Hardly two months of tenure of the PML-N government are left but it is anxious to sign the revised Free Trade Agreement (FTA-II) with China, ignoring the national interest and hastily providing benefits to the vested interest. It is a good omen that the signing of the FTA phase II was delayed at the last moment due to the reservations of the business community and opposition law makers on the final offer list shared by Beijing with Islamabad.
During a briefing by the State Minister for Finance Rana Muhammad Afzal on the status of negotiations on second phase of FTA with China, National Assembly standing Committee on Finance expressed concern over what it stated the secret nature of the negotiations that were held to finalize this agreement. Over the past few weeks, the Chinese ambassador has held meetings with the Commerce Secretary and Prime Minister Shahid Khaqan Abbasi to push the deal. The business community from Fiasalabad-Pakistan’s textile hub-voiced serious reservations about the Chinese final offer list.
China wants zero duties on 75 percent tariff lines that cover thousands of Chinese goods to flood the Pakistani markets, bulk of which may enter on dumping price in violation WTO rules of free trade. Under the first phase of the FTA Pakistan gave duty concessions on 35 percent of tariff lines which led to huge influx of very cheap Chinese goods and many local industries could not survive. The trade bodies are justified in their residence to giving irrational concessions to China which they realize to be extremely harmful to the local industry. Chairman of the National Assembly Standing Committee regretted that the Commerce Ministry did not take all stakeholders on board before offering huge concessions to Beijing.
Trade with China was already one-sided and if further concessions were given no industry would survive in Pakistan. Trade volume which stood at $ 4 billion before the signing of FATF-I in 2008 peaked to $15.6 billion in 2016-17. Pakistan’s exports were $1.5 billion in the last fiscal year, while imports from China amounted to $ 14 billion, causing a trade deficit of $ 12.5 billion. This time the technocrat law makers of the opposition parties closely watch the modus operendi adopted by the secretive PML-N leadership for negotiating and signing the international agreements which adversely affect the economy. PakistanTehrik-i- Insaf MNA Asad Umer said that Commerce Ministry did not hold consultation with parliament before holding talks with China. He underscored the need for review of the trade figures to determine how much from China was the outcome of change of destination from Europe and West to China. He said free trade agreement should not be constructed on theory rather it must be based on ground realities. The ground reality is that Pakistan’s industry is not competitive.
A joint meeting of National Assembly standing Committee on finance and commerce will now be held to finalize parliament’s response to FTA-II. Beijing push for trade liberalization will certainly explode the myth of country’s rapid industrialization created by the Planning Minister Ahsan Iqbal through the premature idea of relocation of Chinese high-tech industries to Special Economic Zones (SEZs) and joint ventures between Pakistani and Chinese entrepreneurs. Chinese industries use 5th generation technology and Pakistan’s industrial base operates on second generation technology. A quantum leap to 5th generation technology is not possible with in the next few years. If FTA-II materializes then it would be convenient for Chinese companies to manufacture their products in China and supply them to Pakistan at zero duties which would render SEZs useless
If the capital intensive economy of the United States can not afford the free trade regime with China then how a debt riddled economy can sustain the luxury of FTA-II with 75 percent tariff lines at Zero duty. The United States has imposed $ 50 billion duties on Chinese goods and President Donald has hinted at $ 100 billion more duties on imparts from China. A wave of protection of domestic industries is surging in Europe. In democracies international agreements are discussed in the parliament where the will of the people is reflected. But Pakistan is a peculiar type of democracy where cobweb agreements with IPPs, LNG import agreement with Qatar and FTA-I with China were made without consultation with the parliament. The FTA-II must be ratified from the parliament. The people have not given mandate to the present government to bypass the parliament for signing the international agreements that negatively impact the economy which is still away from take off stage.
Prime Minister Shahid Khaqan Abbasi announced tax amnesty scheme based on five points according to which people earning Rs. O.1 million per month will be exempt. Those earning Rs. 1.2 million to 2.4 million will have to pay 5 percent tax from their salaries. Moreover, 10 percent tax will be levied on those earning Rs.2.4 million to Rs 4.8 million annually while those earning more than Rs 4.8 million will be liable to pay 15 percent income tax. Overseas Pakistanis after a penalty payment of 2 percent will become eligible to benefit from tax amnesty scheme. Those going for tax amnesty will be exempted from tax net.
The tax amnesty package was not well received by and large because of its liberal concessionary component for offshore accounts and assets holders. It does offer huge tax exemptions to the salaried class. The standing committee on finance resolved to block the government’s move in the national assembly. Pakistan Tehrik Insaf also castigated the proposed amnesty scheme and revealed to challenge it on every platform .Criticizing the PML-N leadership, PTI MNA said that all those who chanted the slogan of the sanctity of the ballot don’t want to give parliament its status now. He said that the real motive behind introducing the scheme via bypassing the parliament is to clear the way for looted money to be brought back to the country. He cautioned the government from rolling out any scheme without parliament consultation. The law maker termed the tax amnesty scheme an attempt to whiten the black money of money launderer and vowed that his party will strongly resist it in the parliament. He said it will be challenged in the court.
Any amnesty scheme for offshore assets is good if it successfully repatriates cash back into the national exchequer that would otherwise stay parked outside. A sum of $ 100 is an attractive addition. But can it be done? Experience has not shown that it can. Pakistan has seen mixed outcomes from tax amnesties. In 1958, under Field Marshall Ayub Khan, the first tax amnesty scheme brought 71,289 wealthy people in the tax net. The new taxpayers declared 1.3 billion rupees in assets. In 1969, General Yahya Khan amnesty added 19600 tax payers with declared assets of Rs. 920 million. In 2016, Zulfiqar Ali Bhutto could collect Rs. 270 million through tax amnesty. In 1986, General Muhammad Ziaul Haq attempted amnesty but that met with little or no success. In 1997, the then Prime Minister Nawaz Sharif could add only Rs. 141 million. In 2000, General Musharaff launched a vigorous campaign for the documentation of the economy which was a right step but it fall prey to the rigidity of tax machinery. Nevertheless, it resulted in collection of $ 3 billion. In 2016, PML-N government announced three tax amnesties with the expectations to bring millions of tax. But in actual terms 128 people participated.
The timeline of tax amnesty shows that in the eras of Ayub Khan and Musharraf, the tax amnesty schemes produced positive results. On the country in all oligarchic civilian governments such schemes turned out to be a farce enabling the black money holders to regularize their ill gotten wealth and immovable assets. The Supreme Court of Pakistan has constituted a committee of experts to trace and bring back money stashed in banks and properties by citizens abroad. Because of its weak ant-money laundering law, Pakistan is facing challenges at the Financial Action Task Force. This intergovernmental organization has given it a short leash until 30th June to improve its anti-money laundering and counter terror financing laws failing which the country will be put back on the grey list. Any offshore amnesty scheme would be viewed with suspicion and would further weaken the country case as being a responsible state in the comity of nations. It may be construed as exeption from the anti-money laundering law. There seems no rationale as to why the incumbent government at the tail end of its tenure is bent upon giving a certificate of legitimacy to the illegal offshore accounts and assets holders. The safe passage provided to the money launderers is an offshore business NRO.
The repeated claims of the PML-N government about induction of 10000 megawatts of power in the distribution system evaporated in thin air. The move to convert the furnace oil and diesel run thermal power plants to a relatively cheaper power generation source of Liquefied Natural Gas (LNG) also backfired. The government has lifted the ban imposed on the import of furnace oil for running power plants and has directed the state owned Pakistan State Oil (PSO) to place orders for bringing fuel cargo in order to meet growing electricity demand in summer.
Taking cognizance of the rising trend in the prices of crude oil and petroleum products the government preferred LNG in electricity production. A few months ago a hasty decision was taken to impose ban on the import of furnace oil. Since then PSO had placed no orders for its import and the power producers who run their plants on furnace oil opted for shut down and the overall power supply went down that necessitated four hours load shedding in the month of march the duration of which may become much longer in the next few months if smooth supply of furnace oil is not ensured.
At present demand for electricity supply stand close to 17000 megawatts, which is expected to cross 20000 megawatts in the peak summer season. On the other hand, the much cheaper hydroelectric power generation has dipped to 1050 megawatts from the installed capacity of 7000 megawatts because of slow down in water inflows in rivers. As predicted by Pakistan Meteorological Department, if rainfall becomes scarce in the next few months then the supply of hydro power generation will not improve to grater extent which will exacerbate the problem of power outages in this summer.
The menace of circular debt causes reduction in thermal power generation. The present government cleared the carryover liability of Rs. 480 billion in 2013. But it piled up again to Rs. one trillion by December, 2017. However the government acknowledges the circular debt liability of Rs.525 billion. The Economic Coordination Committee (ECC) had approved a circular debt settlement plan on March 7 in an attempt to immediately pay Rs. 80 billion to Independent Power Producers IPPs) and fuel suppliers to manage circular debt to some extent. It was decided to acquire loans from commercial banks and shift the back breaking burden of debt servicing to the consumers in the monthly electricity bills. As per conservative estimate consumers will pay additional 43 paisa per unit to service the debt. The consumers are already paying certain amount of debt surcharge for the Past two years. National Electric Power Regulatory Authority (NEPRA) has recommended the merger of electricity duty, Nelum Jhelum and equalization surcharges with the per unit electricity tariff which will add another 70 paisa per unit to electricity price. It will make the electricity tariff unaffordable for both domestic and commercial consumers.
The reason for the enormous amount of circular debt accumulation is that in the second tenure of PPP government cobweb agreements were made with IPPs due which poor consumers have to pay for electricity whichis not produced and supplied to the national grid, not it was consumed by them. It is because of these agreements, made against national interest, that Rs.525 circular debt includes Rs. 312 billion in energy cost, Rs. 214 billion in capacity charges, liquidity damages and loans mark up. The agreements signed with the private power producers have made them accountable to none. They do not allow the audit of electricity generation cost and the government lost cases against aTurkish Rental Power Plant and 9Pakistani IPPs in the international arbitration courts. A compensation of $ 800 million was paid on this account. Now the consumers will have to pay for the electricity which is not being supplied to the national grid by private power producers by virtue of the capacity charges clause despite the shutdown of thermal power plants due to shortage of furnace oil created by the wrong decision of the present government.
The Nitti Gritty of the agreements made with the Chinese private power producing companies by the present government has not been made public. But whatever information is made available to media that suggest that a revolving fund comprising commercial loans will be created in banks for the purchase of electricity from Chinese companies. If the agreements with Chinese companies also envisage the clauses of capacity charges and liquidity damages then the future electricity tariff will not be affordable for the consumers. Permanent solution lies in power generation from renewable and sustainable sources of energy like water, wind and sun which has not been the priority of either PPP or PML-N governments.
Addressing an international conference on terrorism, Interior Minister Ahsan Iqbal alleged that Pakistan is being pressured to house Afghan refugees for a longer period. He lamented over, what he implied, the apathy shown by the international communing towards sharing the financial burden of 3.5 million refugees present in Pakistan. He said that international community needs to work with Pakistan to address the issues pertaining to terrorism and presence of Afghan refugees in the country. He said they should understand that what Pakistan is facing today is also largely due their failure to discharge their obligations in this region.
The Minister claimed that Pakistan lifted the burden of providing relief assistance and shelter to 3.5 million Afghan refugees without the support of international community. He alleged that after the withdrawal of Soviet troops from Afghanistan the war ravaged country was abandoned by the free world and left it at the mercy of terrorist outfits.
The speech of the Interior Minister raises a mixed bogy of hypothetical and real questions to which the Pak-Afghan history of the past 38 years provides answers. It was the decision of President Zia government alone to involve Pakistan in the Afghan war when the troops of former Soviet Union entered Afghanistan in December 1979. It is also a matter of record that in the decade of 1980s the international community doled out generous financial and material assistance to help Pakistan in establishing 258 refugee camps and provide relief and succor to millions of Afghan Refugees. International Committee of Red Cross (ICRC), Freedom Medicine and a number of international NGOs established hospitals for the wounded people of Afghan War. UNHCR carried out multifaceted relief activities for the weal and welfare of Afghan refugees.
It is true that international community did not show much enthusiasm after the signing of Geneva Accord to restore peace and stability in Afghanistan by ending the fratricidal war that ensued between Afghan resistance groups that put up stiff resistance to the Soviet occupation of Afghanistan. However, they did support the United Nations (UN) efforts for the peace process in Afghanistan. UN representative on Afghanistan Benon Sevan made hectic efforts from 1989 to 1992 to bring rapprochement between the sitting government in Kabul and Afghan Mujahidin leaders present in Pakistan but the leadership of the two mainstream parties in Pakistan in their tenures of government did not show sagacity to capitalize on UN efforts for a negotiated settlement for transfer of power in Afghanistan.
There is no open indication that Pakistan is being pressured to extend indefinitely the stay of Afghan refugees in Pakistan though the Afghan youth is reluctant to return to Afghanistan because they have been borne in Pakistan and got education here. However, the law of war refugees does apply to them and have to be repatriated. Afghan ambassador Umer Zakhelwal had categorically told a delegation of Afghan refugee elders that Afghan nationals should be mentally prepared for return journey to their homeland. A senior official of the Ministry of SAFRON said in December that Afghan refugee repatriation plan is on the anvil but the matter went to the backburner. How can the international community commit financial assistance if repatriation plan is not in place? The leadership of an allied political party PML-N, PkMAP is opposed to the sending Afghan refugees back to the country of their origin but even though from 1st March about five to six families are going back from Baluchistan with the assistance of UNHCR. Likewise, 10-12 Afghan families daily come to the UNHCR center in Peshawar seeking assistance for home journey although there is no peace and stability in Afghanistan.
Aversion to the construction of big dam storages since 1975 till date and spending spree of enormous financial resources on less productive megaprojects, have landed the country in perpetual irrigation water crisis. But still the formulation of a comprehensive water policy is hostage to vested interest promoted in the garb of provincial autonomy. There is 60 percent shortage of water at rim stations which has posed a serious challenge to the upcoming Kharif crops. The situation is compounded by less water availability in two major reservoirs-Tarbella and Mangla dams-that hit the dead level.
The water crisis caused by climate change is not only posing threat to Kharif crops, it also led to a drop in hydel generation to an alarming extent causing elongated load shedding across the country. The total hydel generation dropped to 1050 megawatts (MW) due to cut in water releases from dams against the installed capacity of 7000 megawatts. At present Tarbella hydel power stations produce 325 megawatts and Mangla power units generate 200 megawatts.
Keeping in view the shortage of water in the system, Indus River System Authority (IRSA) decided to close downstream water releases from Chisma for Punjab with immediate effect. The province is the food basket of the country as KP and Baluchistan are largely dependent on Punjab for the supply of food grains vegetables and fruits. IRSA Spokes person, Khalid Rana disclosed that from April 4 Tannsa Panjnad link will be closed. The water shortages for Punjab and Sindh have increased to 60 percent. This assessment is almost double of the earlier estimate of 31 percent shortages. In Kharif season that lasts from April to November, Rice, sugarcane, cotton and maize are grown which are the key crops of Pakistan’s agrarian economy. Besides this it will negatively impact the production of different vegetables.
The alarming level of 60 percent water shortfall at a time when Kharif crops season is about to start will badly hit the per hectare yield further depressing the growth rate of agriculture sector which is less than two percent. The sector still contributes a lion share of 20 percent to the gross domestic product (GDP) and the next year target of 6 percent growth rate can not be achieved. The decrease in cotton production will compel the government to lift the temporary ban on the import of cotton from India and farmers will be unable to get better price of their produce.
According to Pakistan Meteorological Department and WAPDA, the country had received 80 percent less snow in catchment areas. The cut in water share to Punjab and Sindh was necessitated because of less water inflow from rivers into the dams’ storages. The water share of Punjab was reduced to 26000 cusecs from 29000 cusecs and that of Sindh to 17000 cusecs from 20000 cusecs. The melting rate of snow is also lower in catchment areas despite relatively higher temperature in the month of April this year and water discharge level is not going up. Last year Skardu temperature was 16 degree Celsius in April and water discharge in the River Indus was 276000 cusecs. This year the temperature is 20.6 degree Celsius but water discharge level is 17000 cusecs. The country had witnessed less water availability for Rabi crops from October 1, 2017 to 29 March 2018. Total water availability was estimated at 36.17 million acre feet but it remained 24.o6 million acre feet during Rabbi Season. As predicted by Met Department if there is no sufficient rain fall in the next three months and the temperature is 2 degree Celsius higher than the previous year then drought like situation may emerge in arid areas.
Over the past 42 years political and personal interests transcended the larger national interests because of which big dams storages were not built. Kalabagh dam was made politically controversial and ultimately shelved. The construction of Diamer basha dam has been put on the back burner for the last twelve years. Although its execution has been cleared by CDWP of the Planning Commission but the project was not tabled for approval in the recent meeting of Council of Common Interest because of unjustified opposition of the government of Sindh. It is because of this myopic political vision that water resources of $ 12 billion are thrown into the sea every year. Criminal neglect of building water reservoirs has decreased the per capita availability of water. Pakistan stores 10 percent of its annual river flows against the world average of 40 percent. WAPDA has the capability and technical expertise to harness the available water resources provided the ruling elite show political will and sincerity.
In the Indian occupied Kashmir, 20 Kashmiri youth were killed by the government forces during cordon and search operation in Islamabad and Shopian districts on Sunday. Thousands of Kashmiris hit the streets, chanting ant-India slogans and demanding an end to Indian rule over Kashmir. Indian forces used pellet guns on the protesters and injured 300 people. Local residents said that soldiers blasted several civilian homes with explosives during the operation. As usual in a muted response to the Sunday genocide of Kashmiris, Prime Minister Shahid Khaqan Abbasi condemned it and expressed sorrow over the recent loss of lives and condemned the Indian tyranny. He urged the United Nations Secretary General to appoint a UN representative for Kashmir.
Foreign Minister Khwaja Muhammad Asif in his tweet showed concern over the killings of Kashmiris and demolition of five houses but avoided strong condemnation of Indian brutalities in Kashmir. He blamed the international community for its docility on the atrocities perpetrated on Kashmiris, ignoring the complacency of Pakistan on the foreign policy front. On the other hand the government of Azad Jammu and Kashmir (AJK) gave a robust response to carnage in the Indian held Kashmir. Azad Kashmir President Mahmood Khan and Prime Minister Raja Muhammad Farooq Haider Khan expressed anguish and indignation over the recent genocide o Kashmirs. The AJK government observed a condemnation day to raise international awareness about the Kashmir dispute which had compromised peace. AJK Education Minister Iftikhar Gilani said that today’s anti-India protests are being held to show the people of India occupied Kashmir that we stand shoulder-to-shoulder with them in their struggle of freedom. He said demonstrations will be held across all 10 district headquarters of AJK.
AJK government is also active on the diplomatic front. Azaad Kasmir President in his to the UK in July last year met 13 newly elected members of the British House of Commons. He emphasized UK role in the settlement of Kashmir dispute. Again in February this year, in his address to British Councilors, Lord Mayors and Mayors in London, Azad Kashmir President stressed that United Nations Security Council should intercede to take full cognizance of the situation in the Indian held Kashmir and “stop massacre, killings and illegal detentions.”
In sharp contrast, Parliamentary Committee on Kashmir, headed by Maulana Fazlu Rehman is in a state of hibernation. A hefty amount of 60 million is being spent every year to meet the expenses of this Committee but the output is a big zero. In the past four years only three symbolic meeting of this Committee have been held wherein mere pleasantries have been exchanged among its members and no diplomatic initiative on Kashmir dispute was recommended to the federal government. The Committee had even badly failed to contribute a single line in the country, s Kashmir policy which is the most important issue of Pakistan’s foreign policy. The head of Parliamentary Committee has virtually undermined the collective efforts on Kashmir cause. The ongoing ‘Intifada’ of Kashmiris in the Indian occupied Kashmir need moral and diplomatic support from Pakistan for which a proactive diplomacy has to be launched. The foreign office official and diplomats posted in important world capital do have the capabilities to discharge this responsibility. It is the lack of political will of ruling leadership which hinders the utilization of great potential of Foreign Service.
Abandoning his favorite economic prosperity mantra, the Interior Minister Ahsan Iqbal has started a public relations campaign to conceal the bitter facts about the government’s decision to allow the rupee lose its value against the US dollar and other major world currencies. He has also given up his often repeated theme of ranking the Pakistan’s economy at 18th position among the fast growing economies of the world.
He has now started a publicity campaign to offer a lollypop that rupee will regain its lost value when the CPEC investment would do wonders. However, he admitted that 9.4 percent loss of value by rupee over the past three months by a bulging current account deficit. But he did not elaborate the reasons of $12 billion plus trade deficit with China and $ 1.54 trade deficit with Indonesia. Almost 90 percent of deficit in external balance is the direct result of personal interest motivated Free Trade Agreement (FTA) with China and Preferential Trade Agreement (PTA) with Indonesia. It will be naïve to assume that CPEC investment alone will make the rupee appreciate in value without improving the economic environment to boost productivity of the economy, reduce the cost of doing business and establish industries for producing raw material and intermediate goods for exportable commodities to make the exports competitive in the international market. Mere a generic statement does reflect the facts and it leads to wrong conclusion.
The Minister contended that a new middle class market will emerge in Pakistan as the country has achieved a growth rate of 6 percent in the gross domestic product. This allusive economic growth, calculated on expenditure method alone, hads no positive impact on the macro economic indicators which have worsened. Nor its trickle down effect has reached the common man. The ballooning current account deficit, stagnation of exports at $ 20 billion over the last four years and foreign debt of $ 90 billion amply elucidate the macro economic imbalances against which the World Bank and International Monetary Fund in their Report “South Asia Focus Fall, 2017.”But unfortunately this sane advice was despicably rejected by the same minister in August, 2017 and now the contents of the report are halfheartedly admitted. The decision of devaluation of currency was taken to seek a fresh IMF bail out loan facility to avoid the likely situation of insolvency.
The Interior Minister claimed that once CPEC project is fully functional, foreign direct investment in key areas are likely to pour in, resulting in greater opportunities for both the countries. The current technological base of civilian goods industries is not compatible with that of China. The Chairman State Engineering Corporation, in his visit to Islamabad Chambers of Commerce and Industry (ICCI), cautioned the entrepreneurs to take a quantum leap from their existing 2nd generation technology to 5th generation technology if they want to enter in joint ventures with Chinese business leaders in the Special Economic Zones (SEZs). The CPEC Center of Excellence has failed to produce even a single Research Paper how Pakistani entrepreneurs can bridge the gap between the 2nd generation and 5th generation technologies? And how Pakistani workforce will be trained to operate the 5th generation technology enabling them to avail employment opportunities in the high-tech industries to be relocated to SEZs under the CPEC frame work.? It is no longer a secret that construction work on certain road projects has been slowed down due to decline in Chinese funding and the approval of up gradation of railway main line Ml-1 from Karachi to Lahore has once again been delayed over dispute on cost estimates worked out by both China and Pakistan.
It is absolutely incorrect that CPEC was conceived by the PML-N government in 2013. In fact its spade work started in 2006 and the broad parameters of the project were finalized in the previous PPP government. It was mainly a connectivity project but the PML-N government converted it into energy project. Time will tell as to whether CEPEC loans of $ 62 billion will make the rupee appreciate in value or is weakened further. The principles of economics particularly that of monetary policy, public finance and international economics do not support the Minister’s theory that establishes linkage between the inflow of heavy interest bearing CPEC loans and rupee appreciation in value.
Taking broad side of the state institutions has now become a routine matter for PML-N leaders. The Prime Minister Shahid Khaqan Abbasi, while addressing the inauguration ceremony of Chaudhry Abdul Hameed Cardiology Center in Lahore, said that recent Senate election should be scrapped and the senators who bought their way to the parliament should be sent packing. He said, “I have said it before and I will say it again that we reject these senate elections that were contested with the power of money.”
The Prime Minister criticized his party’s political opponents and opined that they do not expect any justice from accountability courts. He claimed that that all allegations against the former Prime Minister Nawaz Sharif are baseless. Accusations of horse trading in the elections of members of the upper house is not a new phenomenon in the political culture that was introduced in the country by the two mainstream political parties in the decade of 1980s and it was emulated by the regional parties as well. There is no need to cry over spilt milk. The recent Senate elections were apparently held in democratic manner through secret balloting and the statements that are tantamount to make it controversial run counter to national cohesion.
Pointing an accusing finger on law courts is the demonstration of an attitude which is conflict with the rule of and respect for the court of law. Every opportunity was given to the former Prime Minister Nawaz Sharif to produce a money trial of the offshore assets of his family in the Supreme Court in Panama Papers Case and now the due process of law is fully being observed in the trial against him and his family members in the accountability court. One should better wait for the completion of hearing of the case in the court and announcement of verdict.
The Prime Minister gave a rosy picture about the performance of the government. He claimed that 10000 megawatt additional power has been inducted in the distribution system and economic rate growth has been raised from 3 percent to 5.7 percent. Load shedding of electricity for four hours has been started from 1st April on feeders wherefrom the recovery of bills is 100 percent and line losses are less than 10 percent. The consumers of cities and rural areas from whom the recovery is less than 50 percent and line losses on their feeders are more than 20 percent the duration of load shedding is 20 hours. The government stopped the import of furnace through PSO to encourage the conversion of private thermal power station to LNG but the move backfired and now the import of furnace oil has been allowed. However, the generation of thermal power dropped. The government can not clear the entire amount of circular debt and the likely shut down of IPPs will result in the power outages of much longer duration during June-September.
The positive impact of increase in economic growth is neither reflected in the macro economic indicators nor has its trickle down effect reached to the common man on micro side. Current account deficit has reached $ 18 billion; exports are stagnant at $ 20 billion for the last four years, and imports are at $ 36 billion plus. The burden of foreign debt has gone up to $ 90 billion, showing an increase of $ 45 billion and the country will face insolvency if a fresh IMF bail out does not materialize before June. The economy has slipped down to 147th position in the World Bank Ease of Doing Business Index. The percentage of population living below the poverty line has gone up from 40 to 60 percent. As per the UNDP report the Human Development Index of Pakistan is 0.5 percent which is even the lowest in comparison with number developing countries of South Asia. Tall claims and numbers game can not conceal the bitter facts for long.
The approval for the up-gradation of railway Mainline (ML-1) has again been delayed. The project is the only strategic scheme of China-Pakistan Economic Corridor (CPEC). The hindrance in the approval of the project and it subsequent implementation is the big differential in the cost estimates worked out by China and Pakistan. Beijing tagged the cost of Phase-1 of the scheme at $ 4 billion which is $ 627 million higher than Pakistan’s estimate.
The difference over the cost of Ml-1project of Pakistan Railway has blocked the approval of Chinese loans at the interest of 3 percent, which the Ministry of Planning claims to be concessionary. But the fact is that global lending agencies like World Bank and Asian Development Bank gives project loans at less than 2 percent mark-up. Moreover, the Chinese banks frequently revise upwards the interest rates of loans that they give to Pakistan. If the terms of financing for certain roads and energy projects are any guide then the claim of concessionary loans is not tenable. The contracts awarded so far to Chinese construction companies for CPEC related projects lack the principle of transparency as China does not like fair competition among the reputed companies from a number of countries and insist for bidding between the Chinese companies alone. The incumbent government is then compelled to give contracts to Chinese companies in violation of Public Procurement Regulatory Authority (PPRA) rules.
According to the framework agreement of Ml-1, China will provide 85 percent of the project cost in the form of loans. The details that reflect the conditions about the rate of interest and payment liabilities have not been revealed by neither Ministry of Planning, nor by the Ministries of Finance and Economic affairs. The Ministry of Railway is reluctant to directly acquire loans of billions of dollars beyond its payback capacity. It wants the central government to obtain loans for this project, which will not only make it part of external debt but will also shift the debt servicing liability to the federal government. The contention of Railway Ministry is justified. In 2016, its losses were Rs 28 billions whereas the figures of 2017 are yet to be calculated.
Initially the cost of the project, having a length of 1872 kilometers, had been calculated at $ 8.2 billion. But the government subsequently decided to split the project due to its high cost and the work of expansion and refurbishment of the main rail line. Now the government wants to construct 748 kilometers railway track under phase-1 of the project for which the Railway Ministry has submitted a PC-1 to the Planning Ministry. Up- gradation of Peshawar-Lahore railway track has been excluded and adjustments in distance have also been made in the phase-1 that encompasses the railway track from Lahore to Karachi. Another interesting fact about Ml-1 is that the scope of work in phase-1 under the new PC-1 has been reduced by 56 percent but the cost has been increased by 6 percent. This may have been done on the insistence of Chinese financers.
The plan of construction of dual track of broad gage, improvement in signal system, reconstruction bridges on the track and induction of modern locomotives was worked out in 1985 but could not be implemented due to the change in the priorities of the successive governments of PPP and PML-N. A locomotive factory was established at Risalpur with the technical and financial assistance of Japan with a built in provision of manufacturing different components and parts diesel electric locomotives. But it was reduced to merely a locomotive assembling plant. Even its latest machinery was not utilized for the repair work of locomotives. The quality of locomotives imported from China is not at par in quality with the ones which were assembled from parts and components imported from Japan and Germany. The piecemeal approach towards Railway up-gradation will not produce the desired results. It needs overall modernization.
US State Department Assistant Secretary for South Asia and Central Asia, Alice Wells is arriving Islamabad to discuss matters pertaining to the resolution of Afghan conflict , terrorism and economic matters with senior government officials. The US South Asia strategy will be discussed, particularly in the context of Afghanistan and Pakistan’s stated commitment to eliminate all terrorist groups, which the former still believes to be present on the latter’s soil. Besides this, shared interests to build economic commercial ties will also be touched upon.
The US perceives that Pakistan posses a great leverage over Afghan Taliban to persuade them to accept President Ashraf Ghani offer for a dialogue to restore peace and stability in Afghanistan. This wrong perception gained currency from the irresponsible statements of certain federal ministers who were least concerned with foreign policy. That is why Alice Wells stated on March 11 that Pakistan can play a much more important role in shaping Taliban behavior. She stressed on Islamabad’s critical role to provide incentives to Afghan Taliban for undertaking negotiations with Ashraf Ghani Government.
The perception that Pakistan alone can convince the Afghan Taliban to come on table and hold peace talks with the Afghan government is not correct. Foreign Minister Khwaja Muhammad Asif told the Tashkent Conference on Afghanistan that there is a dire need of collective pressure on the Afghan Taliban and other insurgent groups in order to bring them to the negotiation table and push forward the moribund Afghan peace process. Pakistan has constantly called for the resolution of lingering Afghan Conflict through a political settlement, for which it has all-along supported the international and regional peace initiatives. Bringing Taliban to the dialogue table and restoration of peace and stability in Afghanistan is the shared responsibility of the international community.
The United States has not appreciated Pakistan’s efforts and sacrifices in war on terror. Defense Minister Khurram Dastagir, in an interview with Voice of America, complained that the strained relationship between Pakistan and United States stems from Washington focus on military partnership alone with Islamabad rather than engaging the country as democracy. He argued that the ambivalence in US approach pushed Pakistan to turn towards China and initiate rapprochement with Russia. The US-Pakistan relationship has suffered as successive White House administrations have blamed the country for not doing enough to eliminate terrorist sanctuaries along the Pak-Afghan border. The US move to put Pakistan back on the grey list of FATF if in June if it fails to improve its anti money laundering and counter terrorism financing regime.
It is a good omen that Alice Wells, in her meetings with government officials, will also dwell upon the matters of shared interests to strengthen the bilateral economic and commercial ties. The economic situation of the country is precarious and Pakistan will go for a fresh IMF bail out package to meet its external debt payment liabilities and balance of payments obligations because of ballooning trade deficit. The United States control 70 percent voting rights in the IMF and World Bank and the strained relations between these two allies may hinder the prospects of much needed economic assistance on concessional terms and conditions from the international lending institutions. Hopefully, the ruling political leadership will do a comprehensive homework for improvement of relations between the two countries by removing all the irritants.