across the board single-stage simple sales tax (at a low rate of 3pc to 5pc) without any exemption -- this is the case in Singapore and Japan, two highly developed economies. However, vested interests in Federal Board of Revenue (FBR) and elsewhere prefer the present situation: complex rules and cumbersome procedures coupled with legal loopholes and unfettered discretionary powers -- creating ideal conditions for corruption to thrive. The Finance Minister needs to re-examine his revenue-generation strategy taking these facts into account.
We are facing serious problems like high inflation, burgeoning fiscal deficit, unemployment, poverty and low-economic growth. Our survival now lies in eliminating all kinds of wasteful expenditure, boosting economic growth by diverting funds lying in unproductive sectors to productive areas through a rational tax policy, promoting tax culture, enforcing the existing laws and combating tax evasion with an iron hand.
The Finance Minister has yet not unveiled the fundamental features of taxation policy, if he has devised one. His emphasis on RGST -- without taking into account the entire economic matrix of Pakistan -- is totally misplaced.
Of late, besides IMF and other donor agencies, all and sundry, including the US and Western diplomats posted in Islamabad, are advising us to levy VAT as a main instrument for documentation of the economy. They know little about our peculiar milieu -- rich persons pay millions as charity but are not ready to pay a single penny as income tax due to complete distrust in the government that wastes taxpayers’ money. Common people are paying taxes heavily but in return do not get basic social services like education, health, transport, and even clean drinking water.
Many independent thinkers stress that from pure economic point of view, leaving aside the political dimensions of the conflict, a public debate is needed to justify levy of VAT at 15 percent in the prevalent economic conditions. They apprehend that this imposition would be a final blow to the country’s critically sick economy and would lead to more inflation, recession and poverty.
Taxation is a potent instrument to shape and influence the socio-economic polices of a country. Though the concept of an ideal tax system for a country is linked with the peculiar characteristics of its economy, tax policy is usually assigned the four functions in the stated order in a typical developing economy: resource mobilisation, resource allocation, distributive justice, and stabilization.
Resource mobilisation: The first and foremost objective of tax policy is to raise resources for administration and development. Taxes are the main instrument for transferring resources from private to public use. By designing an appropriate tax structure, resources can be raised from those who are holding them idly or squandering them on luxury consumption. In Pakistan, we need higher revenues from the rich who are holding wealth but not employing it for productive purposes. Pakistan needs not only reintroduction of progressive taxes like inheritance tax, wealth tax, gift tax, capital gain tax -- abolished by military dictators -- but also higher VAT at 23pc to 25pc on luxury items. We should slash the existing GST rate of 17pc to 10pc on commonly used items but withdraw all kinds of exemptions. If revenue leakages are stopped and tax policy is rationalised, current tax to GDP ratio of 9pc can jump to 18pc in just one year.
Resource allocation: By imposing high tax rates on luxury goods and other low priority items (such as motor cars, air conditioners etc), the government can discourage the consumption and production of such items, ensuring in the process, release of resources for high priority sectors. Conversely, production of necessities of life and employment-oriented industries can be encouraged by offering tax concessions or even subsidies.
Distributive justice: Distributive justice or economic justice is an important function of tax policy. Economic justice relates largely to distribution of tax burden and benefits of public expenditure. It is a component of the broader concept of social justice, which encompasses, besides distributive justice, such questions as treatment of women and children, ethnic and religious tolerance in a society. Tax policy is a democratic method to influence the distribution of income and wealth on desired lines. The main ingredients of this policy can be (a) progressive direct taxation of income, wealth, and property transactions, (b) taxation of commodities (customs duty, excise levy, and sales tax) purchased largely by high-income groups, and (c) subsidies (negative taxation) on goods purchased by low-income groups.
Stabilisation: Initial development efforts are generally marked by inflationary tendencies in an economy. Inflation, if uncontrolled, may thwart all development plans and bring misery to the poor. A reasonable degree of price stability should be the primary concern of a government’s economic policies. The overall level of economic activity in an economy depends upon aggregate demand, relative to capacity output. At times, the level of aggregate demand may be insufficient to secure full employment of labour and other factors of production. At other times, aggregate demand may exceed available output at full employment level. Government intervention in both the cases becomes essential to correct such disequilibria in the economy.
Reduction in taxes during deflation would leave greater disposable incomes with the people, giving a boost to aggregate demand. The reverse is true in times of inflation. Dr. Hafeez Shaikh and other economic wizards must prepare a long term tax policy first and then fit in it RGST at a reasonable rate conducive for economic growth, not its retardation; and avoiding a possible tax rebellion.
Manufacturing a ‘hero’
By Beena Sarwar
The assassination of Punjab Governor Salmaan Taseer has been termed a ‘watershed moment’ for Pakistan -- not just because a sitting governor of the country’s wealthiest and most populous province was murdered in broad daylight by one of his own security guards. Perhaps the greater shock was how the murderer, Mumtaz Hussain Qadri, was allowed to commit this crime and how many hailed him as a hero for having killed someone perceived (falsely) as being guilty of ‘blasphemy’.
Qadri being assigned to guard the Punjab Governor raises questions about the workings of the security apparatus. How could a man who was dismissed from Special Branch because of his extremist views be assigned to guard a high-profile target already under threat from extremists -- especially since the murderer reportedly requested this guard duty?
Further, why were standard operating procedures not followed when the first shot was fired? Why did the other guards just stand by and allow Qadri to empty not one but two clips of his submachine gun into the unarmed Governor? They arrested Qadri after he threw up his hands in surrender, handling him with the utmost care and respect. Why was a man who had just murdered a helpless man not even cuffed?
To top it all, how was the opportunity created to transform Qadri into a celebrity? Who informed people about his court appearances, resulting in crowds gathering, chanting slogans and showering him with rose petals? Television cameras broadcast all this, further glorifying the murderer. These slogans, and the banners and posters supporting Qadri that have cropped up around the country, have not only turned this man’s cowardice -- in shooting at an unarmed victim -- into some kind of heroism, it has resulted in further intimidation of anyone who supports amendments to the controversial, man-made ‘blasphemy laws’.
Such was the manufactured hype and the propaganda around Qadri’s supposed act of valour that a group of lawyers (mostly supporters of the PML-N and PML-Q) hailed him as a hero and vowed to fight his case pro bono. And these are the people who are supposed to uphold rule of law.
Then there was the preposterous video clip of the murderer in police custody, singing a ‘naat’, apparently filmed by policeman on his cell-phone and released to the media and the internet.
The glorification of Qadri’s criminal act of murder could not be possible without the vilification of Salmaan Taseer’s supposed ‘blasphemy’ -- for which there is not an iota of evidence anywhere. The build-up to the murder owes much to the Pakistani TV talk shows and channels that perpetuated this false propaganda against the Governor. This propaganda is what led to the widespread belief that the Governor was somehow, preposterously, guilty of his own murder -- in much the same way that attention is diverted to what a rape victim was wearing or doing.
The media editors and bosses belatedly realised the effect that the constant exposure of Qadri was having. According to a senior inside source at a major TV channel, they have since got together and agreed informally to cut down on such coverage that was serving only to glorify the murderer.
The 24/7 news channels amplified the outrageous propaganda of the ‘religious right’ that preceded the murder of Punjab Governor Salmaan Taseer apparently because he took up the case of Aasiya Noreen, the poor Christian woman sentenced to death by a Sessions Court for ‘blasphemy’. Taseer tried to obtain a presidential pardon for her even before her case came up for hearing before the Lahore High Court, which must confirm the death sentence or acquit an accused. Taseer did not say anything that human rights organisations like the HRCP have not been saying for years but he was flamboyant about it, while being a political thorn in the side of the Punjab government.
There was propaganda also against Sherry Rehman, the PPP parliamentarian who has submitted a bill to amend the ‘blasphemy laws’ in order to prevent their abuse and misuse. The propaganda against her included the outright lie that she was acting alone and had not taken other parliamentarians into confidence. The truth is that she had lobbied extensively behind the scenes and even got the opposition PML-N to agree not to oppose the bill once it was tabled.
The agreement of the TV channels to avoid publicising Qadri’s words and deeds, although belated, is a welcome step. The next step is to take criminal action against all those indulging in hate speech and incitements to murder. Some citizens have begun to register such complaints with the police. Will the government stand by them?
The assassination of Punjab Governor Salmaan Taseer has been termed a ‘watershed moment’ for Pakistan -- not just because a sitting governor of the country’s wealthiest and most populous province was murdered in broad daylight by one of his own security guards. Perhaps the greater shock was how the murderer, Mumtaz Hussain Qadri, was allowed to commit this crime and how many hailed him as a hero for having killed someone perceived (falsely) as being guilty of ‘blasphemy’.
Qadri being assigned to guard the Punjab Governor raises questions about the workings of the security apparatus. How could a man who was dismissed from Special Branch because of his extremist views be assigned to guard a high-profile target already under threat from extremists -- especially since the murderer reportedly requested this guard duty?
Further, why were standard operating procedures not followed when the first shot was fired? Why did the other guards just stand by and allow Qadri to empty not one but two clips of his submachine gun into the unarmed Governor? They arrested Qadri after he threw up his hands in surrender, handling him with the utmost care and respect. Why was a man who had just murdered a helpless man not even cuffed?
To top it all, how was the opportunity created to transform Qadri into a celebrity? Who informed people about his court appearances, resulting in crowds gathering, chanting slogans and showering him with rose petals? Television cameras broadcast all this, further glorifying the murderer. These slogans, and the banners and posters supporting Qadri that have cropped up around the country, have not only turned this man’s cowardice -- in shooting at an unarmed victim -- into some kind of heroism, it has resulted in further intimidation of anyone who supports amendments to the controversial, man-made ‘blasphemy laws’.
Such was the manufactured hype and the propaganda around Qadri’s supposed act of valour that a group of lawyers (mostly supporters of the PML-N and PML-Q) hailed him as a hero and vowed to fight his case pro bono. And these are the people who are supposed to uphold rule of law.
Then there was the preposterous video clip of the murderer in police custody, singing a ‘naat’, apparently filmed by policeman on his cell-phone and released to the media and the internet.
The glorification of Qadri’s criminal act of murder could not be possible without the vilification of Salmaan Taseer’s supposed ‘blasphemy’ -- for which there is not an iota of evidence anywhere. The build-up to the murder owes much to the Pakistani TV talk shows and channels that perpetuated this false propaganda against the Governor. This propaganda is what led to the widespread belief that the Governor was somehow, preposterously, guilty of his own murder -- in much the same way that attention is diverted to what a rape victim was wearing or doing.
The media editors and bosses belatedly realised the effect that the constant exposure of Qadri was having. According to a senior inside source at a major TV channel, they have since got together and agreed informally to cut down on such coverage that was serving only to glorify the murderer.
The 24/7 news channels amplified the outrageous propaganda of the ‘religious right’ that preceded the murder of Punjab Governor Salmaan Taseer apparently because he took up the case of Aasiya Noreen, the poor Christian woman sentenced to death by a Sessions Court for ‘blasphemy’. Taseer tried to obtain a presidential pardon for her even before her case came up for hearing before the Lahore High Court, which must confirm the death sentence or acquit an accused. Taseer did not say anything that human rights organisations like the HRCP have not been saying for years but he was flamboyant about it, while being a political thorn in the side of the Punjab government.
There was propaganda also against Sherry Rehman, the PPP parliamentarian who has submitted a bill to amend the ‘blasphemy laws’ in order to prevent their abuse and misuse. The propaganda against her included the outright lie that she was acting alone and had not taken other parliamentarians into confidence. The truth is that she had lobbied extensively behind the scenes and even got the opposition PML-N to agree not to oppose the bill once it was tabled.
The agreement of the TV channels to avoid publicising Qadri’s words and deeds, although belated, is a welcome step. The next step is to take criminal action against all those indulging in hate speech and incitements to murder. Some citizens have begun to register such complaints with the police. Will the government stand by them?
Betting on food
Are we adding up to the number of hungry people around the world?
By Irfan Mufti
Over the recent months, soaring food prices fuelled by financial speculation have contributed to protests in countries like Pakistan, Mozambique, Tunisia, Bangladesh and Algeria. Millions of people are being pushed further into hunger as food becomes unaffordable. Making food markets work for the world’s poor is more urgent than ever. How?
Experts have already warned that the cost of food will soar by 50 percent over the next few decades as the world becomes a victim to famine, mass migrations and riots. The increase will be triggered by the exploding world population, rising cost of fuel and increased competition for water. Spiraling food prices will push hundreds of millions of people into hunger, trigger mass migration and spark civil unrest.
In Pakistan, the prices of basics such as wheat, bread, vegetables, rice and milk will spiral to inflation-busting record within the next few years. The recent report issued by Food and Agriculture Organization (FAO) sets up to predict future crises, calling for ‘urgent actions’ to prevent food shortages. Even a modest rise in food prices could push 100m people into hunger, warns FAO.
Global food prices are already at a record high. Last month, the price of cereals, sugar and meat soared on the world’s markets after a series of crop failures caused by bad weather. Foresight predicted that the world’s population would rise from 6.9bn today to around 9bn by the middle of the century. As the world gets more crowded and wealthy, demand for food, water, and energy will soar.
At the same time, climate change will increase the risk of droughts, floods and crop failures, creating a ‘perfect storm’ of food shortages and above-inflation rises in prices.
A recent report by the Oxford University states: “There is a very large risk of a quite substantial increase in prices over the next 30 or 40 years. We are going to have to produce considerably more food. So, inescapably, we have to produce more food from the same amount of land without wrecking the environment.” The report, written by 40 scientists in 35 countries, calls for a ‘green revolution’ to boost production using traditional, organic crops designed to be resistant to drought or salt water and better training for farmers in developing countries.
Several experts are also saying that the food system is failing. Firstly, it is unsustainable, with resources being used faster than they can be naturally replenished. Secondly a billion people are going hungry with another billion people suffering from hidden hunger, while a billion people are over-consuming.
The situation is worsened while food market is also operating unethically, thus shifting the flow towards financial gains using food as financial commodity and not as basic human need. Financial speculators and bankers are manipulating the market and increasing their gains causing unnatural price hike for consumers. The European Commission is drafting new financial regulations and has launched a public consultation on their proposals. Investment banks, like Goldman Sachs, are lobbying hard to weaken these proposals so that they can continue to profit from betting on food prices.
It’s vital that the voice of ordinary people is heard so that that strong and effective regulations can be introduced needed to prevent millions facing further hunger and deepening poverty.
Peoples’ organisations and representatives have already shown concern about the impact of food speculation on consumers in the developing world. Speculation by financial actors in commodity derivative markets is causing excessive volatility and inflating prices for physical commodities such as food. These markets exist for price discovery and risk management in the physical market, however, they are being distorted by speculators and bankers seeking to profit from rising prices and momentum traders increasing volatility.
This has a devastating effect in global food markets as was seen in the 2007-08 food crises when a further 115 million people went hungry. Food prices reached a record high in December 2010 and without effective regulation to improve transparency and reduce speculation in commodity derivative markets the risks of another food crisis on the same scale are increasing.
Governments and multilateral forums and market regulatory authorities have to seriously consider the proposal for the review of ‘Markets in Financial Instruments Directive’ (MiFID) which would go a long way to ensuring these markets work effectively for producers and consumers and to reducing the negative impacts of speculation. MiFID is the EU directive which regulates financial markets, including proposals for regulating food speculation in derivative markets.
Food derivatives are financial contracts based on the price of food. They were initially designed to give farmers more certainty over the prices they receive for their crops in the future. However, these contracts are now being traded by financial speculators who are not interested in buying or selling actual food, but are making money by betting on rising food prices. This betting pushes up the price of actual food making it unaffordable for people around the world and pushes people deeper into poverty and hunger.
The two key regulatory changes are urgently needed. Firstly, many food derivatives are traded directly between two parties with no requirement for information about the deal to be made publicly available (this is known as ‘over-the-counter’ or OTC). This means that no information, such as the price is available and there is no way to see what effect this has on the wider market. All food derivatives should be traded on exchanges, in the same way shares are, to allow everyone to see what is happening. This should help to make sure that the price -of food derivatives reflects what’s happening in the real world. Secondly, food derivative markets aren’t working properly as they are overwhelmed by the huge number of financial speculators. There should be effective position limits to reduce the influence these speculators can have on food prices.
Some other measures that need to be taken include: reforms and effective regulation in food-trading markets. It should be a requirement that all commodity derivatives should be traded on an exchange (or equally regulated facility). This will improve transparency promoting price discovery, prevent dealers profiting from information asymmetry in ‘over-the-counter’ (OTC) deals and ensuring such deals trading do not distort the prices of exchange traded derivatives. It is important that all food commodity derivatives should be moved off OTC due to the risk of distortion to underlying food markets.
Similarly, it is vital that regulation reflects the difference between derivatives of financial and commodity assets, and the risk of distorting the underlying market. Food is not a financial asset like any other and regulation must reflect the potential for devastating impacts on people’s lives through speculation. All commodity derivative trading venues should make position limit information available to regulators and the public for the purposes of market transparency.
Efforts to categorise traders in multiple ways, accurately reflecting their role in the market is also important. This categorisation should reflect whether they are commercial or non-commercial participants, the investment vehicle as well as the type of regulated entity. Regulators should be given the power to adopt hard position and prevent speculation limits for all types of derivative contracts.
The review process at the EU must consider the impact of this regulation on the people, especially in the developing world, not just its impact on the financial services industry. Many financial institutions make significant profits at the expense of affordable food, due to current under-regulated markets. These institutions will be lobbying hard in their own interest to water down these regulations, however, loosening these regulations will only serve to boost profits for a handful of firms while damaging markets, failing to reduce market risk and damaging the lives of people around the world.
By Irfan Mufti
Over the recent months, soaring food prices fuelled by financial speculation have contributed to protests in countries like Pakistan, Mozambique, Tunisia, Bangladesh and Algeria. Millions of people are being pushed further into hunger as food becomes unaffordable. Making food markets work for the world’s poor is more urgent than ever. How?
Experts have already warned that the cost of food will soar by 50 percent over the next few decades as the world becomes a victim to famine, mass migrations and riots. The increase will be triggered by the exploding world population, rising cost of fuel and increased competition for water. Spiraling food prices will push hundreds of millions of people into hunger, trigger mass migration and spark civil unrest.
In Pakistan, the prices of basics such as wheat, bread, vegetables, rice and milk will spiral to inflation-busting record within the next few years. The recent report issued by Food and Agriculture Organization (FAO) sets up to predict future crises, calling for ‘urgent actions’ to prevent food shortages. Even a modest rise in food prices could push 100m people into hunger, warns FAO.
Global food prices are already at a record high. Last month, the price of cereals, sugar and meat soared on the world’s markets after a series of crop failures caused by bad weather. Foresight predicted that the world’s population would rise from 6.9bn today to around 9bn by the middle of the century. As the world gets more crowded and wealthy, demand for food, water, and energy will soar.
At the same time, climate change will increase the risk of droughts, floods and crop failures, creating a ‘perfect storm’ of food shortages and above-inflation rises in prices.
A recent report by the Oxford University states: “There is a very large risk of a quite substantial increase in prices over the next 30 or 40 years. We are going to have to produce considerably more food. So, inescapably, we have to produce more food from the same amount of land without wrecking the environment.” The report, written by 40 scientists in 35 countries, calls for a ‘green revolution’ to boost production using traditional, organic crops designed to be resistant to drought or salt water and better training for farmers in developing countries.
Several experts are also saying that the food system is failing. Firstly, it is unsustainable, with resources being used faster than they can be naturally replenished. Secondly a billion people are going hungry with another billion people suffering from hidden hunger, while a billion people are over-consuming.
The situation is worsened while food market is also operating unethically, thus shifting the flow towards financial gains using food as financial commodity and not as basic human need. Financial speculators and bankers are manipulating the market and increasing their gains causing unnatural price hike for consumers. The European Commission is drafting new financial regulations and has launched a public consultation on their proposals. Investment banks, like Goldman Sachs, are lobbying hard to weaken these proposals so that they can continue to profit from betting on food prices.
It’s vital that the voice of ordinary people is heard so that that strong and effective regulations can be introduced needed to prevent millions facing further hunger and deepening poverty.
Peoples’ organisations and representatives have already shown concern about the impact of food speculation on consumers in the developing world. Speculation by financial actors in commodity derivative markets is causing excessive volatility and inflating prices for physical commodities such as food. These markets exist for price discovery and risk management in the physical market, however, they are being distorted by speculators and bankers seeking to profit from rising prices and momentum traders increasing volatility.
This has a devastating effect in global food markets as was seen in the 2007-08 food crises when a further 115 million people went hungry. Food prices reached a record high in December 2010 and without effective regulation to improve transparency and reduce speculation in commodity derivative markets the risks of another food crisis on the same scale are increasing.
Governments and multilateral forums and market regulatory authorities have to seriously consider the proposal for the review of ‘Markets in Financial Instruments Directive’ (MiFID) which would go a long way to ensuring these markets work effectively for producers and consumers and to reducing the negative impacts of speculation. MiFID is the EU directive which regulates financial markets, including proposals for regulating food speculation in derivative markets.
Food derivatives are financial contracts based on the price of food. They were initially designed to give farmers more certainty over the prices they receive for their crops in the future. However, these contracts are now being traded by financial speculators who are not interested in buying or selling actual food, but are making money by betting on rising food prices. This betting pushes up the price of actual food making it unaffordable for people around the world and pushes people deeper into poverty and hunger.
The two key regulatory changes are urgently needed. Firstly, many food derivatives are traded directly between two parties with no requirement for information about the deal to be made publicly available (this is known as ‘over-the-counter’ or OTC). This means that no information, such as the price is available and there is no way to see what effect this has on the wider market. All food derivatives should be traded on exchanges, in the same way shares are, to allow everyone to see what is happening. This should help to make sure that the price -of food derivatives reflects what’s happening in the real world. Secondly, food derivative markets aren’t working properly as they are overwhelmed by the huge number of financial speculators. There should be effective position limits to reduce the influence these speculators can have on food prices.
Some other measures that need to be taken include: reforms and effective regulation in food-trading markets. It should be a requirement that all commodity derivatives should be traded on an exchange (or equally regulated facility). This will improve transparency promoting price discovery, prevent dealers profiting from information asymmetry in ‘over-the-counter’ (OTC) deals and ensuring such deals trading do not distort the prices of exchange traded derivatives. It is important that all food commodity derivatives should be moved off OTC due to the risk of distortion to underlying food markets.
Similarly, it is vital that regulation reflects the difference between derivatives of financial and commodity assets, and the risk of distorting the underlying market. Food is not a financial asset like any other and regulation must reflect the potential for devastating impacts on people’s lives through speculation. All commodity derivative trading venues should make position limit information available to regulators and the public for the purposes of market transparency.
Efforts to categorise traders in multiple ways, accurately reflecting their role in the market is also important. This categorisation should reflect whether they are commercial or non-commercial participants, the investment vehicle as well as the type of regulated entity. Regulators should be given the power to adopt hard position and prevent speculation limits for all types of derivative contracts.
The review process at the EU must consider the impact of this regulation on the people, especially in the developing world, not just its impact on the financial services industry. Many financial institutions make significant profits at the expense of affordable food, due to current under-regulated markets. These institutions will be lobbying hard in their own interest to water down these regulations, however, loosening these regulations will only serve to boost profits for a handful of firms while damaging markets, failing to reduce market risk and damaging the lives of people around the world.
Subscribe to:
Posts (Atom)