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Shipment economy

Bulk of Pakistan’s exports consists of primary commodities and low tech manufactures like cotton, rice, wheat, Kino, mangoes, sugar, surgical instruments, sports goods, electrical appliances and light engineering goods. The prices of primary commodities and low techs industrial goods often fluctuate in the interregnal market, resulting in the unfavourable terms of trade. The extremely high tariff of electricity and gas has pushed up the cost of production and the finished goods cannot compete with the identical products of other countries. Moreover, innovations are not applied while manufacturing goods for foreign markets.

Formulation of long term trade policy has been abandoned and the commerce sections in Pakistani embassies abroad are not regularly instructed and sensitised to arrange visits of exporters abroad and explore new markets. Pakistan’s terms of trade, which measures the ratio of exports to imports, have not only been adverse but have also deteriorated over the years, which have adversely impacted the economy. If an economy’s terms of trade are less than 100 percent, they are regarded as adverse. This signifies that capital inflows into the economy in the form of exports are less than the capital outflows in the form of import payments.

In the case of Pakistan, both trade balance and terms of trade have remained adverse, which shows that not only country’s imports are more than its exports, but in monetary terms our exports are much cheaper than imports. This is hardly surprising, because exports of primary products and low technology goods which are derived from products such as textile and leather articles. On the other hand, Pakistan’s imports comprise largely crude oil, palm oil, industrial raw material, intermediate goods, consumer products, capital goods and machinery. Prices of non-oil primary products are generally much lower and prices of lower technology goods are less than those of machinery and equipments which are high and medium technology products.

Pakistan’s terms of trade problem is compounded by the fact that commodity based products which are exported fetch very low price because of very low value addition and low technology content. The manufacturing sector is stuck in second generation technology whereas developing countries like Bangladesh, Thailand and Vietnam have moved to fourth and fifth generation technologies. The industrial base of a number of south Asian countries was primitive as compared with that of Pakistan during 1960s. The extremely harmful and deliberate policy of nationalization of private sector enterprises in Z.A Bhutto era slammed the doors for introduction and indigenization of emerging technologies. It also discouraged the trends of invocation to give competitive edge to Pakistani industrial goods in the international market. Lack of products upgrade and sophistication, make the exports less competitive and have to be sold at lower price.

In the last one decade for fiscal year 2008-17 Pakistan’s terms of trade continuously deteriorated and touched and slipped to 55.82 percent. On the contrary, in the preceding decade for year 1999-2007, the average terms of trade were 88.26 percent as the tariffs of energy inputs were low which give a comparative advantage to exports. This data of Pakistan bureau of statistics shows a sharp deterioration in terms of trade over the past 10 years. In FY 17, Pakistan’s terms of trade stood at 57.17 percent, which suggests that average export prices are nearly half of the import prices. When a country faces a gap so large between its exports and imports, it can avoid substantial trade deficit by drastically increasing the quantity of exports. However, this requires a large exportable surplus which Pakistan does not have. Besides, increase in export surplus tends to depress their prices. Hence, it has not been possible to compensate for low export prices by increasing export surpluses.

On a disaggregate level, it is only in primary sector as food and fuels that Pakistan terms of trade have been mostly more than 100 percent. In the value added sector, notably manufactures, machinery and transport equipments, the terms of trade have mostly been adverse. Conversely, the import of chemicals, high tech manufactured goods, capital goods and transport equipments carry higher prices than that for the products of the same category that are exported because they lack high technology content and innovations of current trends in the export markets.

The swollen trade deficit is greatly disturbing for the new government which is forced to adopt measures such as regulatory duties and restricting imports including those which are needed by domestic industry. Export revenue is an important source of saving. When businesses earn low revenue per unit of exports, they are deficient in funds required for capital formation, which discourages private sector investment. Adverse terms of trade may also cause balance of payment problems. In order to improve terms of trade, the country needs to move towards a high value added and technology content export base.

 

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Compliance of FATF plan

The international community did not show firms resolve to hold the legs of two previous governments of PPP and PML-N to fire on the twin menace money laundering and terror-financing. A clean bill of health used to be given to them. The PML-N government had two third majority in the lower house of the parliament and PPP had majority in Senate which was cooperative with the PML-N to pass legislation to curb money laundering and tighten the counter terrorism laws. A short leash of three months was given before formally putting Pakistan on grey-list in June.

Now a stratagem of tightening the noose around the new government is being applied to clear the quagmire of money laundering and terror financing, which has thin simple majority in the lower house alone and the two mainstream opposition parties will certainly not cooperate with the treasury benches to make legislations to strengthen the anti-money laundering counter terrorism financing regime as the top leadership of these parties is tainted with charges of money laundering. The new government earnestly wants to effectively address the deep rooted menaces of corruption which generates cash for money laundering and choking the sources of finances for terrorism financing but this herculean task without the support of opposition parties.

It was not unexpected that the delegation of Asia Pacific Group (APG) would express dissatisfaction over Pakistan’s progress to comply with international best practices against money laundering and counter terror financing. The delegation shared its findings with the authorities of all relevant agencies, highlighting deficiencies in law, regulations and mechanism and weaknesses of various institutions, and with this Pakistan is unlikely to get out of the grey-list of the Paris-based Financial Action Task Force (FATF). The APG will submit its draft on its finding to Pakistan on November 19. The country would be asked to submit its response to the findings within 15 days after the receipt of the report on the basis of which APG would submit its interim report to the FATF in Paris. The APG delegation will visit Pakistan again in March-April next year ‘on site manual evaluation’ whose report will be made public in July 2019. The authorities were told in clear terms that Pakistan would have to make robust and significant progress from now onwards and before the next on-site review in March-April if it wants to move out of the grey-list or else would fall into the black-list.

The delegation highlighted shortcomings on anti-money laundering front, control and monitoring of non-profit organisations and counter terror-financing mechanism as various institutions suffered poor interface of information sharing and action to combat these deficiencies. Even in areas where legal framework is robust, the APG found implementation too weak. The delegation is also reported to have told the finance minister those relevant agencies during interactions with APG were either ill-prepared and ill-informed or unwilling to share information.

The government has 11 months to implement the FATF Action Plan but there are indications that the plan may fall prey to political expediency like the 20 points National Action Plan which was approved in 2015 with the consensus of all political parties. The PTI led coalition government, because of its vote bank syndrome and not sure support from the opposition parties for passing legislations, will not be able to make progress on legal front to curb money laundering and terror financing. It was the strong factor of political expediency that most important points of the National Action Plan aimed at effectively combating terrorism were buried for ever by the previous government and the present government has also not shown any indication to implement them. The core points of the National Action Plan pertained to strict action against militant outfits and armed gangs; strengthening of National Counterterrorism Authority (NACTA); choking the sources of finances for terrorist organisation; curbing the reemergence of proscribed organisations under new nomenclatures; registration and regularization of religious seminaries; zero tolerance for militancy in Punjab; and reforming the justice system. The provisions of UN security resolutions numbering 1267 and 1373 are binding on the member countries and political leadership of all political parties should realise this fact that non compliance of the FATF action plan will push the country to black-list and international isolation and this scenario must be avoided.

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Water crisis, CJP’s wake-up call

Speaking at the two-day inaugural session of International Symposium on the theme “Creating a water secure Pakistan.” the Chief Justice of Pakistan Mian Saqib Nisar cautioned that the country may run dry by 2025 if the present condition continued to solve the problems that contribute to water scarcity. The president of Pakistan Arif Hussain Alvi was the chief guest at the event, whereas judges of the superior court, diplomats, foreign experts and politicians also participated the dignified session.
Justice Nisar said that it is a well known fact that human beings can survive longer without food than without water, subject to varying weather conditions. Animals, plants and even the smallest of organism require water. The CJP said that our nation is facing water crisis. According to World Resources Institute, Pakistan will rank 23rd out of the top 33 most water stressed countries by 2040, he added.
Pakistan is facing a serious issue of depleting water resources due to climate change impact and poor water resource management. The country has gone from water-surplus to water-stressed situation and soon it is going to have water scarcity. There was an overall, shortage of 40 percent for Kharif season; however, the unexpected rains in the months of September and October greatly improved the situation and the water shortage level dropped to 19 percent. The per capita water availability has reduced from approximately from approximately 5000 cubic meters to 100 thousand cubic meters. Of the 10 percent available quantity, substantial amount of water is wasted during irrigation, industrial and domestic use.
The agriculture sector is highly water intensive as rice and sugarcane are the major cash crops. The latest version of Pakistan Economic Survey notes that rice sowing rose from 2724 thousand hectares to 2899 hectares. The survey also shows that sugarcane was cultivated on area of 1,313 thousand hectares, an increase of 218 thousand hectares. Moreover, primitive irrigation methods results in wastage of large amount of fresh and clean water. The country is expected to experience increase variability of river flows due to enhanced variability of precipitation and melting of glaciers. Demand for irrigation waterway increase due high evaporation rate in summer. Yields of food crops like wheat and rice may decline and may drive their production northwards, subject to the availability water. Water availability for hydropower generation may decline.
In Pakistan climate change is a current reality with devastating consequences. The deluge of 2010 displaced large number of people in KP, Punjab and Sindh and loss to the economy was $ 59.6 billion. If big storage dames had been built on river Indus upstream and downstream Tarbella in the decades of 1970s and 1980s, the extent of devastation of floods could have been mitigated and the country could have avoided the prevailing water stressed situation. Silting has reduced the storage capacity in Tarbella dam reservoir from 13.681 million acre feet (MAF) to 9.360 MAF. The water storage capacity of Mangla dam has also substantially reduced. Pakistan is the third most water stressed country, with fourth highest water consumption. Ground water reserves are dwindling as Indus Basin aquifer is the second most overdrawn source globally. It was sheer selfishness of the most popular ruling political leadership that Kalabagh dam project was not fast-tracked after the completion of Tarbella dam in 1975. At that time this multidimensional project had not been made politically controversial. The multilateral lending agencies including the World Bank and Asian Development Bank were eager to finance this dam. It has the water storage capacity of 61 million acre feet.
Taking cognizance of the water scarcity, The Supreme Court passed a short order in July for the construction of Diyamer Basha and Mohamand dam. The Chief Justice announced a fund for receiving donations in it for dams’ construction. The Apex Court constituted a committee of technical experts, Implementation Committee of Diyamer Basha and Mohamand dams (ICBDM). But the anti-dams lobby, comprising certain political parties, is still active which necessitates the leading role of judiciary to steer the country out from the current situation of water scarcity to water security.

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Kandahar attack

Pre-poll violence continues in Afghanistan and security personnel in the Governors’ House of Qandahar opened fire, killing General Abdul Raziq, one of the most powerful security official of Afghanistan. General Scott Miller, the top US commander in Afghanistan who had been at the meeting with Raziq only moments earlier remained safe but local chief of NDS intelligence service Abdul Momin and Kandahar Governor Zalmay Wesa were also killed. NATO Spokesman Colonel Knutt Peter said that two Americans were wounded in the crossfire. In the aftermath of this high profile terrorist attack, Afghan Election Commission has postponed the parliamentary elections for one week.

Taliban claimed the responsibility for the attack, saying they had targeted both Miller and Raziq. They also urged the people to boycott the ballot. The attack is a devastating blow to the Afghan Government ahead of parliamentary elections, which the Taliban has vowed to disrupt. Taliban spokesperson Qari Yousaf Ahmadi said in a statement emailed to media that main targets of the attack were General Miller and General Raziq.

Putting up a brave face in front of media, US Defense Secretary Jim Mattis said that killing of top Afghan official would not fundamentally change the security situation in Kandahar province. Mattis said he did not see Raziq death as changing things on the ground in Kandahar. “I have seen the officers around him. I have seen the nature of Afghan security forces,” Mattis told reporters on the sideline of security summit in Singapore. It is a tragic loss of a patriot for Afghanistan. But I do not see having a long time effect on our area.”But the fact remains that the attacker was one of the security personnel who were trained by the American forces to fight against the Taliban.

The worsening security situation in Afghanistan is a matter of concern for the countries of the region. The Prime Minister Imran Khan and Chief of Army Staff General Qamar Javed Bajwa have strongly condemned the deadly terrorist attack and desired to see an end to the prolonged violence in Afghanistan. Pakistan has cautioned against the US forces withdrawal from Afghanistan without first achieving the complete peace and security in the war torn country. “Pakistan has been reiterating that US forces should stay in Afghanistan till the achievement of complete peace and stability,” Foreign Office spokesperson Dr. Muhammad Faisal said at a weekly press briefing. “I would like to draw your attention to the chaos in the aftermath after the withdrawal of USSR in late 1980s. The region cannot afford anything similar at this time, he added.

The warning from Islamabad to the United States not to leave Afghanistan before a comprehensive political settlement is worth consideration by Washington. After the withdrawal of troops of former Soviet Union war intensified between the Dr. Najib Ullah regime and Afghan warlords. The United States and, other world powers did not earnestly support the UN efforts for achieving a political settlement in Afghanistan. The mediocre and myopic political leadership that ruled Pakistan during 1990-93 stayed on the sideline as spectators while the fratricidal war went on among the Afghan Warlords who were earlier named as “Mujahideen” by US President Ronald Regan. It was the anarchic situation of four years that created a fertile ground for the emergence of Afghan Taliban at Kandahar who later captured the Afghan Capital Kabul. Afghanistan became a sanctuary of terrorist outfits then which paved the way for the US invasion in November 2001 after the 9/11 incident.

US administration official Allis Will held with the Taliban representatives at Doha a few months ago and its envoy Zalmay Kalilzad has recently held negotiations with them. In both the meetings between US officials and Taliban representatives the option of political settlement may have been discussed. However, the rising violence will blur the prospects of it. Hence Islamabad has to draw a parallel between the situations in Afghans in 1980s and the one if the US decides a hasty withdrawal from Afghanistan.

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Swelling oil import bill

Oil imports may reach $20 billion if prices stay at the current level in world market. Shell Pakistan Chief Executive Officer Haroon Rashid cautioned against the tremendous increase in the oil import bill in the current fiscal year. Speaking at the energy forum 2018, Rashid suggested to the government to extend the oil credit facility from 30 to 90 days, which would defer payment of $ 2 to $ 4 billion at a time when Pakistan is seeking a bailout package from the International Monetary Fund (IMF) due to dwindling foreign exchange reserves.

Haroon Rashid said that oil sector has witnessed a significant change as previously three oil marketing companies were operating, which now reached to 25. The oil import bill was $ 12 billion in 2017, which would reach to $18 to $ 20 billion in the current fiscal year if crude oil prices stayed at the existing level. He said if pipeline infrastructure was upgraded, it would lead to saving of $ 50 to $ 100 million and the benefit would be passed on to consumers. The CEO Shell Company said that earlier high speed diesel was pumped through the pipeline and now motor gasoline will also be transported through it. Pakistan has average stock of 20 days of petroleum products, he said and suggested that storages should be built through oil ventures to enhance the capacity.

The solution to reduction in oil imports lies in streamlining the oil and gas exploration work in the provinces of KPK, Baluchistan and Sindh and boosting production from the already operational oil fields.. From 2008 and onwards oil and gas exploration activities remained almost at a standstill in the existing oil fields and different areas of proven reserves. The most appreciable oil and gas exploration was done during the tenure of government of President Musharraf from 2000 to 2007. Significant discoveries were made in four southern districts of KPK by the Oil and Gas Development Corporation limited and a Pakistan company Zever Petroleum in Shakardarra area of Kohat district. Multinational companies followed the suit and new discoveries were made in Tall, Hangu,Gorgori and Karak. However, oil and gas exploration work came to standstill during the tenures of previous governments. Likewise, storage facility was not expanded to build strategic oil reserves to store crude oil as and when its price goes down. Had the country enough storage facility in 2014 and 2015 maximum benefit could have been accrued from the oil glut in the international market.

It is worth appreciation that the new government has taken cognizance of the growing demand for oil and gas and shrinking supply by taking immediate measures to boost local production and speed up exploration activities to gradually decrease dependence on oil imports. The government has now given 19 licenses for oil and gas exploration but no development has taken place in this regard. The Ministry of Energy has selected 41 new blocks and is seeking clearance from the Ministry of Defense, which has already given go ahead for 20 blocks. At present Pakistan produces 86000 barrels of crude oil per day which meet 50 percent of consumption demand.

Oil rich provinces had complained that the central government failure to auction exploration blocks over the past four years had hindered the search for oil and gas. It further caused losses to the provincial governments in the shape of royalty and gas development surcharge. KPK government had pointed out that not even a single block had been put up for auction since 2014 out of 35 identified sites. Lease agreements struck before 2012 had also expired and were not renewed. This caused more than Rs. 20 billion in royalty earning to the federal government whereas the provincial government lost Rs. 8.8 billion in a single year due to low petroleum production. Criminal neglect of the past five years in oil and gas exploration reflects lack of national thinking.

KPK government had formed KPOGCL which is a non-starter due dearth of technical manpower, required machinery and equipment. The company has so far served as test match ground for hiring and firing of staff on contract basis entirely on political considerations and is going to waste valuable foreign exchange on Lakki block where OGDCL could not find oil and gas in the past. Hopefully, the auction of all 41 blocks will materalise and efforts will be made to increase production from the existing wells of different oilfields.

 

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Looking for half truth

Speaking at a news conference, Information Minister Fawad Chaudhry said that Pakistan Tehrik Insaf government has decided to carry out an audit of all power plants set up during the last fiver years of PML-N government, not saying a single word about the shady deals made for setting up furnace oil and diesel fired thermal power plants in the PPP government during 1994-1996. He also did not refer to the reasons of massive default of electricity bills made by the influential political and business elite federal government departments and provincial governments. The cumulative receivables of power sector on this account are well over Rs. 870 billion three-fourth of the amount of circular debt. Putting the entire blame of not observing transparency in thermal power plants agreements on the last PML-N government is a debatable issue.

Justifying the expected decision to increase electricity tariff, Information Minister said the government is facing a daily loss of 1.2 billion by providing subsidy on electricity to the people, adding, that this practice could not be continued for long. “We have not so far taken decision regarding increase in power tariff, but we will have to take this step and we will make every effort to save the poor from facing the brunt,” the minister declared. Saving the poor from the brunt of high electricity price is a strange logic as people of bottom and lower middle class are facing load shedding of longer duration and pay highly inflated bills. Further rise in electricity tariff would add to their woes.

A lopsided power generation policy had been implemented by the elected governments of PPP and PML-N. The clauses in the power purchase agreements with both foreign and local companies about tariff, capacity charges, mark up on loans and purchase of fuel by the PSO were loaded against the national interest. It is the capacity clause envisaging payment on idle capacity of power plants, if federal government fails to provide fuel to private power producers that adds billions of rupees to the hydra headed monster of circular debt. The capacity charges are paid by the government which is not produced and consumed. The electricity load shedding of four hours in cities and 18 hours in rural areas despite the increase of 10600 megawatt in generation capacity reflects that additional power production is not reaching the transmission and distribution system.

The PML-N government made agreements with Chinese power producing companies for coal based thermal and hydel power generation which were not transparent. Capital expenditure (Capex) for coal projects was about 40 percent higher than the international cost and the agreed coal power tariff was 8.4 cent per unit as compared to a tariff in many jurisdictions of five cents and below. In the meantime more evidence has emerged against irrational coal tariff that Chinese power producing companies will charge and for the payment of which the previous government has agreed to create a revolving fund in the banking system to make payment of the electricity either produced or not by thermal power plants of Bhakki, Haweli Bhadar Shah and Sahiwal.

The story does not end on coal based thermal power plants alone. The hydropower projects which are being completed by Chinese under CPEC will alarmingly raise the power tariff in future. A comparative data of different projects shows that per unit cost varies widely. Karot has 2.03 times more than the World Bank financed Dasu hydropower project., Kohala 3.31 times; Azad Pattan 3.97 times; Sukki Kinari 2.38 times; and Mahal 2.50 times more as opposed to the Capes and tariff of Dasu. It shows how merciless the political leadership is to the country and its people.

Power sector seems to be a sinking ship and may turn out a “Titanic” if urgent and drastic reforms are not implemented for lowering electricity tariff. A more vigilant oversight of EPC bidding process has to be introduced. It cannot be left to the discretion of the sponsors because cost and the penalty are passed on to the consumers under cost plus tariff. Breaking the EPC into a number of components and inviting separate bids for them in future hydropower projects will be in order. The focus should shift now on more competitive power generation projects like solar, wind, hydel and solar-wind hybrid. The canon of post audit of power projects should not remain confined to the ones implemented in the PML-N previous government but it should also encompass the IPPs that were built in the decade of 90s and a team of legal experts should be constituted to find a way out for renegotiating the power purchase agreements made with private power producing companies.

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Desperate situation needs desperate measures

The debris of cumulative economic mess of the previous two governments has fallen on the PTI government. To avoid default situation formal request for a bailout package has been made with the International Monetary Fund (IMF). A leading economist and member of Prime Minister’s Economic Advisory Council has expressed his opposition to seeking this bailout at this point of time and pleaded for prudent and tough fiscal measures for revival of the economy. Broadening the tax base by bringing wealthy people under the tax net is one of these measures for generating more revenues from domestic sources.

The governments drive to broaden tax base by bringing big into the tax net may fail to yield the desired results as it has issued nearly 340 notices to potential tax dodgers without doing proper profiling of cases and without empowering the relevant directorate. The notices have issued by the Directorate General Tax Base wing of the Federal Board of Revenue. But the wing has a presence in three cities and its mandate is limited, according to an official source.

There are over three million registered persons who are still non-filers. The World Bank and the IMF have repeatedly insisted on the utilization of this data to broaden the tax base but the governments turned a deaf ear to the advice of international lending agencies merely because of political expediency and protection of the rich people of the country. In the previous PML-N government 43 percent of listed companies did not filed tax returns and skipped out of the tax net in 2017. The Broadening Tax Base Wing cannot go after the non-filers. The FBR operation wing is responsible to go after these registered people but its workforce is preoccupied with the key function of achieving monthly revenue targets. In President Musharraf era 2.4 million people used to file tax returns and pay taxes under the self assessment scheme. The number of tax payers has dropped to 1.2 million.

A significant majority of the identified High Net Worth individuals belong to areas that do not fall under the federal government tax jurisdiction. Out of the 220 identified cases picked for sending notices in the second phase, about 75 reside in Azad Jammu and Kashmir and exempted federally and provincially administered tribal areas. Like the Panama Papers episode, the tax notices have again been sent on the basis of incomplete information. The notices have been sent on incomplete addresses like Aziz Shaheed Road, without mentioning home numbers or street numbers. Majority of Ishaq Dar team, comprising PML-N loyalists, are still staying put in the FBR. The FBR officials did not inform the finance Minister Asad Umar about these operational difficulties during his maiden visit to this bureau. As of October 10, only 482000 people filed tax returns for the income earned in the last fiscal year. The poor show forces the FBR to give two months extension in the date of filing tax returns. At the beginning of this month, the FBR started civil proceedings by serving tax notices to tax dodgers under section 114 (4) of the Income Tax ordinance. However, the fact remains that in court hearings of the cases under this ordinance the legal teams of tax Commissioner ate most often fail to properly and strongly build up their cases and eventually lose them in the court of law.

FBR said the people who have been served with tax notices have purchased properties over Rs. 20 million or cars of 1800 CC, or have received rent of Rs. 10 million or more in a year time. Out of 340 cases, about 185 notices had been sent in the first phase and the remaining notices have sent in the second phase. Due to incomplete addresses, the courier company could not deliver 90 notices out of 185. These notices have been sent on the basis of collected data from a number of third party sources. Specific details in all these cases are missing. In order to make the tax drive successful, the government needs to give administrative powers to the Directorate General Broadening Tax Base Wing. The government should set up offices of this directorate in all the regional and large taxpayers units. No rocket science is involved for building authentic tax profiles of non-filer wealthy people by getting authentic information about potential tax payers from NADRA. If there is a will there is away. In the current desperate situation comprehensive fiscal measures are needed.

 

 

 

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Engaging India for dialogue

India is not inclined to resume the process of composite dialogue for the resolution of outstanding disputes including the core issue of Kashmir. It showed obduracy to reciprocate the peace gesture of the newly elected Prime Minister of Pakistan Imran Khan. It backed out from its announcement about the meeting of the foreign ministers of both the countries on the sideline of recent UN General Assembly meeting. After calling off this meeting Indian Army Chief hurled the threat of surgical strikes in Pakistan.

India has continued violations on the Line of Control frequently and sometimes on the working boundary killing innocent civilians over the past five years. But Pakistan has once again reiterated its firm resolves for the pursuit of meaningful engagement with it for confidence building measures and avoidance of arms race and risk reduction. Speaking at a conference on Non-proliferation regime at the Strategic Institute in Islamabad, President Arif said that Pakistan would continue to demonstrate restraint and responsibility but no one should doubt our resolve to deny any space for war, adding, nobody should doubt Pakistan’s capability to defend its territorial integrity and sovereignty. The President called upon the international community to take serious note of Indian threats of surgical strikes and limited war. He however, regretted that Pakistan’s postures fore peace have been reciprocated with belligerence. He said the proponents of such reckless fantasies will bear their responsibility and consequences.

India has started arms race in the region with its purchase deals with France for acquiring Rafael jet fighters and SS 400 air defense system from Russia. It does not need these weapon systems neither to counter China nor to bully its small neighbours like Bangladesh, and Myanmar. A proactive diplomacy can build pressure of international community on India.

 

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KPOGCL’s Lakki bloc, trap or treasure

The long awaited Lakki Block has been eventually awarded to KPOGCL to carry on its exploration work for oil and gas and exploit the indigenous resources for the benefit of the province and then country. It is now real test for this provincial Oil and Gas Company to show its professional competence by acquiring state-of-the-art equipments and their usage with high quality expertise. The success narrative has so far been based on concocted stories. The organisation had been a test match ground for the former Chief Minister and former Speaker of Provincial Assembly to hire and fire contractual staff in violation of merit.

It has been the main concern of the people of the province that despite tall claims by KPOGCL and its CEO Mr. Raziuddin, regarding oil and gas production by the company, not a single drop of crude oil or a bubble of gas have been produced in the last five years. But funds of billions of rupees allocated from the taxpayers’ money, which is being placed at the disposal of KPOGCL and its CEO, have been spent on a large fleet of vehicles, ignoring the purchase of much needed equipments. This is something that speaks about the inefficiency and failure of the previous government and former secretary energy and power, barring one minister who had thoroughly transformed Elementary and Secondary Education with his zero tolerance for violation of merit.  However the present provincial government of PTI has appointed a competent ex bureaucrat as adviser to CM regarding Energy affairs. At the same time a competent Secretary has also been posted in the Energy and Power department. Both of them will, hopefully, deliver and at least give some comfort to the people of the province.

Coming back to Lakki Block it has been awarded as a dowry of 18th Amendment with very high commitments of 750 Work Units in addition to around 2 million USD equivalent to 26 crore Rupees spending during the first contract year starting from early September 2018. The work units if translated to Seismic survey are equal to acquisition of around 3 Km seismic drill for each single Work Unit (WU). One Km of Seismic Survey will cost KPOGCL around 12000 to 15000 USD which is equivalent to rupees 15.6 lac to 19.5 Lac. Thus the total cost will be around 30 – 37 million USD, equivalent to Rupees 390 crore 481 crore. On the other hand if the company choose to drill at least two wells against this commitment then the total cost in this area according to experts will be around 15 -20 Million USD per well and thus the total cost will be around 30 – 40 Million USD. In all cases the expenditure recipe is not less than 30 Million USD equivalent to Rupees 390 Crore for KP. At the same time the  people must be aware of the fact that this Block has already cost this unfortunate province around Rs. 15 Crore – 18 Crore on account of salary of a Blue Eyed American National CEO Mr. Raziuddin  at a rate of rupees 3 million per month for the last five years. He is an electrical engineer with zero experience in oil and gas exploration.

The drilling experts believe that 30 – 50 million USD, equivalent t0 390 crore – 650 Crore Rupees, is just normal expenses that usually incur on the exploration. However it remains to be seen that the Lakki block wherein 11 wells have already been drilled with no success does really worth this expenditure and commitment?

Secondly these unsuccessful wells have been drilled by PPL, OGDCL who are not only successful explorers but have also competent teams technical experts to accomplish the job along with several tens years of experience at their back.  The question is that how KPOGCL with very weak or perhaps no competent drilling and exploration team can succeed in finding oil and gas who  has already spent five years with actually no progress on ground despite spending lot of public Money? Moreover people of the province has the right to ask the question that “has the provincial government and KPOGCL were on the same page while agreeing to such heavy commitments for a failed Block and has the provincial government allowed Mr. Raziuddin to go for such a heavy commitment? Do the government or Energy and Power department undertake any exercise to justify such expenses at the hands of foreigners?

The new government which controls the purse of the cash starved province must ask this question as how it can be justified to hand over these funds and responsibilities to a man and his team who have already terribly failed in satisfactorily doing their mandated job.? It is the right time for the incumbent government to take right decisions. Oil and gas exploration effort by KPK government at the hands incompetent personnel can turn in a financial Trap rather than a Treasure for the province which may become Titanic for KPOGCL as well.

 

 

 

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IMF bailout request, US reaction

PTI led government made a formal request for acquiring the bailout package from the International Monetary Fund (IMF). The United State gave rather negative response which was not unexpected keeping in view the interview of Secretary of States Mike Pompeo with a TV network a few months ago. Application of carrot and stick has always remained a tool of foreign of policy of the US in its relations with Pakistan, which has honestly performed its role of a dependable ally in cold war era, Soviet invasion of Afghanistan and the ongoing war on terror.

On the contrary, the United States looked at Pakistan through lenses of suspicion and made repeated demand of “do more.” President Donald Trump controversial tweet of accusing accused Pakistan of lies and deceit in return for receiving billion of dollars in economic and security assistance. Now the new government of Pakistan is being pushed to the wall by raising a bogey of massive Chinese debt for CPEC projects, which is being tied to IMF loans. The agreements of energy and road projects under the umbrella of this corridor were made by the Washington’s favourite Nawaz Sharif government and preliminary negotiations about it were held in Musharf era and another US sponsored government of Asif Zardari. But the United States successive administrations and lawmakers did not react so sharply then. Again when in Nawaz Sharif government, the former planning minister Ahsan Iqbal eulogized and overcalled day in and day out CPEC by describing it panacea of all economic woes of the country the Unites States response was a muted one. Why then PTI government is chosen a target for the shady Chinese loans agreements made by the previous government. In fact it was the misappropriation of $ 11.2 billion IMF loans by the PPP government and the $ 6.2 billion assistance from this lending agency by the PML-N government plus short term commercial loans that made the burden of foreign debt unsustainable. That is why the new government has decided to carry out thorough audit of all loans acquired by the previous two governments.

In view of the foregoing, it seems ironical that the United States, who controls 70 percent voting rights, has decided to keep Pakistan’s legs to the fire on the pretext of CPEC debt. A clear hint has been dropped by the US State Department spokesperson Heather Nauret in a press briefing. To a question about Pakistan request for IMF bailout loans package she said, “In all cases, we examine closely from all angels of it including Pakistan’s debt position in evaluating any type of loan program.”Ms Nauret also blamed Pakistan’s loans agreement with China for its current economic woes. “I think part of the reason that Pakistan found itself in this situation is Chinese debt and the fact there is debt that may be thought wouldn’t be so tough to bail them selves not, but has become increasingly tough,” she said. Partially, her argument is correct which pertains to the acquiring of the most expensive loans by the PML-N government from China.

It was also for the Chinese government to have avoided loan agreements of shady nature with a government which was more than half way through of its tenure. They made the same deliberate mistake with Najib Razzaq government of Malaysia and the new Prime Minister Dr. Mahatir Mohammad has to cancel the agreement of $ 20 billion for the construction of coastal railway line. On Tuesday, IMF Chief Economist Maurice Obstfeld urged Pakistan, s new government to review the loans it is receiving from China and avoid excessive debt which can not be repaid.

Recently, a bipartisan group of 16 US senators claimed in a joint statement that China’s Belt and Road Initiative, which also funds projects in Pakistan, was a debt trap. The recipients always found themselves in debt to China and were forced to make painful concessions, they warned. The contention of US Senators is valid in the context of Sri Lankan’s indebtedness to China for which this small South Asian country had to surrender valuable national assets.

In an interview with CNBC TV network in July, Secretary of State Mike Pomeo said that the United States would not allow Pakistan to use the US taxpayer’s dollars to repay China. “Make no mistake, we will be watching what IMF does,” he said. A Pakistan official has rejected the argument that their indebtedness to China is much smaller than imagined. The Planning Commission’s vague rebuttal will not convince the United States and other influential West European member countries of the IMF that the quantum of Chinese loans to Pakistan is small.