Apr 30, 2011

Prime crime

A listing of prime ministers who took the law into their hands, or so they were accused of

By Sabir Shah

During the last nine decades, at least 22 prime ministers all over the world have been found guilty of committing various crimes, leading to their conviction by courts. The list of 22 convicted prime ministers also includes three Pakistani heads of government.

An in-depth research conducted by The News in this context shows that nine of these convicted prime ministers, including Pakistan’s Zulfikar Ali Bhutto, were awarded capital punishment. Of these nine executed prime ministers, four hailed from Hungary alone.

Pakistan’s Prime Minister Zulfikar Ali Bhutto was removed from office through a coup by General Zia-ul-Haq in 1977. While General Zia appointed himself as Chief Martial Law Administrator, Bhutto was shifted to Central Jail Rawalpindi. Arrested on September 3, 1977, Bhutto was charged with conspiracy to murder Nawab Kasuri on November 11, 1974.

On September 13, Bhutto was granted bail by Justice Samdani of the Lahore High Court, but within three days his bail was cancelled. On the night of September 16, he was again apprehended by army commandoes and bundled out to Sukkur jail. Bhutto’s trial commenced on October 24, 1977 and on March 18, 1978, he was sentenced to death by the Lahore High Court, as the arbiters had found the dethroned premier guilty of orchestrating Nawab Kasuri’s murder.

After Justice Qaiser Khan retired from service and Justice Wahiduddin fell sick, the number of Supreme Court judges was reduced to seven and this bench of Supreme Court endorsed the Lahore High Court decision upon appeal, by a margin of 4 to 3 in February 1979. Bhutto was finally executed in April 1979.

Bhutto’s daughter, and another Pakistani Prime Minister Benazir Bhutto, was convicted in 1999 for not appearing in court, though the Supreme Court later overturned that judgment. Benazir and her husband Asif Ali Zardari were sentenced to a five-year prison, fined $8.6 million and disqualified from parliament for seven years by an Accountability Bench of the Lahore High Court, for allegedly taking kickbacks from a Swiss firm during Benazir’s second stint in power (1993-96). This decision was overturned by the Supreme Court though.

In July 2002, Benazir was also convicted by Accountability Court in Rawalpindi in the ARY Gold reference. She was sentenced to three years in prison in absentia, along with confiscation of her immovable properties. In August 2003, a Swiss magistrate had found Benazir and her husband guilty of money laundering.

Another former Pakistani Prime Minister, Nawaz Sharif, was sentenced to 14 years imprisonment for corruption in July 2000. He had also been fined 20 million rupees and barred from holding public office for 21 years. After he was deposed by General Pervez Musharraf on October 1999, Nawaz Sharif was tried for kidnapping, attempted murder, hijacking and terrorism. A military court convicted him and awarded him life sentence. On July 17, 2009, the Supreme Court of Pakistan overturned a hijacking conviction against Nawaz Sharif.

History reveals that prime ministers have been taken on by courts since 1922, though cases of a few like Zulfikar Ali Bhutto have been dubbed ‘judicial murders’ by most historians. Dimitrios Gounaris, the two-time Greek Premier, was executed in November 1922 for treason. As soon as the Greeks were trampled all over by Mustafa Kamal’s forces in 1922, the army of Premier Gounaris staged a revolt against him. The History of Modern Greece by Richard Clogg reveals that Premier Gounaris was tried in courts along with five top aides and was subsequently responsible for the 1922 catastrophe in which Turkey’s Mustafa Kamal had completely trounced the Greek forces.

Former prime minister of Vichy France, Pierre Laval, was arrested, found guilty of treason and executed by firing squad in October 1945. Vichy France is a term that describes the alliance of France with the Axis Powers (Germany, Japan, and Italy) for industrial purposes from July 1940 to August 1944.

Bela Imredy, Prime Minister of Hungary, was arrested and tried by a People’s Tribunal in November 1945. Found guilty of war crimes and collaboration with the Nazis, he was executed by a firing squad at Budapest in 1946, soon after the German forces were driven out of Hungary by the Soviets.

Another Hungarian Premier, Dr Laszlo Bardossy, was also arrested and tried by a People’s Court in November 1945. He, too, was found guilty of war crimes and collaboration with the Nazis, sentenced to death, and executed by firing squad in 1946. Dimitrije Sztojay, who had served as the prime minister of Hungary during World War II, was also executed by a firing squad in Budapest in 1946. He is known to have carried out massive persecutions of Jews, which within two months escalated to the deportations of Jews to concentration camps. Although he was Adolf Hitler’s blue-eyed chum, Germans had to remove him from power corridors on growing demands.

Prime Minister Sztojay had opted to flee Hungary but was captured by American troops and extradited in October 1945. Yet another Hungarian head of government, Imre Nagy, was executed on treason charges in 1958, two years after his non-Soviet-backed government was brought down by Soviet invasion in the failed Hungarian Revolution of 1956.

General Hideki Tojo, Prime Minister of Japan, was sentenced to death for war crimes by the International Military Tribunal for the Far East and hanged on December 23, 1948. He had served Japan during much of World War II, from October 1941 to July 1944. Former Turkish Prime Minister, Adnan Menderes, was hanged by his country’s army leadership on September 17, 1961. His government was deposed in May 1960 and Menderes was arrested along with his key aides. He was eventually sent to the gallows.

The 75-year old Italian Premier and country’s biggest media baron, Silvio Berlusconi, has been facing charges ranging from links with mafia, attempts to bribe tax investigators, corruption and his widely-known relationships with actresses and party girls.

According to a BBC report of July 8, 1998, Berlusconi was sentenced to two years and nine months in prison by a court in Milan, adding that he would not face jail until a lengthy appeal process was exhausted. Just a week later, he was again convicted of illegally channeling $12 million in campaign contributions to former Prime Minister Bettino Craxi’s now defunct Socialist Party. He was sentenced to two years and four months in jail and fined $5.6 million. Though the Italian parliament had passed a law granting immunity to the premier in 2008 from all sorts of prosecution, the country’s Constitutional Court had lifted the immunity in October 2009. It was this particular decision that had paved the way for a resumption of Berlusconi’s trial in underage sex charges.

A former caretaker Prime Minister of Rwanda, Jean Kambanda, was sent behind bars for life by his country’s court on September 4, 1998 on charges of playing a key role in the infamous Rwandan genocide of 1994. Kambanda was arrested in Nairobi on July 18, 1997 and was accused of distributing ammunition with the knowledge that they would be used to massacre civilians.

Thailand’s former premier, Samak Sundaravej, was found guilty by a Thai court in September 2009 for hosting paid cooking shows on television against the constitution; just months after a group of 29 Thai senators had charged Samak with violating the country’s charter.

In November 2002, an Italian court convicted former Prime Minister Giulio Andreotti, and sentenced him to 24 years in prison for ordering the 1979 murder of muckraking journalist Mino Pecorelli. According to a report published by the Committee to Protect Journalists, the murdered journalist was preparing to publish compromising information about seven-time Italian Prime Minister Andreotti when he was gunned down on March 20, 1979. Former Ukrainian Premier, Pavel Lazarenko, was convicted in August 2006 and sentenced to a nine-year prison term in the US for laundering money. In December 1998, Lazarenko was detained on money-laundering charges as he crossed by car from France into Switzerland.

According to a Reuters report of November 2009, "A former Ukrainian Prime Minister, who fled his country after losing a power struggle, won an 11-month reduction (on November 19, 2009) in his nine-year prison term for laundering more than $20 million through US banks, but failed to persuade a San Francisco federal judge to throw his sentence out."

Former Indian Premier, Narasimha Rao, was alleged to have bribed members of a breakaway faction of a political party called the Janata Dal in 1993 to side with him, when his government was facing a no-confidence motion. In 1996, the probe began, and in 2000 the court convicted Narasimha Rao and his colleague, Buta Singh. However, Rao remained free on bail. He was acquitted of all corruption charges in 2002 due to lack of evidence.

Former French Prime Minister, Alain Juppe, was convicted in Paris on corruption charges in 2004. He was awarded an 18-month long suspended jail sentence and loss of civic rights for five years, which automatically barred him from holding or running for public office for 10 years. In October 2008, another former Thai head of government, Thaksin Shinawatra, was served a conviction order in absentia from the court on charges of corruption. Thaksin was sentenced to two years imprisonment, but remains a fugitive till date.

Sir Allan Kemakaza, former Prime Minister of Solomon Islands, was convicted of demanding money with menace, intimidation and larceny in November 2007. Kemakaza eventually had to serve a five-month prison sentence in 2008. This is what Radio New Zealand had to say after Allan had won the November 2009 polls, "A former Prime Minister in Solomon Islands, Allan Kemakeza, has retained his constituency’s seat in parliament after winning last week’s by-election by a comfortable margin."

The two-time former Japanese Premier, Kakuei Tanaka, was found guilty by a Tokyo court on October 12, 1983 for violations of foreign exchange control laws in connection with the Lockheed scam, and was sentenced to four years in prison. However, Tanaka remained free on appeal until his death in 1993. Tanaka was arrested on July 27, 1976 and was released in August on a US $690,000 surety bond. His arrest came after the vice-chairman of Lockheed had told the US Senate subcommittee on February 6, 1976 that Messrs Lockheed had paid approximately $3 million in bribes to the office of Prime Minister Tanaka for its help in the matter.

Former Ethiopian Prime Minister, Tamerat Layne, was convicted by the Ethiopian Supreme Court in 2000 for a prison term of 18 years. According to a BBC report of December 2008, "He was released in 2008 after spending 12 years in prison for corruption and abuse of power."

Warming up to the budget

What factors should be taken into account while preparing budgetary proposals?

By Mehtab Haider

Pakistan’s budget-making exercise revolves around three Ds -- debt-servicing, defense, and development. Allocation of budgetary resources for these areas reflects priorities of the government for the financial year.

A budget shows total revenues and expenditures of the government in a financial year. A government sets priorities both on revenue and expenditure side. In the aftermath of 7th NFC Award, more resources were transferred to the provinces without increasing their capacity to spend in an effective manner as well as their reluctance to accept responsibilities for taking development projects after devolving 18 ministries after the 18th Constitutional Amendment.

Growing debt-servicing is going to consume a lion’s share of resources as the requirement will jump up to Rs1000 billion after start of repayments of IMF loan. Debt-servicing stood at Rs800 billion in the outgoing financial year 2010-11. It is going to cross Rs1 trillion mark in the upcoming financial year.

Defense allocation is going to consume Rs518 billion in the next budget against the initial allocation of Rs442 billion for the ongoing fiscal year. The major victim will be development allocation because the Planning Commission and Finance Division are at loggerheads at the start of the budget making process. The Planning Commission asked the Finance Division to allocate Rs365 billion for federal development outlay against Finance Division’s indication of Rs280 billion in the next budget.

It will not be any easy task for the PPP government to come up with a status-quo budget as no option is left to rely on external inflows to bridge the deficit. The government will have to take tough measures both on revenue and expenditure side.

According to preliminary macro-economic and fiscal framework for the next budget, the government planned to curtail budget deficit at 4 percent of the GDP in 2011-12 in order to please the IMF with an objective to revive the stalled programme of $11.3 billion under Standby Arrangement (SBA) against an average level of 6 percent of GDP over the last three years.

It will be the biggest challenge for the PPP government to contain deficit at such lower level by raising revenues as well as cutting down expenditures at a time when new political alignments are on the cards. The provision of financing to bridge budget deficit is another challenge at a time when the donors are not ready to provide a few billion dollars.

Government will have to increase revenue in the shape of imposing Reformed General Sales Tax (RGST), reviving wealth tax, exploring ways to bring agriculture income into the tax net, and fully taxing the real estate and capital market to yield Rs2 trillion on FBR’s tax collection target for 2011-12.

In case of Pakistan, a major chunk of budgetary allocation is going to be utilised by three Ds as these left no fiscal space for meeting expectations of the masses for providing basic necessities of life through development schemes. The government was forced to borrow from international donors to allocate any amount in the name of Public Sector Development Programme (PSDP).

The budget-making process for the next financial year kick-starts in March every year. The ministry of finance has so far finalised initial blueprint for macro-economic framework for the next financial year 2011-12. The concerned stakeholders always complain that they are not taken on board by the finance ministry and FBR on key budgetary decisions. Even parliamentary committees, including National Assembly’s Standing Committees on Finance and Revenues as well as the same committee of Upper House of Parliament have been protesting for the last three years that they are never taken into confidence on budgetary proposals.

Renowned economist and former advisor Dr Hafeez A Pasha, who is currently Convener of Economic Advisory Council (EAC) and Revenue Advisory Council (RAC), tells The News on Sunday that the government implemented all recommendations of RAC in the last budget 2010-11 for setting the FBR’s annual target of Rs1,667 billion. But the government’s inability to enforce RGST and other measures in an effective manner, coupled with slowdown in economic activities in the aftermath of floods, severely damaged FBR’s target and finally it was revised downward to Rs1,588 billion. "We have serious doubts about the FBR’s ability to generate the desired revenue collection target of Rs1,588 billion by end June," says Dr Pasha said and adds that "tax collection of outgoing financial year would determine the basis for fixing the tax target of FBR for the next budget".

When his attention is drawn towards government’s preliminary estimates for generating Rs2 trillion as FBR’s revenues, he says there could be some guess but there should be some basis for fixing such an ambitious tax target. The EAC and RAC in a meeting held this month asked the government to consider revival of wealth tax, implement existing laws by the provinces to collect agriculture income tax from land holdings of over 50 acres, evolve consensus on RGST as well as with provinces to bring services into the tax net, rationalize tariff regime, and plug leakages for broadening the tax base to overcome fiscal woes.

A special committee was also constituted by the RAC comprising of Member FBR and tax experts to consider proposals for reviving wealth tax in the upcoming budget. Now the committee would come up with its recommendations before the next RAC meeting which is scheduled to meet on April 30.

The RAC had estimated that even after taking additional revenue measures of Rs53 billion last month, the FBR’s revenue would be standing in the range of Rs1,535 billion by end June 2011. The government estimated FBR’s revenue would touch Rs1,588 billion till the end of the financial year.

The revised fiscal deficit target of 5.5 percent of GDP will also rely on the provinces’ ability to generate 0.7 percent of GDP otherwise the deficit will shoot up to 6 percent on June 30, 2011. The EAC recommended the government to follow the Malaysian model by establishing a company to deal with cash bleeding public sector enterprises with immediate effect. The Malaysian government under Mahathir’s regime had established Khazana Holding Company to overcome woes of public sector enterprises.

Without abolishing role of ministries and establishing one Board of Directors having credible names, the much-needed restructuring of eight PSEs, including PIA, Railways, PASSCO, TCP and others will not achieve success. Former federal minister, Jehangir Khan Tareen, had recommended the government in the EAC meeting to enforce the existing law to collect agriculture income tax from big landlords. Provincial governments are authorised under the existing law of 2001 to collect agriculture income tax from those who possess land holding above 50 acres. There is fixed rate of tax per acre on those who possess land less than 50 acres.

Going for the goal

MDGs can be achieved only through co-ordinated efforts of various government institutions

By Zubair Faisal Abbasi

In Pakistan, the focus of debate around Millennium Development Goals (MDGs) has been whether the country can achieve them or not. It was argued that the country was able to reduce poverty to half from 36 percent to 17 percent a few years ago and, hence, achieve the target before 2015.

Though the argument could not withstand criticism on methodology of poverty assessment, the country could not sustain the 50 percent of poverty reduction either. The euphoria was over before it could make everyone happy. According to some estimates, the country lapsed back into the poverty trap with 30-40 percent natives of the country inside the murky circle.

Looking at people from the perspective of multi-dimensional poverty, the country has more poor and deprived (52 percent) in its coffers than non-poor, according to estimates of Social Policy and Development Centre. Such inequalities and deprivations paint the canvass of life for people and rob them of basic capabilities to live and function.

In a recent report on MDGs by the government of Pakistan, the evidence of health outcomes during the period between 2001-02 to 2006-07 shows that only two more lives can celebrate their first birthdays amongst 1000 live births. While infant mortality rate stands at 75, during the next four years it has to be brought down to 42.

Going from such ebb to a plateau is no doubt an uphill task which goes beyond the ambit of health-focused interventions. Most distressing point is that such deprivations abound in Pakistan, despite the sloganeering of having recently lived another era of high growth and investment in which the highest ever 9 percent growth rate was also achieved.

Responding to the situation of Pakistan, different civil society groups have stressed upon the social and legal side of the enabling and egalitarian environment which could help achieve the MDGs. These are good initiatives and must be carried on with fervour.

However, a deep analysis is also needed that whether MDGs have really focused the development malaise in Pakistan. In addition, how New Growth Strategy (NGS), which has been tagged as neither new nor a strategy by analysts, would be able to take Pakistan on a sustained and equitable economic growth path.

It appears that, currently, the way issue of social and economic development has been articulated in Pakistan (and in MDGs to a certain extent) is something like: largely if health (i.e., more doctors, medicines, and hospitals, etc.) and education (i.e., more schools and teachers) get some attention while letting the market decide what kind of capacity is needed in the economy, everything will automatically adjust based on the logic of so-called free and open market.

At best, what is needed is to allow individual entrepreneurship to flourish through (micro) credit at the bottom and enforcement of property rights at the top levels of economic activity. The rest can be left to the national and international market and competition to decide in which direction welfare functions can perform since such a system will increase size of the economic pie and hence improvement in distribution will follow.

There is a need to question the above-mentioned doctrines of the ‘new developmentalism’ being pursued and brought in Pakistan. Prof. Ha-Joon Chang, through his research on the dynamics of economic improvements around the world, has argued that countries need to improve their ‘productive capacity’ in order to meet the challenges of poverty and social development. They need to bring in the idea of ‘flying goose-like’ situations in which the government, private sector, financial sector, and academia build industrial development vision which reinforces the collective entrepreneurial efforts for economic growth through up-gradation and modernisation of the productive capacity of an economy.

It is important to note that individual entrepreneurs do play a very significant role, such as having more business graduates, doctors and engineers means trained and skilled human resource to fuel the engine of economic growth. However, equally important is to have successful large-scale enterprises and firms which absorb and sharpen the utilisation capacity of the economy. Such firms are needed to organise complex division of labour which is needed to harness the potentials of individual entrepreneurs.

Ha-Joon Chang argues, what really distinguish the US or Germany, on the one hand, and the Philippines or Nigeria, on the other hand, are their Boeings and Volkswagens, and not their economists or medical doctors (which the latter countries have in quite large quantities).

In a nutshell, the argument is that trade and industrial development should not be left to the forces of competition and markets. While humanistic concerns for egalitarian social development are important and must be adequately addressed, the federal and provincial governments need to come forward and invest in technological development of the country to bring in improvement in productive capacity.

Even restructuring and devolution of Higher Education Commission must be looked at from this angle rather than playing politics around the spending capacity of the institution. In this way, the development vision of Pakistan has to go ahead of achieving MDGs.

Only way out

Bringing non-taxpayers into the tax net is the only option to come out of the economic blind alley

By Huzaima Bukhari and Dr. Ikramul Haq

In the wake of statements on tax reforms by Finance Minister, Abdul Hafeez Shaikh, while in Washington and interview of Governor State Bank of Pakistan, Shahid Kardar, with Reuters early this month, the country is in the grip of heated debate on how existing revenues should be increased. Member Inland Revenue, Federal Board of Revenue (FBR), in a series of Press statements during the week stressed that "the real challenge confronted by the country is to revamp the tax system to survive as a successful nation".

While FBR is keen to introduce new taxes, without first ensuring the enforcement of existing ones, powerful businessmen have warned that if wealth tax is re-imposed, they would openly protest and counter this move with full force. Hafiz Shaikh, Shahid Kardar, Nadeem Ul Haque, during parleys with IMF and World Bank, tried their best to convince donors to give more loans to Pakistan as the government was sincere and serious in keeping the fiscal deficit within agreed limit and imposing necessary tax measures for this purpose.

However, IMF-World Bank teams were annoyed with the present state of affairs and dismal performance of FBR even after receiving millions of dollars from them for Tax Administration Reforms Programme (TARP). Hafiz, Kardar and Nadeem want reforms, but are helpless before the crafty tax bureaucrats.

For the last many years, FBR is struggling to improve tax-to-GDP ratio but has utterly failed despite resorting to all kinds of highhandedness in blocking genuine refunds, data manipulation, harsh tax policies and unjust withholding taxes. Tax-to-GDP ratio dropped to 9 percent in 2009-2010 from 12.5 percent in 2001-2002. FBR works in protecting tax evaders while squeezing the last drop out of those who pay due taxes. This unholy alliance between FBR and tax evaders is depriving the nation of billions of rupees.

FBR enjoys unlimited discretionary powers under various tax codes. Tax machinery is not subjected to pecuniary damages for blatantly unlawful acts. Those who neither file returns nor pay any tax are friends of tax collectors but large taxpayers are compelled to pay what is not even due at times. They are forced to spend millions to get relief in courts.

Even when obnoxious orders are declared unlawful by courts, no action is taken against delinquent officers. The FBR clout is so strong that it escapes any kind of accountability. The stalwarts of FBR thwart imposition of progressive taxes and plead oppressive taxes. It is an established fact that since 1991-92, the incidence of regressive taxes, shamelessly levied on the poor, has been increasing manifold -- making the powerful sections richer and richer.

Progressive taxes like wealth tax, estate duty, capital gain on immovable property and gift tax were abolished to benefit the rich. This has distorted the entire tax system, created income inequalities, widened the rich-poor divide and retarded economic growth.

When regressive taxes -- sales tax and presumptive taxes under income tax code -- were imposed in 1990 and 1991, our fiscal deficit was just Rs80 billion. After 20 years, our fiscal deficit has soared to nearly Rs900 billion, proving beyond any doubt that irrational taxes do not bridge fiscal deficit; rather they push a nation towards debt enslavement and economic collapse. Irrational tax measures have always played a decisive role in destroying civic society and paving the way for anarchy and chaos. This is exactly what the rulers want for Pakistan.

Low tax-to-GDP ratio is the main challenge faced by our economic and tax managers. The size of Pakistan’s GDP in 2008-09 was estimated at Rs13 trillion but revenue collection was less than Rs1.2 trillion. Figures of collection vis-à-vis tax-to-GDP ratio in 2008-09 is given in Table A and for 2009-10 in Table B. Pakistan stands 155th amongst 179 nations in terms of tax-to-GDP ratio based on US think-tank Heritage Foundation’s 2009 Index of Economic Freedom.

Mr. Kardar in his interview with Reuters said that he was worried by a "structural shift" of incomes towards the untaxed sectors. He added that "with this shift of incomes away from the taxpaying sectors to non-tax paying sectors, the tax-to-GDP ratio was structurally destined to be hovering around lower levels". According to Governor State Bank, economy has shown signs of improvement but quick steps are needed to broaden the tax base to benefit from the growth in untaxed sectors, such as agriculture.

In the Finance (Supplementary) Act, 1977, passed and enforced during the Bhutto regime on January9, 1977, for the first time a great revolutionary step was taken to tax the feudal lords by levying normal rates of income tax on agricultural income from assessment year 1978-79 as computed under the Sixth Schedule.

This Act and Land Reforms Act, 1977 annoyed the ruling classes and Military-Mullah alliance decided to do away with Bhutto. The rest is history -- these laws were overturned by military dictator General Ziaul Haq to protect rich landlords, which included mighty generals as well who by that time had grabbed thousands of acres of State lands under one pretext or the other. Since the rich and mighty have been avoiding taxation in Pakistan since 1977, 2 percent of population has accumulated 80 percent of national wealth without paying any personal taxes whereas total number of persons living below the poverty line is now 65 million.

The country is piling up huge debts -- external debt till 2015 will increase to US $75 billion from present figure of US $55 billion. The domestic debt is increasing at an alarming rate -- it is now over Rs. 5 trillion.

Achieving revenue targets by keeping the rich outside the ambit of personal taxes is a criminal act. Our revenue potential is not less than Rs4000 billion but FBR is not even collecting half of it (In the nine months of current fiscal year it collected merely Rs1019.8 billion).

The collection will never go to optimal level unless all the untaxed sectors are brought into tax net and leakages are plugged. Massive non-compliance testifies to the complete failure of FBR, yet its stalwarts get promotions, rewards and what not.

On the one hand tax collections are miserably low and on the other no efforts are in sight aimed at improving productivity and economic growth. Resultantly, Pakistan is facing a dilemma: neither can it afford to give any meaningful tax relief package to the common man, trade and industry (due to huge fiscal deficit) nor can it achieve a satisfactory level of economic growth (due to retrogressive tax measures).

The writers, tax lawyers, teach at Lahore University of Management Sciences (LUMS)

Table A: Tax-to-GDP ratio in 2009-2010

Nature of Tax Collection (Net) Tax / GDP

(In million Rs.) Ratio (%)

Direct Taxes 443,548 3.39

Indirect Taxes 717,602 5.48

Surcharges 18,071 0.14

Total Taxes


Surcharges 1,161,150 8.87

Total Tax

With surcharges 1,179,221 9.01

Source: FBR Year Book 2008-2009

Table B: Direct & indirect tax collection

for FY 2009-2010

Nature of Tax Collection (Net) Tax / GDP

(In million Rs.) Ratio (%)

Direct Taxes 528.6 4.32

Indirect Taxes 800 5.18

Total Taxes 1328 9.50

Source: FBR Quarterly Report April-June 2010

Power of the community

Micro-hydel plants in Chitral offer electricity to masses at rates one-fourth of Wapda

By Shahzada Irfan Ahmed

Bibi Zar, 58, a resident of Wahat village in Chitral district, is spending a life full of comfort. She has access to warm water in freezing cold and uninterrupted power supply at minimal rates. Besides, she has enough leisure time at her disposal - a luxury she could not even think about until a couple of years ago.

Living almost 55 kilometers away from Chitral town, she is one of around 1,800 proud beneficiaries of the 100 KW micro-hydel power plant set up in the village. The facility managed by the village community never stops working, so there’s no load-shedding. This is in sharp contrast to the privileged Chitral town where electric supply sometimes remains suspended for 10 hours and more at a stretch.

Zar feels relieved as she doesn’t have to pick wood for heating or wash clothes in streams. The washing center in her village, run on locally produced power, serves the purpose. Above all, the houses in the village are illuminated at night, prompting night-time activity which was not their earlier. Besides, they have electrical appliances like micro-wave ovens, washing machines, electrical irons in their homes which have totally turned around their lifestyle.

"Our children can study during late hours and we can carve handicrafts throughout the night, sometimes doubling our production and income," she tells The News on Sunday (TNS) in a triumphant tone. The best part of the story is that per unit electricity costs between Rs1.5 to Rs2 to domestic consumers and Rs3 to the commercial and the rate does not increase with an increase in the number of units consumed. This is a blessing, considering the fact that Wapda sells a domestic unit for Rs8 in the area.

This micro-hydel plant is just one of the 63 set up on the banks of Chitral river and water streams as an initiative of Agha Khan Rural Support Programme (AKRSP). The formula at work is that 80 percent cost has to be borne by the donor and the remaining 20 percent by the benefiting community, mostly in the form of kind and labour.

"AKRSP has availed funding for micro-hydel power plants from different donors but right now their donor is Pakistan Poverty Alleviation Fund (PPAF)," says Fazl-e-Rabbi, Manager, Hydel and Renewable Energy, AKRSP while talking to TNS. He says the micro-hydel plants provide electricity to 24,000 households in Chitral and this number is double that of those connected to the national grid.

Fazl explains the process of setting up a micro-hydel plant which starts with a social organiser visiting a place and mobilising the local community. This phase is called first dialogue. During the second dialogue, civil and electrical engineers reach the venue for survey and assess its suitability for the purpose. In the third phase, a proposal is sent to PPAF which studies it and releases the required amount for the purpose.

Fazl says the households contribute wooden poles for installation of distribution lines, etc, and do physical labour as part of their obligation to cover 20 percent cost of the project. Sometimes, transmission lines have to be carried to villages situated at a distance of 10 kilometers or more from the power plant. The locals perform the arduous task of setting up wooden poles and transmission lines in the mountainous terrains of Hindu Kush.

Amin Baloch, a resident of Garam Chashma tehsil, Chitral, believes the plants are a lifeline for the local communities. He tells TNS they are managing the affairs of these power plants very effectively. "The village organisations, elected for this purpose, award electricity connections to households, at a cost decided unanimously, and sells electricity units to local and commercial users after keeping nominal profit." The excess amount, he says, is kept in a reserve pool and used for routine repairs and troubleshooting. In case of a major fault, the donors are approached for intervention but this situation seldom arises.

The potential of setting up micro-hydel power projects is huge as the raw material does not deplete at all and can be used again and again for power generation. In these plants, the energy of fast-moving water is used to rotate the blades of a turbine at high speed. The turbine turns an electrical generator, which produces AC electric power.

To build the required pressure, a part of the river water is diverted into a gently sloping channel running along the slope of the hill, at a much lesser gradient than the main stream below. After some distance, there is a 30 meter or more height difference between the channel and the river. The water from the channel is then sent down a pipe, known as a ‘penstock’, with a narrow exit jet.

This gives the water sufficient force to rotate the blades of a turbine, which turns the 220 volt electrical generator via a V-belt drive and the water is released back into the river. The turbine, generator and control systems are located in a small turbine house in the valley, from where distribution cables supply power to nearby communities.

Amin shares with TNS that people of Chitral have always welcomed innovation and that’s why these projects have materialised here so well. "Before the construction of Lowari tunnel", he says, "Chitral would remain cut off from the rest of the country for six to seven months in a year. They would adopt different methods to store edibles, etc, for themselves and take measures to sustain during this phase. A strong bond between community members and the awareness created by perennial interaction with NGOs have made these people action-oriented", he adds.

"Fortunately, all the components of power generation system are made in Pakistan, except for the generator and electrical meters which are imported from China", says Rahim Diyar, Managing Director, Hydrolink Engineering & Equipment Company (pvt) Ltd, which supplies hydel turbines in the market.

He says as per policy, communities can themselves manage micro-hydel projects up to 1 MW. Projects above that capacity have to come under the shadow of WAPDA and may be added to the national grid. Rahim tells TNS his company is in talks with the Punjab government which wants to produce hydel power at river and canal water heads in the province.

PPAF spokesperson, Ghulam Haider, says the fund is financing these projects as per its commitment to promote Clean Development Mechanism (CDM) in the country. "This mechanism calls for reduction in greenhouse gas emissions and offers incentive in the form of carbon finance (in dollars) to those succeeding in doing so. This money can be used for sustainable development in countries that cut on emissions." Haider says PPAF expects to earn $8.33 million in carbon revenue generated by micro-hydel projects funded by it till 2015.

Where is the justice?

There is a structural contradiction within the ‘justice’-delivery apparatus

By Aasim Sajjad Akhtar

The Supreme Court’s decision to acquit five of the six men that were involved in the gang-rape of the now world-renowned Mukhtaran Mai has quite understandably elicited widespread outrage. This latest pronouncement of our country’s most powerful institution of ‘justice’ will no doubt subject the victim and her family to a fresh bout of emotional and mental violence. But it should also discredit once and for all the fashion of looking to the Supreme Court as the panacea to Pakistan’s myriad problems.

Of course, right-wingers throughout our land of the pure continue to hope (and pray) for their latest messiah - the Chief Justice - to wave his magic wand, rid Pakistan of its incomparably ‘corrupt’ politicians, banish infidels from this Kingdom of God, and put us all on the righteous path towards Zia’s Pakistan (no doubt on the back of our heroic generals). This will not happen, not necessarily because certain judges and generals would not want to proclaim themselves messiahs but because the balance of forces in Pakistan’s infinitely complex calculus of power is simply not amenable to such upheavals at the present time.

Yet, even beyond the Machiavellian antics of our elite and its foot soldiers, the media has managed to create a popular perception that the Chief Justice - and his Supreme Court - is the last bastion of ‘justice’ in a society where injustice is rife. Thus, all over the country - although much more so in Punjab’s cities and Karachi - the poor and dispossessed sit in front of Press Clubs and other prominent locations with placards in their hands appealing to the Chief Justice to take note of their plight.

The ‘suo moto’ craze has subsided to some extent as it has become apparent that the designated messiah does not actually take up the cause of every long-suffering victim of class or legal oppression. Yet largely because segments of the media continue to project the Supreme Court in an extremely positive light - helped I am sure by the honourable court’s own populism, of course - many of the most wretched of this Pakistani earth continue to wait in hope.

Even high-profile decisions that fly in the face of the Court’s populist image, including the Mukhtaran Mai case, are pitched in certain ways to save the cause of ‘justice’ even while rendering legitimate patriarchy, historical privilege and the overbearing power of the state. I would argue that it is high time that the myth of the institutions that dispense ‘justice’ in this country is exploded once and for all, even if the media and other influential segments continue to forge ‘public opinion’ according to their own agendas.

In truth, it is misleading to even employ the word ‘justice’ to refer to the institutions of the state charged with adjudicating on disputes and administering public goods. As with every other institution of the state, the ‘justice’-delivery apparatus has changed little since the colonial period. Under the Raj, ‘justice’ meant only the enactment of laws that were framed in the interest of the colonial state. More often than not, the ‘justice’-delivery apparatus enforced upon state subjects draconian arrangements that served to extract the maximum amount of surplus from society whilst maintaining order. The emphasis was on the credible threat of force and exemplary punishment.

More than six decades on from the end of colonial rule, ‘justice’ is still an ambivalent notion for most ordinary Pakistanis. While we all come into contact with the thana and katcheri to some extent - the subordinate classes much more so than the dominant ones - it is generally true that we harbour little expectation that these institutions will dispense justice impartially. In fact, it is not uncommon for ordinary people to circumvent these institutions entirely which suggests a distinct lack of confidence in them.

There is a structural contradiction within the ‘justice’-delivery apparatus that explains its role as well as the ambivalent attitude of ordinary people towards it. On the one hand, the British vowed to create an impersonal, legal-rational justice-delivery apparatus that matched up to the classic Weberian prototype. In practice, what came into being was far from impersonal whereas - as I have already mentioned - law itself was a function of political machinations rather than the popular will.

Nevertheless, one does hear old-timers pointing out that there was some semblance of impartiality under the British in comparison to the almost completely arbitrary state of affairs that has taken shape in the post-colonial period. This is, of course, misleading because it is the very nature of the state - and justice-delivery apparatus in particular - that the British created that has facilitated the rapaciousness and privatization of public institutions that we are all witness to today. By subordinating political to administrative institutions on the one hand, and instituting an illegible set of procedures and systems on the other hand, the British ensured that a certain oligarchic elite would forever remain powerful whilst being able to draw upon the law and the slogan of justice-delivery to maintain their power.

In recent years the international financial institutions (IFIs) have thrown money at our governments to reform this ‘justice’-delivery apparatus. The Asian Development Bank (ADB) issued loans of hundreds of millions of dollars under the guise of the Access to Justice programme. Just like the donor money that was given to Musharraf to devolve power to the local level and reform the civil services and police, the Access to Justice programme smacked of colonialism of the most insidious kind - that which claims to empower the ‘natives’ whilst reinforcing structures that disempower them decisively.

The biggest fallout of the movement that signaled the end of the Musharraf dictatorship was the reification of the higher judiciary and the suggestion that the Chief Justice and other judges were able and willing to truly change the destiny of Pakistan’s long-suffering people. If nothing else, decisions such as the rejection of Mukhtaran Mai’s appeal are conclusive proof that the formal state apparatus does everything but dispense impartial justice to the most weak and vulnerable segments of our society.

Last chance?

The impediments to full provincial autonomy under the 18th Amendment need to be tackled despite the odds

By Raza Rumi

Perhaps the best thing about contemporary Pakistan is the way its governance arrangements are being restructured to undo the bitter, brutal legacy of centralisation. Had we undertaken such reform decades ago, Pakistan would have been a far better place. The 18th Amendment reflects a board political consensus on how Pakistan can actually evolve into a real federal state as opposed to the notional federalism of the past where provincial autonomy had become a residue of central patronage and not guaranteed by the Constitution.

Nevertheless, the devolution of powers in 2011 faces two major dilemmas. First, the provinces are currently operating as centralised bureaucratic apparatuses with little or no powers and accountabilities at the local levels. Second, and perhaps far more important, the provinces have to build their technical and political capacities to handle the new powers and functions, which are now flowing at an unprecedented speed. These two challenges are the real test of civilian governments and it remains to be seen if they can handle it lest another messiah or messiah-proxies enter the arena and reverse this process. Knowing Pakistan’s history, anything is possible. This is a country plagued by lack of political stability and policy continuity. We shall examine the pitfalls and challenges that lie ahead in this transitional process.

Progress so far: During the first two phases of the devolution, 10 of the 48 ministries at the federal level were to be devolved. The Committee set June 30th 2011 as the deadline for this process. Taking up these recommendations, the federal cabinet devolved ministries for special initiatives, Zakat and Ushr, population welfare, youth affairs, and local government and rural development to the provinces in December 2010. The provinces also inherited office buildings, equipment, development funds and projects for fiscal year 2010-11. All international matters of these ministries were transferred to the Economic Affairs Division (EAD) and some planning-related matters to the Planning and Development Division. However, overall planning of ministries that are being transferred or will be transferred in February 2011 will be the responsibility of provincial governments.

On April 5th, 2011 the second phase of the devolution process commenced, with the devolution of the ministries for education, social welfare, and special education, tourism, livestock and dairy, rural development and culture. According to reports, the Commission for Implementation of the 18th Amendment has also approved a plan for the transfer of three federal ministries, including sports, women development and environment, to the provinces in the third phase.

Unclear federal arrangements: While the centre has abolished ten ministries so far, there is a deadlock over the staff and resources. Provinces complain that they cannot pay the wage bill of surplus staff and centre has retained all the existing federal public servants, as any move to right size will be fraught with political dangers. Similarly, after June 2011, who will pay the staff? If the federal government continues to foot the salaries bill then it will not be able to rationalise its size and the temptation of recentralisation will remain. Secondly, the federal government’s move to shift attached bodies and autonomous organisations to Cabinet Division and such other dysfunctional ministries is even worse. There needs to be a more thorough assessment of post-devolution architecture of the central authority. It appears, with due respects to a great reformer, Raza Rabbani and his colleagues, patchy, ad-hoc and devoid of long term thinking.

Resistance by the bureaucracy: The Implementation Commission for the 18th Amendment has already voiced its concerns over how the federal bureaucracy is resisting reform. Add to this the vested interests whose power, pelf and rents are endangered and the plot thickens. As the case of Higher Education Commission (HEC) demonstrates, powerful lobbies can play the game of resistance well. HEC debate is being argued along the lines of why HEC is so effective instead of what justification does HEC have after the political executive has agreed devolution? There are vested interests such as drug companies that might find it easier to deal with central authorities than dealing with messy governance dynamics in the provinces. These issues require critical thinking and more technical options than simple case of ‘doing the devolution’ in a hurried manner. Above all, it also necessitates the need for civil service reform.

What happened to civil service reform? Since 1970s we have not initiated any kind of civil service reform in Pakistan. The 1970s reforms were partial and more symbolic than substantive. Now is the time to rethink the efficacy and necessity of federal services such as District Management Group (DMG) and Police. If the provinces are going to be managing their administrations should we not move to revamped provincial civil service cadres that classify officials according to expertise, skills, integrity instead of seniority and province versus federal divide. The federal government has an ideal opportunity to retain a highly trained and effective small group of federal officials instead of mammoth armies of ‘cadres’, CSS inductees and group-wise services, which work like clans and tribes rather than professional class of managers. We hope the federal government is going to do something about it. The best way forward is to pick up the thread where Ishrat Ali committee left it. The proposals in that report are fresh and lying unattended. Someone needs to read them.

Provincial capacities: While a few provinces, such as the Punjab and Khyber Pakhtunkhwa, have started to make preparations for the new roles and responsibilities, the situation in Sindh and Balochistan is somewhat worrying. The key reason for lack of clarity relates to the political environment existing in these provinces. The federal government has the duty of helping the provinces out and the Council of Common Interest (CCI) must take note of the situation and appoint special purpose committees to review the situation. A good solution would be to use scores of officers who are currently sidelined as OSDs to start working on these lines. Leveraging existing resources is not only sensible; it will set a good precedent for the provinces too. Officers cannot be declared as idle; taxpayers are paying for their salaries and perks.

Education and health: The complete devolution of education is underway and the provincial education (and in some cases higher education) departments need to bolster capacities. This may be a good opportunity to engage in public private partnerships with the education institutes, think tanks and NGOs. Using domestic expertise can only help provinces handling the vertical programmes and improving the service delivery. Similarly, for health services, provinces need to gear up their resources in anticipation of the devolution of the national health ministry. A few experts, like Sania Nishtar, have raised concerns about the public interest areas that may be affected in the wake of devolution.

In particular, setting standards, managing health information, disease security, compliance with international regulations, and the regulation of medicines and related products are domains where the federal government has an edge. Dr Nishtar has opined that in most countries a ministry or a semi-autonomous public regulatory authority, such as the Food & Drug Administration in the United States, regulates medicines and drugs centrally, usually. Even countries such as India where some (but not all) aspects of drug regulation were previously decentralised, are now moving towards centralised regulatory arrangements. These are important policy debates that should start now and further delay may harm public interest in the short to medium terms.

Culture: With the abolition of central culture ministry the important areas of conservation of heritage and archaeology have also been decentralised. Most provinces lack the essential technical capacity to manage the old sites which are important for conservation. Lest we squander whatever we have, the provinces should immediately move to take federal staff or hire new ones to avoid disruptions.

Planning for the burgeoning youth: In a country where 65 percent of the population is below the age of 26 (and the new census may increase this percentage) the devolution of youth ministry requires special handling by the provinces. Currently, youth affairs are lumped with information or such other ministries and, therefore, are treated as just another bureaucratic outfit. In fact, planning and preparing for a young Pakistan is now an urgent priority. It would be best to add youth to planning and development departments along with authorities that are focusing on skills development. All these issues are interrelated.

Province to local: The most urgent complementary reform relates to the revitalisation of local governments that were packed by the current coalitions in the provinces. This has been an inimical development and the devolution from the centre will be meaningless if the centralisation at the level of province is not taken care of. It is necessary that the provincial laws - that exist in draft forms - are debated and approved by the legislatures. Political parties must remember that at the end of the day an election will assess their effectiveness in delivering basic services and not their stance on US drones or foreign policy shenanigans that occupy the central position in policy discourse. Pakistani state has to be rescued and that too at the local level where it interacts with the citizen. The current absence of local state can only endanger Pakistan’s future.

The recent resignation of Ishaq Dar, the Vice Chairman of the Implementation Commission, indicates the contested nature of the devolution process. Many analysts believe that smaller provinces are keen to push the agenda while Punjab has reservations over the way the process is being handled. It is, therefore, imperative that this process continues through a consensual approach and should not be derailed. Concurrently, provinces must fast-track their preparations and think of devolving powers and resources to local governments. The impediments to full provincial autonomy under the 18th Amendment need to be tackled despite the odds. This may be our last chance to do so.