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PMs’ China visit, fiscal crisis

It appears that at this point of time China has not given firms commitment to help its deep and trusted friend Pakistan out of its grave fiscal crisis, save signing a number of agreements and memoranda of understanding for future economic cooperation. China said on Saturday it was willing to offer financial assistance to Pakistan to weather its current fiscal woes but the terms of such aid would be discussed. Does it mean lack of proper homework on both sides? Pak-China joint statement speaks of expansion in ties but contain no assurance of immediate support

The lack of firm commitment for granting a bail out package followed a meeting between the Prime Minister Imran Khan and his Chinese counterpart Li Kiqiang. The Prime Minister had also met the Chinese President Xi Jin Ping the other day. Likewise China has not indicated to open its market for exports from Pakistan to reduce Pakistan’s huge trade deficit with China which is about $ 13 billion. It was because of this unfair play in bilateral trade that the United has to impose heavy duty on Chinese exports to America. Pakistan has given zero import duty concession to China on 35 tariff lines but has got nothing on reciprocal basis for exports to it.

Following Chinese Premier meeting with Prime Minister Imran Khan, Vice Foreign Minister Kong Xuanyou said that two sides have made it clear in principle that Chinese government will give assistance to Pakistan to tide over the current economic difficulties. But for specific measures, the competent authorities of the two sides will have detailed discussions, Kong told reporters. However, he assured that despite Pakistan’s looming balance of payment crisis, there are no plans to scale back china Pakistan Economic Corridor (CPEC). He vaguely hinted it will be altered somewhat to tilt in favour of areas relating to people’s lives. Perhaps he was referring to Chinese desire to enter the agriculture sector of Pakistan for guaranteeing the supply of food commodities to China as there are no bold indications of China’s cooperation for skill development of Pakistani manpower for employment in the conceived special economic zones (SEZs). China, willingness to enter in agriculture sector has been objectively commented by experts in print media. Their analysis implies that it may not be fairly beneficial for the people of Pakistan at the micro and macroeconomic levels.

Media reports had earlier said China was preparing a $ 6 billion package of aid including soft loans and additional investment for CPEC. Pakistani leadership seemed optimistic that China will provide the much needed liquidity support enabling Pakistan to meet its foreign debt and balance of payment obligations which is not forthcoming. It is worth mentioning that Saudi Arabia is releasing the first installment of 1 billion dollars to Pakistan. The Kingdom has agreed to deposit $ 3 billion in the State Bank of Pakistan and will provide oil worth $ 3 billion on deferred payments/.

In the prevailing scenario, financial support from the multilateral donor agencies is the viable option to mitigate the economic woes. The International Monetary Fund (IMF) team is arriving Pakistan within the next few days to begin loan programme negotiations. Previously, the lending agency asked the successive governments to privitise the bleeding state owned institutions and expand the tax base preferably through direct taxes to reduce the budget deficit. However, these conditions were not fulfilled. PTI government has also made it clear that privatisation is not part of their economic agenda. However, it is anxious to sell out the profit making public sector enterprises. Privitisation commission in its meeting last week recommended to government to privitise 11 profitable state entities but surprisingly dropped the hemorrhaging state owned enterprises (SOEs) including Pakistan International Airlines (PIA), Pakistan Steel Mill (PSM). The loans liability of PIA has reached Rs. 500 billion and it is incurring losses of about Rs. 40 billion annually. PSM has eaten up Rs. 400 billion taxpayers’ money so far and Pakistan Railway is making Rs. 37 billion losses every year. The approved list of Council of Common Interest contained 62 enterprises for privatisation. The aggregate losses of inefficient SOEs have reached Rs. 1.1 trillion.

Likewise at the time negotiating the bailout every government promised to expand the tax base but backtracked on its promise of taxing the rich people after availing the IMF loan facility. The axe of indirect taxes fell then on poor people. Let us hope this time sanity will prevail to fulfill the IMF conditions of privitisation and broadening the tax base through tax

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Inflationary trend

The recent fiscal measures of revenue generation have accelerated the inflationary pressure which will impact the cost of doing business. The World Bank in its report indicated slight improvement in the cost of doing business index from 147th to 135th ranking. The rising inflationary spiral will also make the life of people more miserable, particularly those who belong to poor and lower middle classes. The interest rate is bound to rise in the next monetary policy.

The core inflation has inched up to a four years high of 8.2 percent in October 2018, according to the data released by Pakistan Bureau of Statistics (FBS). The inflation rate is slightly lower than the key discount rate of 8.5 percent. The narrowing gap between the key interest rate and core inflation may lead to another round of interest rate hike in the current fiscal year. Even the headline inflation measured by consumer price index (CPI) jumped to 7 percent—the highest pace in the past four years beating the expectations of less than 6 percent inflation. The worrying inflation reading points towards the unofficial estimate made by the International Monetary Fund (IMF) that inflation in Pakistan would reach close to 14 percent by the end of current fiscal year in June 2019. Core inflation, excluding volatile food and energy prices, went up to 8 percent in September. The 8.2 percent core inflation was the highest in the past four years. Last time when reading stood above that level was in July 20`14 when core inflation was 8.3 percent.

The headline inflation soared to 7 percent in October which was significantly higher than expectations. Key factors behind it were increasing prices of oil, said the FBS National Accounts acting member. Gas prices increased 104.9 percent whereas high speed diesel price rose 34.2 percent that caused nearly 45 percent hike in transport fares. Overall prices of housing, water, electricity have gone up by one-tenth. The group has a 29.4 percent weight in overall inflation basket—the second largest group after food.

Cost of education services has jumped by 11.5 percent and Urdu language newspapers charges rose by 55 percent on the back of currency depreciation and increase in paper cost. Transport group prices surged by 18.6 percent as compared to the same month a year ago. Due to over all inflationary expectations prices of almost every commodity increased, except some perishable food items. The health cost increased by 9 percent followed by nearly 7 percent rise in prices of clothing and footwear.

A further increase in the interest rate will push up the cost of doing business and make the economic environment more unfriendly for domestic and foreign investment. It will also make it more challenging for the Prime Minister Imran Khan to achieve his goal of constructing five million houses at affordable price. It will certainly offset the gains of lower power and gas tariffs allowed to export industries.

After July, the government has also levied more regulatory duties in addition to letting the rupee depreciate further against the US currency. The impact of these measures will be more visible in coming months. The currency devaluation may not reflect in the proportionate increase in exports. A number of export products consume the imported intermediate goods and raw material. Upward adjustment in regulatory duties on the imported raw material, intermediate goods and currency depreciation will make the exports less competitive.

Remittances from more than8 million overseas Pakistan are likely to post double digit growth and Pakistan is expected to receive $ 22 billion in the current financial year as compared with $ 19.62 billion last year. But the sagging exports due to loss of comparative advantage in the international market. A tradeoff has to be sought between the fiscal plus monetary recipe and prevailing economic environment. Let us hope the ghost of “Darnomics” will be scared away and the finance minister will reconstitute its team of economic managers as still the policies of former finance minster Ishaq Dar seems to be all pervading.

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Futile exercise

Pakistan Tehrik-i- Insaf government is failing in its two goals—broadening a narrow tax base and enhancing revenue collection– which has started displeasing finance minister Asad Omar who sought explanation for apparent breakdown of the tax machinery. Umar expressed displeasure over Federal Board of Revenue (FBR) performance in broadening tax campaign and revenue collection in first four months of the current fiscal year. The minster rejected the excuses and reasons given by the taxmen during a visit to the FBR Headquarters before departing for China.

The PTI government has promised that it will double tax collection and broaden narrow tax base which currently comprise only 1.4 million taxpayers including the new taxpayers in the wake of tax amnesty scheme of the previous government. It is pertinent to mention that the number of active taxpayers was 2.4 million in Musharraf era although his government’s hectic drive of documentation of economy failed halfway due to the rigidity of tax collection machinery but the self assessment scheme was a total success according Dr. Salman Shah. Over the past ten years the number of tax return filers started decline and dropped to 1.2 million before the announcement tax amnesty scheme. In other words 50 percent active tax payers skipped out of the tax net.

As a part of its intended futile exercise the FBR started sending notices to non-filers of income tax returns at incomplete and invalid addresses. When the first notice bounces back, a second one follows at the same invalid address and with the third notice account of tax liability is attached with the notice which will certainly return undelivered. How come that Inspectors of Inland tax Department could collect the valid addresses of wealthy non-filers? Why CNIC based authentic tax profiling is not done with the cooperation of NADRA. How long the tax collectors will remain hand-in- glove with the tax evaders?

As a part of a campaign, the FBR has started sending notices to the big fish has started backfiring. These notices have been issued by the Directorate General of broadening the tax base on the basis of faulty data provided by the FBR Operation Wing. Of the 373 notices sent in the first phase, about 145 could not be delivered by the courier services due to wrong addresses. So far 19 people have filed tax returns. The FBR is servicing notices to tax dodgers under section 114(4) and 116 of Income Tax Ordinance. These people have purchased properties over Rs. 20 million, cars of above 1800 cc or more engine capacity or have received rent to the tune of Rs. 10 million or higher in a year.

The data of tax dodgers is not a new one. It has been with the FBR since 2010 and the World Bank and the International Monetary Fund have persistently told the two previous governments to utilise it for broadening the tax base and revenue enhancement but they did not budge on the matter. Now the incumbent government is anxious to widen the tax net but different FBR wings are not effectively coordinating with each other and there are complaints about lack of automatic data sharing by the Information Technology Wing of the authority. Data relating to more than 2500 cases of purchase of expensive properties, vehicles and receipt of high rental income by non-filers has been handed over to relevant FBR field offices.

The finance minister also expressed displeasure over the shortfall in tax revenue.  The FBR was able to collect Rs.1.1 trillion in first four months of the current fiscal year and fell short of target by Rs. 100 billion. The growth in revenue collection was less than 7 percent while October’s growth was a meager 1 percent.

The nosedive of rupee against the US dollar and other major global currencies has also depressed the revenue situation. Pakistani currency faced a hefty depreciation of Rs. 25.096 against the SDR—a basket of world’s five currencies—compared to Rs. 16.643 to the US dollar in fiscal year 2017-18. The value of SDR is based on the basket of five currencies—US dollar, European Union Euro, Chinese Renminbi, Japanese Yan and British Pound.

The impact of huge depreciation against SDR massively impacted country’s finances as most of its financial liabilities like debt repayment are in SDR form. Simultaneously, the rupee SDR exchange losses badly hit the State Bank of Pakistan (SBP) consolidated profits in FY 2018. The central bank’s dropped by 26 percent to Rs. 1654.67 billion in the current fiscal year due to exchange losses following rupee depreciation compared to Rs.238.06 billion in the preceding year. The finance minister once said about revamping of FBR by inducting professional from the private sector which is yet to be done.

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Maintaining state’s writ

Prime Minister Imran Khan issued a stern warning to certain far right groups that have been agitating against the Supreme Court Verdict to acquit Asia Bibi, Christian women sentenced to death on charges of committing blasphemy. He said in categorical tone that state will come into actions against the elements that create law and order situation.

The Prime Minister addressed the matter in a short video message that solely focused on the Apex court verdict and its after math. He said he has been compelled to communicate with the nation due to the reaction given and language used by a “small segment”, in response to the Supreme Court verdict. Pakistan was created in the name of Islam and the verdict given by the highest court of the country is in accordance with the constitution, which is in line with the teachings of Holy Quran and Sunnah, he said. He sharply criticised the protest that broke, and is still underway across the country in response to the judgment, saying people livelihood was being harmed through road blocks and demonstrations.

It is a moment of deep meditation as to why Pakistani society came to the present state of intolerance which was fairly tolerant till mid 70s. Its seeds were sown when the ruling civilian leadership launched a forward policy viz-a-viz Afghanistan after the fall of King Zahir Shah. Far right groups were patronized inside the country without visualizing its disastrous long term impact on the country and its people. The same leadership paid a very high price after 1977 general elections and afterwards. The succeeding dictator patronized and strengthened these extremist elements because of his legitimacy syndrome. The successive elected and non-elected governments continued the policy of appeasement either for promoting political interest or lack of spine. The sentiment of hate and intolerance which got well entrenched in the social fabric of the country did not remain confined to minorities, which are on the receiving end. It also created and flourished an environment of sectarian strife which has devoured lives of hundreds of innocent people in the attacks on Mosques and Imambargahs over the past 30 years. The print media, particularly the Urdu newspapers of certain media groups, have always been on the look out to inflame religious sentiments by their misleading reports and biased comments. A senior journalist associated with a big media house, which is fond of highlighting Indian narrative against Pakistan, writes columns containing biased comments.

It is worth appreciation that the incumbent government will not show leniency to the groups that openly challenge the writ of the sate. It will help promote soft image of Pakistan in the comity of nations. It is worth appreciation that PPP leadership has taken a clear stance on this matter. The young and talented chairman of the party Bilawal Bhutto Zardari said that the country will be run according to constitution and law and the political leadership will not succumb to street pressures. However, senior PPP leader Khursid Shah in his speech in the National Assembly lashed out at prime Minister’s address to the nation in the wake of Supreme Court judgment and subsequent reaction by some religio-political parties. “I strongly condemn Prime Minister’s address to the nation. The Chief Executive of the state should not have said what he said,” Shah remarked, adding that he could not even repeat parts of Prime Minister’s. Which speech part of his speech people party stalwart was referring to? The address of the chief executive of the country was telecast by electronic media and published in the print media. Meanwhile, Minister of State for Interior Sheriyar Afridi told the house that government is in talks with the religio-political parties and nation would soon hear good news. However, he categorically declared that there would be no compromise on the rule of law and no one would be allowed to misuse the present situation for political gains. People expect such a stand from the main opposition PML-N and left of the center parties.

 

 

 

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Privitisation priorities

It appears that PTI government is keen to tread the path of skewed priorities in its privitisation programme, ignoring the sale of hemorrhaging big public sector entities that devour bulk of  financial resources of cash strapped country. In a major development the government has decided to privitise 11 entities—all profitable ones—and dropped all bleeding companies like Pakistan International Air Line (PIA) and Pakistan Steel Mill (PSM) from its active list of privitisation. Of the 51 losses incurring public sector enterprises, PIA and Pakistan Steel Mill eat up about Rs. 400 billion tax payers money annually and the aggregate losses of all the inefficient corporation has reached Rs. 1.1 trillion.

The government decision to either exclude or put on the backburner all loss making enterprises is aimed at protecting its political capital at the cost of economic woes of the country. But there is no escape route from taking the unpopular decision to offload the public sector corporations to reduce the massive budget deficit.

The approved list of the Council of Common Interest contained 62 enterprises for privitisation. Of these the board of Privitisation Commission recommended to retain only 11 for active privitisation; put the privitisation of 24 enterprises on back burner and dropped 29 loss making companies from privitisation programme. The board recommended four banking and insurance companies, three oil and gas sector companies, two hotels owned by PIA and one real state sector transaction for privitisation. The board approved strategic sale of the loss making Small and Medium Enterprise (SME) Bank, First Women Bank Limited and Pakistan reinsurance Company Limited. The board also approved three capital market transactions of Oil and Gas Development Corporation Limited, the Pakistan Petroleum Limited and Mari Petroleum Limited. It also approved the strategic sale of 1233 megawatt Baloki Power Plant and 1230 Haveli Bahdar Power Plant.

The sale of profit making state enterprises will provide easy money to the government but the chronic issue of reducing the budget deficit by selling out huge losses incurring government entities needs to be addressed by their rightsizing and subsequent sale. The previous PML-N government had divided the core and non core factions to facilitate the sale of air traffic.

In a related development, the Privitisation Commission Board decided to approach the investigative bodies for the purpose of retrieving Rs. 4 billion outstanding dues from defaulting buyers of state owned enterprises (SOEs). This decision comes after all the past attempts to receive dues have failed, partially because of connivance of commission officials. But it is pertinent to mention that an amount of $ 800 million has been outstanding against the UAE Etisalat Telecom Company from the sale of 49 percent shares of Pakistan Telecommunication Company Limited since 2006. The entire outstanding amount plus interest accrued thereon must be retrieved as the country is in dire need of foreign exchange.

Headed y the Privitisation minister Muhammad Mian Somro, the board also set up a committee to finalise a plan by mid-December in a bid to recover the dues in these cases. Presently, the dues in 14 privitisation transactions are outstanding. The chairman directed the committee to leave no stone unturned to recover the outstanding amount from the buyers of SOEs that had been privatized in 1990s, though at throw away price to the favourite parties. The receivables included remaining balance of sale proceeds, loans and advances by the government to these sold enterprises and interest charges on delayed payments. Out of nearly Rs. 4 billion, the balance sale proceeds are Rs. 1.2 billion including the principle amount of Rs.120 million. A major chunk of Rs. 2 billion is outstanding on account of advance loans given to these SOEs. The amount is due in 14 cases but the commission has sought the directions of Privitisation Board in half a dozens cases. The commission informed the board that Rs. 526 million were due against the Schon Group on account of sale proceeds of Pakistan China Fertilizer Limited, Quidabad Woolen Mill Limited and National Fibers Limited. The recovery of remaining sale proceeds of sold out enterprises and privitisation process of losses incurring state entities need fast-tracking.

 

 

 

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Victimising upright bureaucrats

It appears that Pakistan Tehrik-i-Insaf leadership’s zeal and zest for “New Pakistan “has lost its steam and their much clamored resolve for genuine accountability, transparency in decision making and respect for honest and upright bureaucrats has dissolved in thin air. The federal government on Monday removed a senior most officer of Pakistan Custom Services after he rightly refused to release non-custom paid vehicles of Qatari Royal family that have been confiscated for nonpayment of duties.

Shaukat Ali a grade 21 officer, who was working as Director General at the Federal Board of Revenue (FBR) Directorate of Intelligence and Investigation (DI&I) since October 2016, was transferred on verbal directives when his case was to be considered for promotion to grade-22. The High Powered Board met on the date of his transfer and reviewed cases of promotion to the next grade from various services. According to a notification issued by FBR the honest officer has been transferred to the slot of member FBR Headquarter. The transfer without portfolio is considered a punishment. In place of Shaukat Ali, the government has given look after charge to Iram Maqbool Aamir, a grade-20 officer, who is serving as Director Intelligence and Investigation in the FBR Headquarters.

The unceremoniously transferred officer is believed to have resisted the intense political pressure to release the confiscated vehicles recovered from the premises of former Senator Saif ur Rehman, the brain behind the shady LNG deal with Qatar and the ones related to CPEC during the previous government. Is Pakistan a ‘Banana Republic’ under the new leadership as it succumbed to the Sheikhdom of a small Gulf state?

Last month, Custom Intelligence seized 26 non-custom paid luxury vehicles of Qatari Royal family from the compound of a textile mill in the suburb of Islamabad. These vehicles were apparently brought into the country for hunting purposes, without paying custom duty. The vehicles were parked Saif ur Rehman premises in Karachi, Lahore and Islamabad, according to a report published in Arab News. The newspaper had reported that Qatar’s embassy in Islamabad had announced that the vehicles belonged to Qatari Prince Sheikh Hamad Bin Jasim Jabbar Al-Thani, whose letter was submitted by the former disqualified Prime Minister Nawaz Sharif as defense evidence in Panama Papers case.

Sources in the Custom I&I Department claimed that there were a total of 330 vehicles valuing Rs. 7 billion that were imported to Pakistan, on which custom duty of Rs. 4.5 billion had to be paid. There was extreme pressure on the Director General of Custom Intelligence and Investigation to hush up the matter. They said criminal and adjudication have already begun. Their view is that the person who imported the vehicles was not entitled to duty free imports.

The growing incidents of removing honest high official on verbal directives in violation of set rules and regulations and the suspension of their transfer notifications by the Apex Court do not augur well for PTI government which is yet to complete its first 100 days of its tenure. The removal of officers merely for their justified refusal to comply with the recalcitrant to rules verbal directives of political masters will certainly dent the image of PTI led government which frequently emphasises merit, honesty and efficiency on the part of bureaucracy. The Prime Minister’s office has also intervened in routine transfer posting matters of senior bureaucrats which runs contrary to PTI leaderships’ often repeated promise to free the bureaucracy from political pressure. There seems no difference in the style of governance of present and previous leadership.

The Prime Minister Imran Khan eulogized the role and performance of civil bureaucracy in ensuring a model of good governance in the decade of 1960s in his maiden speech to the civil servants. In fact, President Auyb Khan used to give a lot respect to bureaucrats, appreciated and honoured their independent opinion while taking decisions. The Prime Minister must read the writings of the former Cabinet Secretary Qudrat Ullah Shahab for seeking guidance and inspiration while dealing with honest bureaucrats. The policy of victimisation and harassment of Z.A Bhutto gave irreparable damage to the civil service which undermined the principle of good governance. A military ruler General Ziaul Haq reposed confidence in civil bureaucracy and he used to say, “Had my civilian colleagues (Rufaq-e-Kar) had not been on board I would have been unable to arrive at a right decision.”The damaging policy victimisation of bureaucracy must be stopped if PTI government really wants good governance in the country.

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Tackling trade deficit

The tenure of previous government from 2013 to 2018 witnessed a skyrocketing current account deficit which increased from $2.5 billion in FY13 to $18.9 billion in FY 18. The highest in the world prices of gas and electricity, slamming the doors of introduction of fourth or fifth generation technologies in the industrial sector, not facilitating investment in the industries producing raw materials, intermediate goods needed for export products and imports substitution and lopsided free trade and preferential trade agreements with certain countries resulted in manifold increase in imports and decrease in exports.

One of the alarming macroeconomic imbalances was the bulging current account deficit over which the World Bank expressed deep concern. But former planning minister Ahsan Iqbal despicably rejected the sane advice of multilateral donor agencies that provide concessionary loans for various developmental projects as compared with the exorbitantly high interest bearing Chinese loans for CPEC related projects. The swollen current account deficit was a contributory factor to the prevailing economic melt down despite the singing of prosperity mantra by the pseudo economists of the PML-N government. The current account deficit widened from $ 19.2 billion in 2012 to $ 35.6 billion in 2017. Imports increased from $ 43 billion in 2012 to $ 57.4 billion in 2017 and exports decreased from $24.4 billion to $21.9 billion in 2017. Hence the amount of trade deficit exceeded from the total value of exports. Even though the trade deficit was skyrocketed, the exports and imports as percentage of GDP, as reported in the World Development Indicator by the World Bank, was the lowest for Pakistan in the region. Even with a relatively higher level of imports, the decline in exports has turned Pakistan into closed economy within the region.

The lack of export growth to accompany the high rate of imports growth is a serious cause of concern. Pakistan’s trade deficit with China is $ 13.9 billion. It is $ 6.7 billion with UAE and $1.9 billion with Indonesia in 2017. Moreover, it had a trade deficit of more than $ 1 billion with nine countries including Saudi Arabia, Thailand and Japan. In 2014, trade deficit with China was $ 4billion.

In terms products classification, imports of machinery and mechanical appliances, electrical machinery, iron and steel rose sharply. The import of vehicles rose slightly. The fall in prices of crude oil between 2014 and 2017 its import value declined significantly but at the same time rise in the import of LNG and Coal at inflated rates contributed to the surge of fossil fuel. The demand for other products such as dry fruits, processed food, tea and coffee increased as well. Palm oil has a greater share in imports that may be labeled under food items. Palm trees can be grown along the coastal line from Karachi to Gawadar. Jojoba and other plants that bear oil seeds can make the country self reliant in the production of edible oil, saving a foreign exchange of $ 2 billion plus. Excluding the import of palm oil, other food and luxury items constitute a small proportion of the total quantum of imports. However, with rising prices of crude oil fuel commodities will regain their major share in the import bundle. Efforts to curtail imports by imposing regulatory duties may divert imports to informal channels and create further challenges for declining foreign exchange reserves. Pakistan is a large cotton producing country, investment in upstream textile production such as cotton yarn is likely. However, there is an urgent need to increase investment in downstream value added exports’ industry like ready made garments and other finished products. It is pertinent to mention that the modest increase in exports in FY 18 is due to the utilisation of idle capacity in textile sector. The government must adopt a set of policies to attract investment in exports oriented industries. Pakistan can increase exports to Central Asian States only when peace and stability returns to Afghanistan. The share of gems and geological products in exports can be increased manifold with value addition. Currently the export of raw gem, cut and polished gemstones is stagnant at $ 100 million. By establishing big gemological centers with state-of-the-art technology can boost the value added gem stones and variety of gemological products. Likewise, marble products can also increase the value and quantum of exports.

 

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Farfetched logic

While addressing a press conference, former President Asif Ali Zardari has attempted to link the arrest of his close friends in connection with fake bank accounts investigation with the imaginary bogey of undoing the 18th Amendment. The more investigation proceeds forward the louder the leaders of PPP and ANP harp on the conspiracy theory about this amendment. The PTI led government does not have the required majority in both the houses of the parliament to even slightly amend the existing grey areas of this legislation what to speak of its scraping.

The arrest of close friends of the former President has not even a vague linkage with it. It is merely a ploy to hoodwink pubic opinion to raise hue and cry about the 18th Amendment. It is the ongoing across-the-board process of accountability carried forward by the independent state institutions that offends the forces of statisque. Day in and day out media reports the transfer of millions and billions of rupees in the bank accounts of ordinary people and the dead ones. Footage on private channels the other day showed a factory worker who received a notice from FBR for having a number of factories in his ownership. The assets did not belong to him. He sarcastically said in front of TV cameras that he would donate them to ‘Dams fund.’

Sugar Stock worth Rs. 11 billion was secretly shifted from the sugar mills of Omni group in which the former President Asif Zardari is believed to have major share holdings. Namar Majeed, the second son of Omni Group Anwar Majeed, was arrested by the Federal Investigation agency in relation with ongoing fake bank accounts case. During the hearing of the case at the Supreme Court Karachi Registry, the Chief Justice of Pakistan asked how sugar stock worth millions from group’s warehouses and summoned the group Chief Executive and other officials. The younger Majeed had been on interim bail and was taken into FIA custody after the hearing concluded. The Chief Justice ordered the Omni Group to submit full record by 30th October. It is pertinent to mention that Sindh PPP government is also not cooperating with FIA by withholding the relevant record which may be relevant to the investigation in this case.

The Director General FIA said nine sugar mills operate under the Omni group banner which include Naudero, Khoshki, Ansari, tandoala Yar, Bawani, New Dadu and Chamar.

PPP Co-Chairperson Asif Ali zardari, his sister Faryal Talpur, former Pakistan Stock Exchange Chairman Hussain Lawai, and Summit Bank Senior Vice President Taha Raza are among those investigated by seven member JIT headed by Additional Director General FIA Najaf Mirza for allegedly facilitating 29 fake accounts in Summit Bank, Sindh Bank and United Bank Limited. The question that agitates the minds of the people as to why the State Bank of Pakistan remained oblivious of this illegal accounts openings for money laundering. According to FIR registered against Hussain Lawai and others, billions of rupees were deposited into the bank accounts and subsequently transferred to beneficiaries, including the company owned by Zardari Group. The Zardari Group received Rs. 15 million of the laundered money, according to the FIR.

It was enshrined in the original 1973 Constitution at the time of its adoption that subjects borne on the Concurrent List shall be transferred to the provinces after 14 years. But the original statute book did not envisage altering the federal structure of the constitution through amendments in future. A number of legal experts are of the opinion that 18th amendment, in addition to abolishing the concurrent list, has virtually converted the federation into an arrangement akin to confederation. Diluting the powers of the federal government in the matter of imposition of Governors’ rule in the event law and order break-down and constitutional crisis and making it conditional with the approval of the provincial assembly is a provision which did not exist in the original text of 1973 constitution. It is not included in the Constitution of India, which is the biggest functional democracy. Likewise, making the deployment of federal paramilitary forces in a federating unit to the approval of Chief Minister, in case of law and order breakdown, is difficult to justify, when innocent civilians fall prey to the bullets of criminal gangs and shooters of armed wings affiliated political parties. The apathy shown by the previous PPP government to the prolonged killing spree in Karachi is a classic example in this regard. People will not buy the farfetched logic of the former President.

 

 

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Power sector revenues

The government has set a target of Rs.140 billion for power distribution companies which will recover it through reduction in line losses and increase in collection of electricity bills in order to offset the impact of industrial support package.  For the power division current line losses and improvement in the recovery of electricity bills a target of RS. 60 billion has been set for the current fiscal year. In addition to that, a target of Rs.80 been billion has been set for the last financial year to offset the impact of industrial support package.

The industrial consumers will continue to receive support package of Rs. 3 per unit. It will be funded through efficiency gains in power sector with improvement in bill recoveries and reduction in distribution losses. The tariff change for industrial consumers will remain within the revenue requirements. Five zero rated industries would be given a rate of 7.5 US cents per unit.

The Prime Minister’s initiative to control power theft has been launched in Punjab through a joint task force of power division and provincial government. A similar exercise will be launched in all other provinces. The culture of power theft is more deep rooted in the provinces of Sindh, particularly in the areas controlled by feudal cum mercantile big consumers of interior Sindh who have a tremendous political clout, Baluchistan and KPK. The non-recovery of electricity bills was estimated 10 percent in 2017-18. However, the cumulative power sector default is well over Rs. 860 billion the recovery of which needs immediate and strict measures. In order to improve recovery, a target of 2 percent per year, amounting to Rs. 23 billion, has been set through use of technology and administrative measures.

In a recent meeting of Economic Coordination Committee (ECC), it was informed that substantial amount of revenue could be generated through reduction in line losses and improvement in bills recovery. The committee emphasised that there should be zero tolerance against defaulters of electricity bills. Actual line losses in the power sector stood at 18.3 percent. However, NEPRA allowed recovery of 16.3 percent which resulted in addition of Rs.202 billion to circular debt. The low recovery of power bills was also a major reason, which stood at 90 percent. It added Rs.205 to circular debt. An amount of Rs. 102 billion had been added to circular debt due to payment subsidy to consumers of tribal areas and AJK.

Line losses, electricity theft and default on payment of electricity bills are the major factors which have made worse the power sector crisis. Officials of power distribution companies usually face the vendetta of influential political and business elite in their recovery and disconnection drive. These companies are also confronted with the non-cooperation of government departments and public sector enterprises which do not positively respond to clearing the arrears of electricity bills in instalments with waiver of surcharges. The cumulative arrears can be recovered by the federal government through at source deduction by activating the federal adjuster in the finance ministry.

The Asian Development Bank had approved a loan of $ 5 billion in November 2015 for upgrading the dilapidated power transmission and distribution system and implementation of advanced metering infrastructure (AMI) project. Out of this multi-finance facility $ 400 million were to be spent on the installation of smart meters in the jurisdiction of power distribution companies with satisfactory recovery position. Only two power distribution companies including Islamabad Electric Supply Company (IESCO) and Lahore Electric Supply Company (LESCO) meet the required criteria.

The previous government was not interested in implementing the advanced metering infrastructure project because of political expediency. The PTI government is not suffering from the syndrome of not offending the political and business elite who are addicted to power theft and default of electricity bills. Pakistan has been paying commitment charges on the undisbursed amount of ADB loan from taxpayers’ money. The original closing date of smart meters installation project is June next year. The stated objectives of the loan are reducing line losses and improving revenue collection; enhancing load control and load management; providing automated data consumption for all consumers; and modernizing the electricity metering and billing system.

The ADB is pushing the project on the premise that prepaid electricity meters will control the flow of electricity and ensure 100 percent collection of bills. The Economic Affairs Division had expressed concern a few months ago that cancellation of ADB multi-finance facility will affect the prospect of acquiring loans in future from the multilateral lending agency. Hopefully, the incumbent government will avail the ADB loans for modernizing the power transmission and distribution system and bills recovery mechanism.

 

 

 

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Pakistan’s bashing

Pakistan’s bashing has become the corner stone of the US South Asia Policy, blaming incidents of terrorisms in Afghanistan on Islamabad. In its desperate reaction to Kandahar attack both the United States Secretary of State Mike Pompeo and Afghan President Ashraf Ghani made allegations against Pakistan regarding this attack in which Governor of this province Zalmey Wesa and Police Chief General Abdul Raziq were killed, US brigadier General Jeoffery Simley was injured and the top commander Scott Miller survived the attack.

In the wake of this incident US Secretary of State issued a strongly worded statement, saying that Pakistan would be held ac countable if it did not cut ties to extremist groups including Haqqani network. Dismissing the statement that Washington will hold Islamabad responsible if it did not act decisively against terrorists, the Foreign office insisted that no country could exert pressure on Pakistan for “something which we believe in our own interest.” Speaking at a weekly news briefing, Foreign office spokesperson Dr. Mohammad Faisal said Pakistan’s own economic vision and interrelation into border region hinges on peace in Afghanistan. “There is no question of any country applying pressure on Pakistan for something which we believe is in our own interest.”The spokesperson made it clear that Pakistan’s domestic and external pronouncements were guided by its national interest and prosperity of the people of Pakistan.

Prior to the US Secretary of State warning, Afghan President Ashraf Ghani claimed that the conspiracy of Kandahar attack was plotted in Pakistan and it should handover the concerned criminals to us so that they could be brought to justice, ignoring the fact that the attacker was the body guard of the slain Governor and belonged to Afghan National Army. It was an act of homegrown terrorism with its master mind in Afghanistan. Rebutting these allegations without referring to specific statements, Pakistan rejected them as baseless and unfounded. The Foreign Office pointed out that it would have been more appropriate to invoke the relevant arrangements under the Afghanistan-Pakistan Action Plan for Peace and Stability (APAPPS) “to mutually and effectively investigate any such unfortunate incidents instead of resorting to media blame game.

Pakistan’s cooperation with Afghanistan and international community to bring about peace in the war ravaged country is borne out of the firm belief that a stable Afghanistan is vital for eliminating the menace of terrorism inside Pakistan and the region in general.

Pakistan has remained actively engaged in all peace initiatives to end the ongoing conflict in Afghanistan through a political settlement arrived among all stakeholders. It participated in the jumpstart conference with China and Russia which was held in Moscow in December, 2016. Again it attended the follow up regional peace initiative held in February, 2017. Later Pakistan participated in the 12 party international peace conference hosted by Russia in Moscow in April, 2017.To further buttress the diplomatic efforts for restoring peace and stability in Afghanistan, it played an active role in trilateral talks and quartet meetings held in Beijing to give impetus to the reconciliation efforts in Afghanistan. Chief of Army staff General Qamar Javed Bajwa visted Kabul a number of times and held talks with President Ashraf Ghani and Chief Executive Abdullah Abdullah in the pursuit of Afghan peace. High powered delegations of both countries have held meaningful discussion on the platform of APAPPS. Pakistan has strongly supported the direct talks held between the top US diplomats and representatives of the Taliban in Doha. It is the selective military policy of the US viz-a-viz terrorist groups in Afghanistan that has complicated the Afghan conflict. No decisive military action has been taken against ISIS (Daesh) in Afghanistan. A comprehensive military operation across-the-board against the militant groups has been completed in the former FATA. All its administrative units of the tribal belt along the Pak-Afghan border have been merged with KPK and border fencing is in progress. The frequent incidents of terror inside Afghanistan are the work of terrorist outfits which have their sanctuaries there.