The Hard Realities
Untouched in the Budget 2003-04
The
Budget Does Not Relate to Pakistan, its People
Dr
Zafar Altaf
ISLAMABAD:
Finally, the new budget of the new political regime in Pakistan
is out. All know that except 15 percent raise in the salaries
of the government employees and old pensioners, rest of the budget
does not relate neither to this country nor its inhabitants. It
is meant only for the mighty foreign audience and hopefully it
might have been well received there.
But, many democracy lovers in Pakistan would be pleased to note
one thing good that finally once the mighty and arrogant Shaukat
Aziz had to appear before the elected house and learn some tough
democratic lessons. He was taunted and hooted during his speech
by the opposition parties and no one deemed it fit to lend his
or her ears to what he was trying to make them understand or believe
for about one and half hour in the parliament.
But,
many might have missed what Ishaq Dar, the former Finance Minister
of Nawaz Sharif regime did to Shaukat Aziz and his questionable
policies in the Senate at the time of budget presentation. All
know that it will be hard for Mr. Aziz to justify his three years
economic policies which can not stand the test of truth and an
objective analysis.
Dar
grilled Mr. Aziz on the issue of loss of $10billion to Pakistan
economy during the war on 
terror
as revealed by Centcom and scooped by the South Asia Tribune.
A helpless Mr. Aziz caught red handed by SAT had really no excuse
to offer what Dar said except changing sides in his chair. He
wondered that on the one hand government was making claims of
improvement in social sector while on the other, the poverty during
military regime had gone up by 4 per cent.
Pakistan
has had another economic hiccup for the budget starts with behavior
aberrations and we know that when we are false in little things
we can be very false or almost criminal in big things. This is
the democratically elected government to which the finance minister
subscribes having been a democrat all his life. His philosophy
is simple. There must be continuity and consistency in economic
policies if Pakistan is to attain its glorified place amongst
nations. That philosophy holds for the last three years and as
was strongly believed is going to be as long as he lasts in this
position.
That
being so the last three years the expenditure was not voted for
reasons beyond his control. The budget meetings then were simple.
One pre-briefed the powers and took care of their concerns that
were limited although they were concerns that skewed the economic
policies and placed the few in more exalted positions.
The
wealth tax and capital gains tax was sorted out so that the poor
did not suffer the consequences of the property that they had
acquired any way, which way. So the previous government’s
acts were out of context and the last three years continuity had
to be ensured even though the macro-micro framework did not work.
Certain claims are in order before the macro framework is analyzed.
The budget touches the lives of the very rare and dignified few.
Ask the rich men of Cholistan and Thar or Northern areas and they
will not even know the document what to talk of what is in it.
Increasingly the budget has come to mean the elimination of benefits
for the poor and elevated benefits for the rich.
His
pious hopes of making Pakistan a viable state without a begging
bowl is laudable and then the usual chest expansion policies that
have no relevance to the state of affairs are stated in terms
of what can be done if and if and if.
Let
us examine the growth rates and see how prime are these. For this
we have to go to the sectors. First the growth in agriculture
has been over stated. The wheat figures of 19.235 million tons
are over stated. Considerable evidence is available of the debacle
that followed the attack of aphids at the crop maturity stage.
The figures are in any case provisional. The price of wheat at
harvest time always reflects the surplus or shortage.
This
year those who had all along been clamoring for open district
borders wanted these to be closed. The price of wheat at harvest
time was well above the announced support price of Rs300 per 40
kg. The price at this point is about Rs. 360-380 per 40 kg and
this is likely to increase. The policy makers are talking in terms
of importing wheat.
Cotton
figures are also incorrect and the yield of cotton indicated is
so ridiculous that one wonders whether we are living in Pakistan
or somewhere else. The yield increased according to the cotton
growers located in the ministry of finance by 7.25%. What does
the main body of the economic survey reports ‘During the
current year the textile sector showed greater resilience to lower
production crop’. All the production figures for 2002-2003
are provisional. So let us massage them and cook the figures to
mean what they should mean.
Growth
rates indicated in agriculture will not be attained. The growth
rates in agriculture for 2001-2002 were –1.8. The provisional
rates were again fixed on a provisional base and were highly exaggerated.
Large-scale
industry grew by 8.7%. What constitutes that growth rates? Group
wise data shows that the automobiles had a growth rate of 49.8%,
[affect of flight of capital from west after 9/11], 20% in non-metallic
[including cement-housing of the rich] 20%, Metal and products
and machinery 18.4%, Tires and tubes 16%, paper and board 15.7%,
Beverages 8.5% and so on.
Now
all these industries are pneumatic ones and consumption oriented.
If automobiles growth increases what happens in the cities is
for you to worry about. Lahore is suffocating from the fumes that
cars leave behind. My one time favorite city is not worth living.
So is the case with Karachi, Faisalabad, Multan, Hyderabad and
so on. So the costs Mr. Finance minister are exorbitant to your
industrial growth rate.
The
much-touted Vasco De Gama vision of Textiles is in tatters. Yarn
has increased by 8% while
the value added cloth has increased by 1.5%. What does the text
say ‘the brighter side of the investment in this sector
is the heavy investment in the air jet weaving segment’.
And pray where did this investment go for it is not reflected
in the growth of the weaving section. Was the amount siphoned
off by the over invoicing mechanism. Want to know how? The amount
of money that has been pumped into this sector and will again
be posted this year is simply a waste of resources. At what cost
do you want to earn this money.
The
Textile johnnies have been getting preferential cotton from the
farmer to the tune of 40% below the international price. They
are exporters of mops and sops. The act has to be cleaned up and
this finance monster [no mistake] just cannot do it for he is
in an unholy alliance with the mafia.
The
less said about the services sector the better. You can do what
you want with the figures and this sector is used for gap filling.
What of the other macro-economic criteria/figures. Inflation is
down to 3.3%. There has always been considerable skepticism on
the inflation figures given that the database is such that it
leads to ignoring the official statistics. The price increases
have broken the back of the common family.
In
a country that cannot control and manage its communication costs,
amongst other things there is bound to be increases in inflation
as that transaction cost is the major item to be countered. The
others are utilities and we know that utilities have price affects.
Ask even your friends in the manufacturing sector who will cry
themselves hoarse as the rise in bills is having an adverse affect
on their competitive edge.
Investment
likewise in the domestic sector has gone up and is now 15.6% of
the GDP. That figure is not reflected by the employment increases
nor the manufacturing increases that should have reflected the
increases.
And
Foreign Direct investment recorded a 100% increase over the last
year. The finance Minister chooses not to divulge what the last
year’s base was. Is this investment in manufacturing, is
it in the food and beverages industry or is it in the exploitative
industry. 
Dependent
on that will be the question as to whether the economic activity
is consumption oriented, technologically important and leading
to transfer of technology, and or is it in the exploitative search
for such minerals as can be extracted and taken out of the country
at a cost that is destructively poor. Or is it in the transport
sub-sector [Daewoo]. Why did he change the basis for comparison?
That is what statistics can be for illumination or for support
and a lean to structure. In our case statistics seem to be not
for illumination but for whatever way we can state an opinion.
Foreign
exchange reserves have increased after the 9/11 incident? So how
was the economy doing before that date? The finance minister had
the opportunity to state what would have been an excellent comparative
analysis. Is it because we have since held our head high and taken
decisions that are taken by independent nations and that will
continue in times to come. Zia’s finance minister stated
the figures in the same manner. An economy that piggy bags another
international agency or another country is not likely to sustain
that intervention when left on its own.
A
defunct economist would have not thrown his opinion in the manner
that Mr. Aziz has done. How is a current account surplus of 3
billion dollar? It maybe an indication of lack of trust in the
economy and dependent on what it was made available for? Without
stating the details he throws another figure in to the system
as it happens to be positive. The strength of a nation and its
manufacturing sector is very much dependent on the import of machinery
and not the investment in small and medium industry. The last
is for holding some hope of jobs for the poor and meeting the
demands of the lowest sectors of the economy through cheap production
processes.
The
debt burden is now removed and Pakistan will not have to go around
begging for aid. That means that the gap between homegrown resources
and the demand for those resources has been met. In fact what
has happened is that the current lot has taken more loans in the
last two years then what was done in the last ten years.
The
rescheduling does not mean that the debt has been permanently
taken care of. It only 
means
that the debt has been put back. So to the articulate and the
suave one can only say that it is better to state matters as they
are. But again his advisers are such. They have been known to
swap sides without and qualms of conscience and in any case they
have not seen anything but a couple of town of Pakistan and may
have moved around with their masters elsewhere.
The
other criteria do not affect the common man and is for the consumption
of the powers that are located elsewhere. What is a deficit going
to do for the common man? What is a high reserve going to do for
the common man? what is the exchange rate going to do for the
common man if the locally produced goods are more expensive than
the imported ones despite the debacle in foreign exchange?
In any case the foreign exchange has been made to look like what
it is by the friends of the ministry for it is they who are allocating
these funds for their own little benefits. The common man does
not have the privilege of the use of these funds. The fiscal space
has been provided by the remittances that are coming in from the
west especially from the United States. For what is happening
to them has led to a flight of capital from that country to the
home country. All of a sudden Pakistanis in foreign countries
have realized that it is better to be in one’s own country
and live on salt and water of one’s own. It is my own.
People
of the vintage of which the finance ministers are made of have
a habit of leaving a sinking ship. There are many of them. If
the mark up rates has been considerably reduced pray why have
the investments not increased due to the domestic investors?
I
have not seen a single prospectus to that affect of a public limited
company? Have you? Yes the liquidity of the banks has increased
substantially and that is because investors are not borrowing
any more. They are vary of the economic policies and are not willing
to borrow and invest. A study by an economic institute of the
country recognizes the fact that formal employment has dropped
and then typically states that the informal employment has doubled
from 2% to 4% but the take home salary has been reduced by half.
In
other words any one taking home 4000 rupees is now taking two
thousand rupees home. You can live on Rs 4000. I asked this of
the policemen I usually give lift to while going to my office.
They were frank enough to admit that there seniors have been wanting
all kinds of perks for themselves and take salutes from every
power that comes in this country but the lot of the foot constable
is still on his foot. So goes the 15.6% increase in investment.
Where is it? Why is it not reflected on the employment scene?
What
is a budget an indication of? It provides hope for the future.
It is an extrapolation of the policies in which the good ones
are substantially increased and the poor ones are eliminated.
Now according to the finance minister all policies have done wonders
but we have to provide room for miracles to happen and that will
be done by the PM and his entourage because the last lot were
after all the last lot.
He
has to reduce poverty. That is challenge number one. It has increased
to about 48% as indicated by the Asian Development Bank. Finance
minister’s finance advisor [yes he has one and there was
time that an advisor had an advisor in the same field] stated
that poverty had been contained and in fact was well in hand for
reduction. The same advisors printed word has stated that poverty
has increased by 4%. The International agencies do not agree.
Will any of the economic policies listed above decrease poverty?
None.
The
roots believe me are totally different. There are other kinds
of poverty than what these fat guys talk about. In a recent visit
to Baluchistan I encountered poverty of a form that I thought
was not the format of decent independent nations. In a valley
of 28 villages there were no schools, no dispensaries nothing
that could say that was part of Pakistan. Its flora was such that
it could be made into an instant success. I had an uncooked lunch
with them [in this modern day and time].
The
growth rates are calculated as they are. There is no link between
the macro indicators and the micro requirements. Mr. Aziz should
by now have learnt this. But it is difficult to teach a blind
in the ear and a deaf in the eye. He has both disabilities and
these are compounded in his staff. Come with me and live out an
evening with these poor unfortunates. There is no hope for them.
There is no hope for the people of Cholistan, Thar, and Northern
areas other than promise them the kingdom of heaven a la Kargil.
People of lesser Gods are living in other areas of Pakistan. Mr.
Finance Minister they are living under your very nose. Do you
have the ability to rise to the occasion and first recognize them
and then suggest some measures for them? Perhaps have you forgotten
your roots and how fortunate you got because of this country?
And then speak well of the robber barons because they can articulate
you before the powers and ignore the poor and make occasional
pious statement about them. I will deal with this at some length
in the very near future.
The
budget’s second hope giving feature is the Rs 17 billion
allocation for agriculture. Cleverly this has been reflected as
Water and agriculture. Fine. What is agriculture going to get
out of it? These are mega water projects and I do not have to
make any statement who they cater for but on the next occasion
the proceedings of the farmers of Sindh and Layyah[Punjab-yes
Punjab has poor too] shall be provided to the readers.
These
projects are cheat projects in which the interests of the powerful
have been kept in mind. The poor will suffer the consequences
of the powerful. Instead of the poor leaning on the rich feudal
it will be the rich, likely to be feudal, leaning on the poor.
Good hope. Agriculture has been dismissed in a single line and
tagged with water. This would generate employment to thousands
of people. The rule of thumb that I always find relevant to a
given situation is to look for mega projects and go behind them.
Mega projects of NS and of PPP and of Military have the same thing
in common-half baked and benefiting the few at the expense of
the public Interests.
The
airport at Bahawalpur to holds Boeing aircraft is more important,
the yellow lining of the motorways. The Killi Dabao (Drive
Faster) syndrome. Get your thing going under the garb of public
use. Get the bridge to your honeys house so as to get to your
nocturnal activities quicker and faster. What have you done Mr.
Finance Minister. Why have you allowed this to be done Mr. Prime
Minister?
Should I use the letters in a bigger form to portray your heaviness.
Why have you defaulted for Baluchistan? Do you not realize that
the future granary is in Baluchistan and people are not interested
in doing anything over there. There will be more on this you can
bet. For as Frost said "There are many rivers to cross and
many miles to go, and many miles to go, and many miles to go’
before I sleep. Mr. PM there are any miles to go and many rivers
to cross.
Conveniences
are not part of that format. You keep on making judgmental errors
in the selection of your staff Mr. PM and your Finance Master
[is he really yours] keeps on making conceptual errors. I once
asked him for a decision in the Economic Coordination Committee
when he was all in all [which he still is]. His reply was not
forthcoming and I was to go back to the farmers and I asked him
whether in deferring this decision he was going to a soothsayer
for help. Some goon [actually I know the goon] had this published
in the local press. That was the end of master and servant relationship.
It was like Liza who was asked by the husband to stop a hole in
the bucket. She enquired lyrically with what shall I stop the
hole in the bucket’. The loving husband replied ‘Try
straw dear Liza try straw’. How
will finance minister stop the leak-with a straw?
By now it must be clear that I am no admirer of the double standards
of the theorists and how these have been implemented. Pakistan
should start developing another discipline and add to the existing
ones of – macro-micro-development - the discipline of behavioral
economics. The distortions of thought and action can then be covered.
Incidentally
were these massive documents given to MPs in the assembly or the
night before or the morning after the speech? Try Stockton for
budget making in a democratic manner. No harm. Try the non-partisan
approach.
