Sunday, December 28, 2008

Nuclear Scene

A number of events and developments on regional and world nuclear seem we want a review of the situation.IAEA’s report on Iran’s nuclear programme is expected to be released
soon. By the time readers read this piece, the report would have been out. The conclusions of the report are expected; some verified activities and some un verified ones, casting doubts on Iran’s declaration that it was not up to making nuclear weapons. As an appendix Pakistan’s role in Iran’s nuclear activities are highlighted and more embarrassing the nuclear black market network alleged to be operating from Pakistan. Indo – US nuclear deal may not be up for congressional review, as the current session ends in September. The next session would be after a new President is installed. President Bush is expected to push the congressional
approval before the current session winds up. Oppositions to the deal has come from unexpected quarters. President Carter in an article has asked the US Congress to see to it that India undertakes to shun nuclear testing. The agreement reportedly is drafted in a manner that
it allows both the parties – India and the US – to interpret it in diametrically opposite ways. That means India does not commit anything regarding nuclear testing, while the US has the
option of suspending the deal if India resorts to nuclear explosions.

NSG (London Based Nuclear central of some forty nations) has reportedly
approved the deal. However, the US congress may not approve of the confusion regarding nuclear testing. And any emphatic statement in this respect may not be politically acceptable to the Indian government.

Outside South Asia, Pakistan’s nuclear programme has almost turned into a liability for us. Musharaf surrendered to US pressure in the aftermath of 9/11 ,reportedly to save Pakistan’s nuclear assets from a possible American onslaught. Further possible concessions by the new government to the US administration may partly have the same consideration. The new IAEA report implicating Pakistan may be a part of the some old pressure tactics. Any new nuclear challenger Iran, N. Korea, Syria etc. somehow puts Pakistan on the spot – revealing
assistance from Pakistan’s nuclear black market. We need to take stricter institutional measures to see to it that nuclear material or know now is not exported or smuggled from Pakistan. In Pakistan, controls in whatever field, are tight for only those who
are not the members of the exclusive power club and are lax for the blue eyed boys or bosses, although PM’s have been declared security risk and not adequately informed on nuclear subjects.
Musharaf himself asserted that Dr. A.Q. Khan was outside the security controls due to his status and the latter’s control of security apparatus by himself.General Zia’s plane crash, as it is told, involved exploding mangoes, which were somehow smuggled onto the plane due to the some lax controls.

Therefore an institutionalisation and strengthening of controls on nuclear materials and know how is to be the number one priority of the sector including personnel employment and exit policies. Government should consider enhancing the retiring age of some key personnel of nuclear establishment.
Keeping in custody is embarrassing and create bad taste. Employment is a better prison, giving salary to the employee and security to the employer.

Another area which merits careful consideration by the government is nuclear safety. A nuclear safety commission is operating, but seems to be busy with controlling radiological activities in health and welding.
We keep hearing of heroic improvisations and indigenisation made by our able engineers due to lack of supply of required parts in the wake of export bars and controls by western countries .While it is commendable, it sends freezing signals down the spines of risk analysts who ponder over the safety issues. Sometimes back, there were news items regarding health problems in the community living nearby a nuclear mine in D.G. Khan. Reportedly KANNUP, whose designed life has already passed ,is up for enhancement of its
capacity at a site which is already too perilously close to the population of Karachi. Kannup site should be closed down, once the current power crises come to end. In any case, KANNUP’S power supply is not stable due to abrupt breakdowns.

Any environmental impact Assessment activity worth its name would disapprove of any capacity upgradation of the Kannup’s site at paradise point. The cost advantage may not be worth the risk. Therefore public oversight of nuclear safety issues by an adequately powered Nuclear Regulatory Commission and parliamentary committee on the subject are required to be instituted.

We need not be noisy about Indo US nuclear deal. It will not stop because we oppose it. It would fall on its own, should the issue on nuclear testing is not resolved by the postis concerned.

Concluding it does not merit much elaboration to emphasise that without a significant improvement in our governance and political stability, the world look at Pakistan’s nuclear capability to be in wrong hands. Therefore if not for the sake of teeming millions, the elite
should do the needful for its own sake.

Friday, December 26, 2008

No First Use Policy;Pakistan"s Nuclear Weapons.


President Asif Ali Zardari of Pakistan has spoken to foreign media on recently on no first use of nuclear weapons .

NFU has been on the table for several decades original between Warsa NATO countries the erstwhile Soviet Union used to be the main proponent ,While the US and NATO rejected the idea,due to proximity and conventional weapons dominance in Western Europe.The US did not want to close any option,especially dealing with the Soviets in the European theatre.In fact the US has never comitted non- use of nuclear weapons even vis a vis non- nuclear weapons states.Nuclear threats have been given by the US several times during the postwar decades including Korean war,Veitnam conflict and Cuban crises.Interestingly the Russians after the demise of the Soviet Union,also seem to have withdrawn their interest in the NFU.Being reduced to a smaller power status,they would like to resort to a more active use of  a nuclear threat in the achievement of their foreign policy objectives and projection of power.Earlier Soviet interest in NFU was primarily to have a flexibility of having a conventional military campaign in Europe without incurring the nuclear risks,at much earlier stages in a possible confrontation.

While reading the US nuclear policy literature,it is clear that the US would not hesitate in using nuclear weapons anywhre ,whenever it is in a difficult military situation including Pakistan,Afghanistan,Iraq,Middle East etc.For example if a thousand of their soldiers are trapped and their lives are in danger.

Todate only India seems to be interested in NFU,partly for propaganda reasons and partly for clever strategic reasons,especially vis-a-vis Pakistan,the only country with which it has active conflict or confrontation.Any hesitation or delay on the part of Pakistan in starting to prepare for pushing the nuclear button would deprive it of the value of its deterrence.Plainly speaking,NFU would give India  an opportunity to launch or win  a conventional attack,without thinking of  our nuclear weapons.India does not need nuclear weapons to face Pakistan in a conventional conflict, while  the reverse may not be true.

Whether there  may or may not be a formal nuclear doctrine in Pakistan in the context of first use in a military campaign or engagement,there seems to be a  national consensus in the use of nuclear weapons,vis-a -vis India,should the need arise.There is no refrain,hesitation or compunction in general public over use or threat to use nuclear weapons.With this physical and psychological ability and preparedness to launch nuclear weapons in military conflict,the nuclear deterrence regime is established in the subcontinent.The confidence and resolve among the people and maybe the government to take on India seems to have come about due to this nuclear deterrence regime.

India has amassed forces on the border earlier and is ,these days unduly pressurising Pakistan in a wanton manner.Somehow there is no worry among general public despite poor economic conditions.The technical question ,however, remains;a definite threshhold for introducing nuclear weapons and the intensity of nuclear response.To explain this a bit,under what conditions would Pakistan resort to nuclear weapons ?Will it gradually escalate to a nuclear war and inthis it will use most or all of its 40-50 bombs at a time?Looking at the constancy and the background of the tone,India maybe after getting the answers to these technical questions.

It appears that India may launch some kind of attack to achieve these possible objectives as well.The pronouncements seem to be quite clear in this respect.Another motivation for the Indian stand could be to test and create space for power projection and achieving its policy objectives,despite a nuclear deterrence regime,namely to blunt,confuse,milden the regime.

Nuclear deterrence has also been linked to the Mutual Assured Destruction(MAD)doctrine.The regime assures that both sides would recieve unacceptable damage and destruction during a conflict.In the context of MAD our image of bieng mad people among some,comes in quite handy.The cool, happy and rational attitude of typical westerner belies his ability for a resolve and readiness in using nuclear weapons."Dama Dum Mast qalander " should be taken seriously by India.

It is therefore concluded that the recent pronouncements by President Zardari on NFU may be a mere palliative or plain simple gentlemanly wish usually untenable in realpolitik.It is quite understandable in these early days of his presidency.It has happened elsewhere also.President Ronald Reagan reportedly and quite innocently asked his advisors publicly as to why they were so particular and edgy about a few Pakistani nuclear bombs,when the US had thousands,.Reagan was anxious in entailing Pakistan"s support in Afghanistan against the "evil empire".Did Ronald Reagan prevail or the  nuclear non-proliferation policies persisted ! perhaps both continued,for Pakistan continued its nuclear progam without a major threat from the US,but amidst loud American protestations and export bans. Or President Zardari"s statement may be not so untutored as it appears to be.Afterall talking about no first use indicates the inherent possibilities.
On the other hand Pakistan"s nuclear policy makers and strategists may have to somewhat define the contours of the nuclear deterrance regime.Would Pakistan be converting every military incident to anuclear war.Would it be able to do so;should it do so?A minimum threshhold may be difficult to define and this should remain fuzzy.Keep tehm guessing!!On the other extreme, a leadership set up maybe lacking resolve due to a variety of internal and external pressures,and this may delay the introduction of nuclear weapons beyond  acritical point,beyond which national security,stability and coherence may be in severe jeopardy.Thus a maximum threshhold or critical point may better be defined than not eg., incidences such as crossing of BRB on Lahore front,or a certain locationon LOC in Kashmir or similar thresholds elsewhere.definition of such a maximum may reduce the hesitation or haste of a pressurised,beleagured or lacking-in -resolve,political-cum-military leadership.

So much for the cruel logic of the nuclear weapons use,the people and governments of the two countries should realize that the stakes are very high and the consequences of the politics of brinkmanship too dangerous.The use of force or the threat of it should be shunned in resolving mutual disputes.Let us learn to sit and talk together on all issues facing the two sides.The interrupted peace dialogue must be resumed without further loss of time.

Tuesday, December 16, 2008

What the New Government Should Do

Akhtar Ali

What the New Government Should Do?

There is misplaced hue and cry in the media that the new government has not been able to do anything in the last five months and thus a conclusion is made by some commentators that it sets a trend and that nothing would possibly be done by the current dispensation. The threat is that the political government may came under such a pressure that it may start bringing in half baked policies and solutions and start tinkering with smooth running established policies. In this two part article, we would examine as to what can be possibly done by the new government in the economic arena in the short run, which is the theme of this piece. In another part, we would examine the political and administrative issues that could be taken up by the new administration for a longer term and more fundamental over-haul of the system.

This hue and cry is not new. Unfortunately the system tolerates long spells of military led governments and becomes intolerant with the short spelled civilian and democratic governments; either it is the high expectations in the wake of elections wherein promises are made or the problems and difficulties of people have reached an unbearable level or it is both. It is sincerely hoped that it is too early for the undemocratic and invisible forces to start their destabilising game.

Most pressing and urgent problem of food and energy inflation is largely imported. almost all the countries are suffering from these issues, except the oil rich nations. No Nobel prize holders headed governments could have done anything about it, at least in the short run. It is simplistic to blame either the previous government or the current ones for these woes.

The days of revolutions and revolutionary policies are over. Many developing countries have played the politics of revolution without success. The name of the game today is continuity, stability and endurance in government policies; flexibility, involvement of the stake holders, fast track implementation mechanisms are the additional required features. Revolutionary policies have not delivered in the past. Look at what Bhutto’s nationalization of industries and banks achieved. Musharraf government started with jailing prominent industrialists and sending sentries to shop keeper for tax and bill collection. He activated NAB and ended up with NRO.

There are always new problems and new solutions in changing perspectives of international politics, technology and trade. The new government does not have to search for problems ; these are well known, and are pressing ones. Even the solutions have long been debated and quite a few are in our national intellectual basket.

The main problems are law and order, food shortages and high prices, energy demand ,dwindling social sector, trade imbalance and shortage of revenue, poor housing and infrastructure.

I hope I would be proven wrong, that law and order situation may not improve in the foreseeable future. Poverty, underdevelopment , indefinite postponement of reforms in the tribal belt, the Afghan Jihad legacy, inexpedient expediencies of big powers in not solving the Middle East and Kashmir issues, convenient export of dissident and revolutionary manpower from Arab countries to this region are the determinants of the problem. If Americans are not persuaded by our national leaders that peaceful options be pursued and if they intensify direct attacks and incursion on Pakistan territory, the problem may become even more complex. Is there a larger game? We are not short of conspiracy theorists who argue that 9/11 was an American conspiracy and that Americans are in for larger strategic goals including oil and minerals.

There is a myth among many Pakistanis that Pakistan is a resource rich country. It may not be liked by our patriots and my compatriots but the reality is that it is not. Resource rich countries are Iran, Iraq, Saudi Arabia, Nigeria,and Indonesia besides Europe and the USA and some Latin American countries. We are short of water and short of land, coupled with burgeoning population. Half of the area falls in Balochistan which is mostly inaccessible for a variety of reasons;95 per cent of countries population is cramped in the remaining 50% land mass of the country. Most minerals are of low grade and concentration; look at Iron and copper. The Copper mine at Saindak has been a financial liability . One can bring forth many cases of resource poverty.

Military myths have been similarly inculcated among the masses. Military performance and capabilities have been well documented in the two wars; Kargil. The lack of success against militants are additional indicators. I would not further elaborate on this.

It is useful to creatively investigate and contest these myths, for it would help us in truly understanding the country’s problems and creating a political environment and consensus that may enable governments pursue realistic policies, goals and initiatives, domestically and abroad , in political and economic arena.

Much of the population is poor and illiterate ,estranged with its governments and elite and divided in tribes, sects, ethnicity and mythical folklore. Local government can not take action against traffic violations and land grabbers lest it may have ethnic fall out. Dams can not be built because there is a zero sum game and mistrust among provinces. Where is the nation which the super patriots want to push against India and now even America .This is the perspective that must be borne in mind while dealing or commenting on the problems of governance and development in Pakistan.

Let us now see as to what is possible and feasible in the economic field. Assuming that law and order does not improve ,one should not count much on direct foreign investment and export led growth. DFI may continue to flow in telecom and energy. Attention should therefore be paid on mobilising local investment for import substitution in industry, agriculture and other sectors.

Budgetary resource gap and its allocation need special attention. Budget deficit has traditionally hovered around 7_% of GNP. The deficit is met through internal and external borrowing which contributes to inflation and foreign dependence, the latter at tremendous consequences on national sovereignty. There is an upper limit on increasing the revenue, most of it being indirect. Excessive extraction of existing tax payers may be counter productive.

The only feasible option appears to be reducing the non productive expenditure which constitutes 40% of the budget. Military expenditure and administrative expenses are the two major items thereof. In the current internal security environment, a reduction in these items appears to be impractical. However, this has been a long term problem for Pakistan’s economy. The internal security situation has in major part developed because, for a long time disproportionate resources have been diverted to these items, away from vitally needed investments in social sector.

It is a vicious cycle, more military and police, more repression, more poverty and more estrangement and alienation which has now acquired the dimension of militancy and terrorism. Recruits from a poor, unhealthy and illiterate populace would contribute to deterioration in performance and productivity. However such reductions in expenditure are easier said than done.The problem is that some people, especially the right wing wants education ,health, prosperity along with a high agenda on Kashmir and fighting with India – all at the same time. It is not possible. One would have to prioritise; high political agenda or improvement in the lives of people.

Ironically the poor masses are also for strong political agenda .Consequently the masses, having less power for resource extraction, get a short stick in terms of allocation in social sector. It is quite apparent that business as usual can not go on a for a long time now .On the other hand , an arbitrary cut in the short term by the legislature is neither possible nor advisable. A systematic approach and dialogue ought to be initiated with the stake holders. Retired military leaders have often indicated that a 25% reduction is feasible without compromising defence effectiveness. A few percentage point reduction in real term per year may be able to achieve this target in 3-5 years. One would also feel the need of strategic and doctrinal adjustments and restructuring in the wake of nuclearisation and missiles development. Roman or Raj army styles are wasteful and anachronistic and do not match with the requirements of an age compounded with the complexities of a nuclear milieu and fertile terrorism. Without creativity and innovation, nuclear weapons will be adding additional burden on conventional defence, as it appears to be happening already. Many believed that it would happen otherwise.

On macro economic policy front, consensus policies on tariff and taxation ought to continue in its present shape. Some reforms should be considered in the banking sector. Banking sector seems to have outgrown disproportionately in the past years . Banks have earned profits of 40%. This surplus should not be permitted to continue; either government should siphon it off through taxation or some kind of interest rate control should be introduced. The banking spread (difference between average borrowing and lending rates) is much too high; 6-8% as compared to 2% in the US 3% in Europe. Prices in developing countries such as ours are not determined by pure competition, the latter being there only for labour. (In fact with labour, the dice is loaded the other way round –more supply less demand, and thus unduly low wages. There are natural and, informal cartels which operate; the invisible hand of monopolists and cartelists and not of market and pure competition. Partly high interest rates are due to excessive salaries of the banking executives, who seem to have conspired with the bank owners. Why should the banks be allowed to earn 40% return on equity. This must be cut down ,decreasing the interest rates. The non performing loans are due to their own lending policies of pushing consumer finance to unsustainable limits.

Reform is in order in the micro finance sector. A number of unscrupulous micro finance banks have started operating. They are the bankers of the poor, but lend at excessive rates, sometimes 22-25% p.a. It is difficult for a poor borrower to pay these rates. These banks are reportedly hiring goondas who harass and even kidnap and torture these poor borrowers, sometimes reportedly in the premises of these banks or in the hide outs of the collection agencies run by the goondas or retired police and military personnel. Government should introduce cheap and subsidised finance thru its own banks thus phasing out these so called micro finance banks or put some lid on their practices resulting in cheaper and controlled rates thru cheaper credit lines. Market is never fair in this country; food prices, cement and sugar cartels etc are the living example.

A lot can be done in agriculture. The country and sector is not short of ideas and solutions. There is even consensus on many ideas. But a lot depends on government in this respect, which normally fails to deliver, be it credit or extension, and others. A lot can be achieved if government can bring the house in order.

Having been associated with Harvard in the past for some time, I would like to disbelieve that Harvard economists advised GOP in 1960’s not to pay much attention to wheat and agriculture as it could be more efficiently produced in the US and imported from there. Fortunately the advice was not taken. However same traces of this simplistic advice remained in our successive policies which did not give the required attention and support to agriculture. It is said that a growth of 4% p.a. is required in agriculture, to feed the burgeoning population and enhance the currently prevailing low national nutrition levels. .

The growth in agriculture has been erratic and depended an vagaries of weather. Much agricultural output is attributed to increase in area under cultivation and other inputs, and not to increase in productivity. There is an upper hint to increase in area under cultivation and in other inputs. Agriculture growth should be steady at 4% and should come out of increase in productivity. Neither production nor productivity could increase. Why, the answer is long. But a few things could be done without waiting for miracles. Fortunately, there is consensus on fair price approach to growers. Output increases in food crops can only be sustained if fair prices are guaranteed to the farmer. There is an upper limit in this respect as well. Part of the agricultural profitability should come from rise in productivity which would result from the government intervention in agricultural credit, research and extension exercitation of the relevant institutions, bringing into play the market forces and reform in research and agri-universities and in agricultural extension.. There is a plethora of advice of past commission reports that should be seen, analysed and implemented. Achieving self sufficiency in cooking oil and food grains should be our main objective in agricultural policy. An agricultural task force should be formed to help achieve these objectives and realistic but tough targets be given to the relevant officials along with monitoring of performance and achievements.

Agriculture is suffering and would suffer more in future due to water scarcity. Water problem, apart from being intimately associated with agriculture, is an independent problem on its own. Our supply of fresh water resources is – per capita as compared to other parts of the world like Europe ,US and South America and even Southeast Asia. Water shortage would increase world wide, if not managed and controlled properly by national governments. Too much water is wasted by industry, agriculture, commerce and household. Water conservation and its efficient use would improve agriculture and living standards and hygiene. Sprinkling and dripping irrigation has a lot of potential, which government should promote than to continue to rely on flood irrigation. A lot of international research and advice is available to be implemented. There is an annual water conference, which has generated a lot of advice. This should be read, analysed and put into practice where feasible. Water recycling, waste water management, small and dispersed water storage, saline agriculture etc are the areas which need special attention. Plugging water wastage in urban areas would release a lot of useful water for the poor, hygiene and sanitation. Leakages and excessive flows at the household and municipal level are important culprits. A water conservation project or agency should be created, but not just a sign board.

In agriculture, initiatives are required in areas other than grains and crops. Milk, dairy and meat could further rural prosperity significantly. There is a proposal (not mine) pending for quite some time now; Allotting one acre rural land and loaning two buffaloes/ cows to the landless peasant families. This would provide both food and shelter and job to the landless unemployed peasants, enhancing milk and meat output. There can not be a better multi targeted intervention. End of patwari culture, a cherished good always of successive administration must be pursued. Institutional measures such as modernisation of land records and associated legal procedural changes would dilute Patwari power and machinations Only if our security establishment could be persuaded ,GIS system could revolutionise not only the land record system but the whole agricultural statistical and planning and forecasting system thru integration of GIS and satellite imagery. A way could be find out to mitigate the security concerns. Frankly all data management may have security implications. A thoroughly isolated village is the most secure but would one want it.

Drinking water in urban and rural areas need much attention. There is marked deterioration in urban areas, and there is no system at all in rural areas for safe drinking water supply. A project had been launched by the previous government which has faded away due to the usual corrupt practices. A continuous program and activity in this respect is in order.

If people’s lot is to be improved, investment and attention is required in social sector, namely education, health and hygiene. In this case again, the policy frame work is available in the form of MDGs (Millenium Development Goals), to which Pakistan and other developing countries are committed. Pakistan is already lagging behind the schedule in these. An affirmation and commitment to MDGs should be announced as a first step. Projects and programs should be developed for achieving MDGs .The sector is plagued by thorough corruption. It would appear simplistic to suggest that corruption be weeded out totally. However, one would expect that some success can be achieved towards curtailing excessive and flagrant cases. A task force, comprising of public representatives, independent professionals, and stake holder should be formed for monitoring the progress in every section of MDGs. All of this requires money and resource allocation, which has been discussed else where.

Musharaf regime diverted disproportionately large resources to higher education. The excessive funding has naturally resulted in all kinds of fancy and supercilious projects almost on bordering lunacy. Immediate corrective measures are required .Much starved primary and secondary education should receive the kind of attention and resources it deserves. Already Pakistan ranks too low in human development indices, in “good” company with Mali, Chad and Zaire, although not very far below than India. Poor’s empowerment or betterment can come only through education, at least at the primary level. In sindh, primary education is the worst victim; apart from resource issues corruption and poor management has taken its toll resulting in extremely poor quality, output and coverage, not to name the proverbial ghost schools and teachers.

Energy sector has been the biggest victim of Musharraf regime’s in action, delays and undue posturing. Kalabagh dam way pushed hard enough, but in vain, as political consensus could not he granted, It is said that the crisis was created to woo support for Kalabagh Dam. Ironically Musharraf invited Chinese assistance on Thar in his very early years. A Chinese firm invested considerable time and effort in studying and developing a viable proposal and offered to sell electricity from Thar Coal at 6.5 cents. The offer was not accepted. Thar and hydel power are the only hopes for supply of much needed electrical power; hydel in the north and coal in the South. Although there are technical problems with Thar Coal, these are not insurmountable. Associated issues of infrastructure development must be handled by the provincial and federal government. Thar coal development has also been a victim of parochial and sub nationalist themes along with those who are looking forward to reap undue gains; hence the too much tussle on control. The PPP government has done well to have made the Thar coal Authority. To safeguard the interest of Sindh, adequate royalty and mandatory social development of the area, which are already in vogue, would take care. If private sector and international companies are shy, it would be a good idea to develop infrastructure and launch a 200 MW public sector project under WAPDA with Chinese assistance. It is a preposterous idea to import coal and invest in a jetty costing 200 million dollars or so, knowing that government is not able to pay either in local or foreign currency the legitimate dues of WAPDA and IPPS and knowing that foreign currency resources are being exhausted. While negotiating energy contracts with IPPS, local or foreign, one should bear in mind that the energy prices would continue to increase, as the fossil fuels are being exhausted world wide. Pricing coal or other fossil commodity based on landed prices or international prices may be very dangerous. For a change, let us have same thing for comparative advantage. While any thing else is expensive, let there be cheap electricity from Thar Coal. A cost plus pricing formula may be more appropriate in this respect. Present government should aim at 2000 MW of coal power during their tenure to be reached by 2012. There are many hydel options both small and large other than Kalabagh. Private power should be encouraged in small Hydel sector.

Industrial land and housing land is an essential input both for individuals and as wells as industry and commerce. Urban land and real estate has become unaffordably expensive, resulting in housing shortage, congestion and higher cost of doing business having negative influence on exports, land and infrastructure development. A great housing scheme conceived by Nawaz Government was brought down due to political reasons and perhaps corruption as well. The idea of utilizing unused public land and passing it to the housing projects of the poor and lower middle class was a good one. A similar scheme with appropriate reform should be revived. As reported by Senator Taj Haider ,Shaheed Benazir had a dream of giving way one plot of land to every single poor family in the country, and to be leased in the name of the woman of the house, thereby achieving two cherished goods in one step. I am sure PPP government should be actively considering this. Apart from subsidised schemes, even a normal land development and supply should bring the land prices down.

Industrial land especially in Karachi is still more dearer. Industrialists owning land in industrial estates are preferring to indulge in real estate activities than installing industries there. Most industrial estates are fully allotted and over subscribed. Hub and Nooriabad have literally fled into oblivion for a variety of reasons.

SMEs, the so called and rightly called engines of growth can not buy such expensive land thereby industrial growth is discouraged. The current solidarity among the two major political parties should also show its effect in reviving the projects which were victims of earlier political brutality. Schemes like Surjani Town, and others in others parts of the country should be revived and developed. There are other novel and innovative proposals for SME’s such as high rise industrial estate that need to be looked into and implemented. There is no dearth of good ideas in this respect.

The central theme of these lines is that the policies, actual and proposed, are available in abundance. There is no need of “new wisdom”, to blink the eyes of the people, as is being lamented by commentators that no new wisdom has been shown by the new government. What is important is action and implementation. What one expects the new government is to take charge of the situation, provide leadership and initiative, assemble experts and stake holders and get to work. Buck up, Ministers. Don’t be so despondent and snug. Things can change. You can make a difference. Change and achievements are possible. Your work would be appreciated.

Outh band kamar kia darta hai

Phir deekh Khuda kia karta hai

Tighten your belt, what are you afraid of.

You will see what God does (in your assistance)

The writer is policy planning expert and author of many books on these issues.He was a research fellow at Harvard University and management cosultant.


Iran"s Nuclear Imbroglio

Iran’s Nuclear

The US President George Bush will be visiting the subcontinent in March 2006.
.Both Pakistani and Indian government stand to benefit from the rewards, he may be bestowing on the two countries in acknowledgement of their respective favorable policies and
actions, vis-à-vis US interests.Pakistan stands to benefit in areasof surveillance technology, military equipment and some economic aid while Indiawill be given important concessions and technological transfer in areas of tradeand sensitive technology including the nuclear one. Two important items in Indian package are related to; a) 8000 MW nuclear reactors, technology transfer and nuclear fuel;
b) another important item is Missile technology related to ballistic missile
defence. (Ironically about two decades ago this writer had recommended the same for Pakistan in his book on South Asian nuclear scene). Prime Minister of Pakistan Mr. Shaukat Aziz has expressed reservations though cautiously, while visiting the USrecently.

A major political and military crisis is in the making in our region withpotentially severe international repercussions. The basic element in this crisis isthe Iranian nuclear program and its Uranium enrichment component. The U.S. and Europe view this matter with grave seriousness. They fear that Iran may follow theexample of North Korea, India and Pakistan. The latest statements of the Iranian president have only increased the urgency and even fears of such prospects - Iran acquiring nuclear weapons.
Israel has even threatened to physically attack the Iranian nuclear installations to halt this process of enrichment. Even the US has not ruled out such a possibility, directly or in consonance with a third country namely Israel.

The Irony of fate is that Iran an old signatory of Non - Proliferation Treaty (NPT) is being viewed with so much skepticism while India and Israel which neither aresignatories of NPT or any other convention limiting nuclear weapons, raise no alarm for the West.
India has exploded several nuclear bombs, but is being given 8000 MW of reactor and Uranium fuel.
Israel has an active nuclear program having amassed more than 200 nuclear weapons.
Iran’s nuclear program is almost as old as Pakistan’s nuclear program. It began
in 1960’s in
Tehran with the acquisition and installation of an American atomic research reactor. This was the peak time of the Kingship of Muhammad Reza Shah Pahlavi. At that time, there was no sign or indication of the Islamic revolution led byAyatollah Khomeini. In 1975 the Shah of Iran had made firm contractual arrangements for the purchase of 8 to 10,000 MW atomic reactors. At the time of
revolution these agreements were at various stages of implementation. The
suppliers of these reactors were the
U.S., Russia, Germany and Japan. It has been quoted that Ayatollah Khomeini considered the nuclear weapons contradictory to Islamic ideology and was opposed to its acquisition or implementation in the immediate post-revolution period. The nuclear deals were put in cold storage by the revolutionary government and the supplier countries found it convenient as well and thus did not object to the postponement or cancellation of the contracts.

The revolutionaries soon realized that the state power tools that
they initially had rejected were as much needed by them as the Shah of Iran, in
order to sustain
and nurture their revolution. The much
opposed intelligence agencies were revived and strengthened; technology and
weapons acquisition was renewed to be able to fight the
US instigated war with
Iraq.The change that was brought about by the revolution resulted in political and economic changes most important of which were the expelling of foreigners from
Iran, the weakening of the latter’s influence and the increasing resort and focus on self –reliance in domestic economic and international policies in Iran.

After establishment and strengthening of the revolutionary ideology, in the late 1980’s and in 1990’s, Iran has made considerable progress in industrial development. The key feature in this is self-reliance, as distinct from other states in the Middle
. Pre-revolutionary Iran was similar to the Middle Eastern pattern of considerable or almost total reliance on foreigners for running the industry, infrastructure andother economic activities in general.

Iran is twice the size of Pakistan in terms of area, and is rich in oil and other natural resources. It has had a high literacy rate especially women’s education, even in pre-revolutionary period. The industry in Iran has also been growing fast esp. automobile, machinery, steel, plastics, and mineral exploration, esp. after the revolution.

After consolidation of the revolution, the government demanded the implementation of nuclear agreements and re-launched its nuclear program. The Shah had already made considerable payments to nuclear supplier companies. Most of this paid equipment at the time of revolution was lying in various Western countries to be delivered to Iran.
Iran started raising demands for delivery of the paid for equipment. The issue was subject to many legal wrangles and Saddam Hussein made it easy for Western governments by bombing the nuclear installations and premises of Iran, which were considerably damaged but not totally destroyed.

Most recently one of these installations has been revived. This is an 800 MW nuclear reactor and power plant at Bushehr, being supplied and erected by
Russians. In the last decade, there has been considerable cooperation between
China and Iran in economic and technology transfer fields. In the nuclear field
China has supplied technology, SCUD missiles, Uranium etc to Iran.
Iran in return has been supplying China its much-needed oil
requirements. In the latest crisis, the West is accusing
Iran of initiating its nuclear
enrichment program for development of nuclear weapons while
Iran insists on its rights to develop nuclear power technology/energy and claims that its activities in this domain are solely for peaceful purpose. It had signed the NPT long time ago and
has also willingly accepted continued and perpetual inspections by the IAEA as
required under the NPT Fuel scope safeguards.

The problem started with the sudden discovery of a Uranium enrichment facility at Natanz (south of Tehran). Iran claimed that it had not yet introduced nuclear material in the contested plant and thus was not required to report it. It is very difficult to prove categorically the claims and counter claims being made in this respect The problem compounded with the discovery of pilot scale Uranium enrichment facility established through acquisition from Dr.A.Q. Khan’s network (illegally). After protracted negotiations Iran accepted safeguards and even additional protocols incorporating more stringent inspection regime.

Iran negotiated these arrangements with the EU interlocutors expecting some
quid-pro-quo ala North Korea or India, details of which have not yet been elaborated. Leaving this aside, Iran expected that by agreeing to more stringent inspection regime, the stigma and pressure to restrict its nuclear activities would be removed or at least reduced. This has
not happened. Instead the pressure has increased. The core issue is fear of “Nuclear
Iran”- Iran with a bomb. No amount of safeguards can possibly prevent the march of technology, is the basic source of worry for the major powers.

What is the merit of
controversy over
Iran’s nuclear

The problem is that once Uranium Enrichment is mastered, it is a question installing more stages to graduate from reactor grade enrichment (3%) to bomb grade enrichment (90%). Similarly, in nuclear fuel reprocessing, the Plutonium so produced could well be used directly for making nuclear weapons. The only check is material balance calculation and monitoring, some diversion out of which might not be impossible. In-fact if we compare reprocessing with Uranium enrichment, the latter can be monitored against diversion much easier, as it is the number of stages which determines level of enrichment, which is very easy to monitor; hence the strength of the Iranian argument for peaceful intent and its monitorability. But again, a country can, with a short notice, with draw from NPT and throw out the IAEA
inspectors as did
North Korea. Nothing could have yet been done against the latter. Or a clandestine operation, parallel to the peaceful program can be launched and sustained, albeit with some difficulty due to material balance inspections.

The issue is really complicated Under the Non- Proliferation Treaty (NPT), of which Iran is one of the oldest members, was negotiated in 1960s? NPT permits nuclear reprocessing and Uranium enrichment, under a surveillance and inspection regime called full scope safeguards.
Iran’s nuclear program has not only been under this full scope safeguards scheme, but Iran has agreed to additional protocol meaning more frequent and stringent monitoring and inspection of its nuclear facilities. Thus under international law,
Iran is absolutely legitimate in doing what it is doing in the nuclear field. Then why this
fuss over
Iran’s Uranium enrichment. We have mentioned one of the rather tactical reasons elsewhere.

The strategic reason for this opposition is as follows.NPT, as mentioned earlier, was conceived and negotiated in 1960s, at theheight of cold war. Middle powers like India, Mexico, Brazil etc managed to dilute the original NPT proposals due to the east-west rivalry and cleavage, permitting the non nuclear weapon states nuclear fuel cycle activities under a monitoring and inspection regime. Secondly, the NPT negotiators could not have conceived that countries like Pakistan and Iran would acquire that level of technology as to be able to indigenously develop nuclear fuel cycle capabilities, and thus allowed these activities under NPT.
South Asia and Middle East were poor, downtrodden, and shearly underdeveloped. Imagine Iran, Iraq and Saudi Arabia without oil (at 1$ a barrel
prices). Perhaps the guilt consciousness of the
US administrations, in the wake of Hiroshima and Nagasaki bombing, impelled them to conceive and support nuclear technology programs to third world countries. As a result, in all problem regions, American technology transfer is involved. In today’s world, in the after math of 9/11, the West esp. the US are redefining their laws even on “freedom and liberty”,
which are the core values for their civilization. They are redefining the
nuclear regime as well. In theory NPT permits nuclear fuel cycle activities, in
practical terms, the nuclear reality does not permit Uranium

One shudders to think of a nuclear Pakistan, which is politically out of line with the US, due to domestic politics in Pakistan. The nuclear freedom of Pakistan is only conditional and, God forbid, possibly temporary.

Iran is a powerful country with a strong economy and rich natural resource base. It is a major oil producer and exporter. Iran has gone through economic sanctions earlier in the wake of US embassy hostage crisis. Chinese are significantly dependent for their oil imports on Iran. Closure of Iranian oil would cause the already high prices of oil to go to an unacceptably high level. This would break the back of developing economies, who are already suffering from the pressure of high oil prices.

Striking out nuclear facilities may not be an easy task, as Iranian nuclear facilities are widely dispersed, although the contentious facilities are reportedly in Natanz, some 200 kms south west of Tehran. Israeli attack on Iraqi reactor was successful and did not leave any fall-out, because the reactors were not yet loaded with nuclear material. Uranium enrichment facilities, if bombarded are not expected to give out a major radio-active fall-out, as nuclear or enriched Uranium is not radio active as nuclear irradiated fuel rods or nuclear waste materials are. The centrifuges would solidify and jam the uranium hexafluoride due to its very low critical pressure. This aspect would make the political/human fall out of the attack to be much less than it would have been on irradiated nuclear materials.
Basement or fortifications of Iran’s nuclear facilities need
not pose insurmountable problems to American technology.

They are quiet capable of using “radiation free” nuclear
weapons. It should be noted that the
US has never subscribed to
No-First-Use doctrine. On various occasions esp. in
Vietnam, active and serious
consideration had been given to the use of nuclear weapon. As to the routes of
attack, ample choices are
available to the US, if not to the Israelis. In the Persian
, the US has bases and facilities and Iraq is under their control. They are present in Afghanistan.

The US has also acquired bases and
facilities in the former Soviet states, which
seem to be closest to Tehran and Natanz. The US may not seek or require permission from Iraq or Afghanistan.However, from the former Soviet states, permission may be obtained. It appears that such permissions would be granted by one of these countries.

While the attack may be technically feasible, its political consequences would be severe. The region and the world at large would be embroiled in new crises and unpredicted consequences. The saner advice to all parties therefore would be to seek
diplomatic solution. A much more desirable approach would be a renewed effort
towards the solution of the Palestinian problem and declaring the
Middle East as a Nuclear Weapon Free Zone, after denuclearizing Israel. In this bitter pill, is the cause of most ills with which the humanity is beset with currently.

IAEA’s board of director has referred Iran’s case to the Security
Council, although not with any negative recommendation like sanctions.
India has sided with the American position in supporting the IAEA’s report and resolution. The US administration had clearly warned Indians of the consequence of not supporting US stand in IAEA board meeting. It has been proved once again that when chips are down, India would fall in line with the US administration’s dictates.
IAEA’s intent is to give diplomacy as an opportunity to work out an agreement.Mediators are cautioning both the sides;
the US for not being hasty in pressing for punitive measures and Iran for
adopting a more flexible stance and the latter to agree to some kind of real or
not so real restraint on its nuclear program. Restraint would be well advised on
both the sides. Iranian nuclear issue is a multilateral one, but as is usual
these days, has degenerated into a bilateral issue between the US and Iran; all
other major powers except the UK (the poodle syndrome) are not very keen or in
no hurry to take on Iran and initiate another round of instability in the Middle
Iran has also reacted rather mildly in real terms, although the rhetoric has been a tough one. Iran has only withdrawn from the additional protocol; the latter a rather intrusive, frequent and more stringent inspection regime. However Iran is still co-operating with the IAEA under the normal full scope safeguards inspection regime under the NPT.
If pushed to the wall, Iranians may literally follow the North Korean model.
They need not be very creative in devising their own strategy. North Koreans
broke all their agreements with IAEA, sent all IAEA inspectors home and withdrew
from NPT it self - and to top it all, fired a nuclear capable missile (without
warhead of course). Nothing could have been done against North Koreans. Another
Vietnam like affair could not have been initiated in a region where Japanese and South Korean sensitivities hold supreme, a circumstance which does not prevail in the Middle East, where Iran is situated.

The security environment from the point of view of Iran has been improving. Saddam has been overthrown and has been replaced by Shia-majority democratically elected government. In the North, Soviet empire has been dismantled and replaced by small states like Tajikistan and Turkmenistan etc. Nuclear weapons are a prestige instrument, although Pakistan and other countries’ success in developing nuclear weapons has diluted the awe and prestige bestowed by nuclear weapons. Nuclear weapons can also be a liability. For example in case of Pakistan, nuclear weapons have improved the security climate for Pakistan vis-à-vis
India. However, to safeguard and maintain nuclear status and weapons is proving to be a major liability for Pakistan.

It is said that Pakistan’s military government may not have supported the post 9/11
American policies with the same commitment, as it has been doing till now, had
it not had to save its nuclear assets from American
possible pre-emption. Several times in the past, one has heard of inspired leaks, wherein possibilities of attack and
Pakistan’s nuclear assets have been discussed. India-Israel-US nexus has been cited in this case.
Iran’s leadership should think deeply about the temptation lying in a quasi and not-so-quasi nuclear regime. In case of their proximity to Israel, and direct confrontation
with the
US administration, and Iran’s rather blatant statements
vis-à-vis the whole of western civilization, the major powers will not look the other way round, while Iran continues to increase its nuclear capability of dual use and consequences, as had been done in case of Pakistan. Even in the case of
latter, Soviet invasion of
Afghanistan bailed out Pakistan’s nuclear program. Had the
Soviet Union not been in Afghanistan, it would have been well
nigh impossible for
Pakistan to do what it managed to do in the nuclear field.

Thus in the environment of bitter hostility to Iran and its government, opposition to Iran’s nuclear program would be most severe. Iran may have to shun its revolutionary style, if not substance, to be able to do something meaningful in this direction.

Are the nuclear weapons worth the cost? Hence adoption of a more
conciliatory tone and agreeing to a reasonable solution proposed by third
parties may appear to be in the best of Iranian national interest. And if the
intent is not of making nuclear weapons,
current confrontation seems to be
totally out of place and risky for
Iran’s well being. Had Saddam had not maintained an ambiguity towards Iraq’s possessing weapons of mass destruction (WMD), it would have been difficult for Americans to invade Iraq.

Repeating Pakistan’s case again, ambiguity may have worked well for Pakistan, for a long time in its specific circumstances and time frame. The same may not be advisable to Iran. May I clarify here that the intent here is not to support or justify American policies towards Iran and Iraq. It is Iran’s well being and interests
is that are closest to our hearts of us Pakistanis.

Finally let us examine the Russian proposal. What is its merits and prospects. At
the time of this writing, negotiations are going on with the Russians in the
aftermath of IAEA’s referral of Iran’s nuclear case to the Security Council as has been mentioned earlier in this article. It should be noted that Iran has with drawn from
additional protocols only and not from NPT itself or its standard inspection regime.
Iran has also broken seals from pilot Uranium enrichment centrifuges. This has only symbolic defiance value and should not pose any significant threat to those who
consider Iranian nuclear capability to be catastrophic to their world view and
order. There are only a small number of pilot centrifuges, which may not be able
to make weapon grade enrichment for even one bomb in many

Russian proposal is to enrich uranium on its soil for Iran. Big deal? It means only more business for Russia and increased dependence of Iran on Russia, which Iran would like to avoid.
Already there are problems with
Russia on reprocessing charges
demanded by the latter for the spent fuel that would come out of Russian
supplied 800 MW
reactor at Bushehr. Russia should have offered
something more useful and substantial like power reactor technology or something
of the like. If they do so, it is more likely that
Iran may accept some of kind of
trade-off. Russian proposal, in its present form, only offers a face saving
option to
Iran. One is not sure, if Iran’s options have exhausted to that stage.

Friday, December 12, 2008

pakistan trade gap

Pakistan trade gap has been widening ominously, consuming the reserves that
had been built as a consequence of several political and economic
policies and arrangements. The most recent and immediate cause has
been the rise in energy, food and commodity prices internationally,
on which there is no control or leverage of our poor governments.
Infact even the rich and powerful governments and countries have not
been able to do anything about it. The problem is structural
embedded in capitalism as an ideology. This can be an interesting
and long debate that would continue across the world governments,
corporate board rooms and academia.

Government has taken some short term measures like devaluation of currency and
controlling imports. In this article, we will discuss and propose
some measures to curb the trade gap, enhancing exports and curbing
imports. However our focus would be more on exports than imports,
the latter to be tackled in a separate section. On the import side,
the main items are oil, cooking oil and raw materials. Currently
there is no substitute to oil. However falling steps could be taken:
firstly, enhancing oil production from 70,000 barrels per day to a
100,000 bpd, which is feasible in the short run, provided certain
active measures are taken. Due to lack of space, we leave the
mechanics of this to a future date. CNG has made a lot of
contribution towards reducing oil consumption in the transport
sector. More can be done, especially in converting buses to CNG,
which would not only reduce pressure away from oil, but would
contribute to reduction in the cost of public transp

It would also have a salutary effect on urban environment as well.
Fuel rationing and pricing would have to be used for curtailing
petroleum imports. Our economy can not afford unlimited imports of
oil at 100 – 150$ per barrel. It is being hoped that the oil
price in the short run may stablise around 80$ per barrel. In the
long run, however, the days of cheap oil and other fossil resources
are gone. If the oil prices do not come to a reasonable level, fuel
rationing would have to be introduced. This is not something new.
In 1970’s Several European Countries introduced fuel
rationing. Space does not permit the mechanics of such rationing but
it is certainly feasible. Rationing can be made a little benign for
the well to do by exempting high octane from rationing, but pricing
at Rs. 150 –Rs. 200 . per litre. Fuel rationing would bring
and popularise energy conservation measures , which otherwise would
not be adopted. Pricing alone has not been successful in achieving

A lot of oil goes into firing cement kilns and electricity
generation.. Implementation of Thar coal mining project,
installation of mine – mouth coal based power generation, and
conversion of oil fired utility boilers to Thar coal (eventually)
would cause a major reduction in domestic oil demand.

A more than two decades now, the need and issue of planting palm oil
trees in the 700 kms long coasted line of Baluchistan and same Sindh
has been discussed and debated. Technical feasibility has been
demonstrated. Cheaper imports from Malaysia probably thwarted the
Palm tees plantation proposals.

It has come, indeed it is overdue, that the present Government takes
serious steps to bring self sufficiency in this sector in the next
five years. However, plantation in a 700 kms area is a tall order
although achievable. Malaysia could be provided incentives, to enter
into corporate plantation and installing local refineries, the
latter they are doing already.


Erstwhile EPB, and new TDAP has in the past taken many initiatives, and as in
the process of implementing many others, fresh thinking is required.

On enhancing exports, following strategies and actions are suggested.

Reform Textile Sector
Look into Africa & South America

Develop export Synergy with China.

Develop food processing & exports to Middle East.

Export surgical and sports goods.

Improve foreign buyers access through ICT.

Open border trade with Iran ,China and even India.

Capacity building of SME exports in light manufacturing.

Broaden the export product list, especially automobile components,
engineering and capital goods.

Improve workers remittance by launching high skill training &
certification programme..

Launch quality schemes & initiatives along with revamping ISO -9000
services and regime.

Launch Productivity Initiatives.

Promote rise in workers salary & welfare, improve EOBI..

Reduce cost of doing business by improving inputs supply especially
industrial and commercial space/land.

Conduct research in foreign markets; buy research .

Disseminate research resources such as UN’s trade data bank.

Bring in corporate farming.

introduce workers cooperative.

Doubling exports in five years is not a utopia. It is feasible, if the economy
grows, barring short term problems, at the rate of 7% p.a..

Iwould select a few of these proposals for elaboration, as the rest
may be well understood in its own right.


When I was a boy, every fifteen days, I used to visit a designated ration
shop, with a ration card in my hand and may be20or25 Rupees in my
hand.. The ration walla used to weigh and supply quite some atta and
sugar, which I had to hire a labourer to carry home. The ration walla
used to write the amount of atta and sugar supplied by him.. A widow
used to visit our house every month, with a few kg of sugar bound in
her dupatta, and used to sell it to my mother, perhaps at double the
price. Those were the days of food shortage and the green revolution
of fertilizers, pesticides and tractor s had not started yet, At that
time combined West and East Pakistan was --Today (West) Pakistan
alone is 160 millions, with its strategic depth Afghanistan of
-------- million who produce nothing but poppy. Why cannot we ask the
US the supply Afghan’s requirements of food, and why donot we
introduce the ration shop again. Their new version utility stores are
still there. Their number could be increased. However, the staff and
management are thoroughly corrupt and involved in black marketing.
But this is due to no ration card and recording. Now with the advent
of computerisation , NIC cards and NADRA, there can be a significant
control. Rich should not be issued the ration cards, and they should
buy from the open market. Similarly fuel rationing can be introduced.
Present Government has converted wheat subsidy into Benazir Cards,
whereby Rs.1000 would be transferred monthly to poor families. Many
people are skeptic of the feasibility of such a scheme. Passing the
subsidies, through ration shops/ utilities, may be more practical.
One can include one or two more items. Through rationing, Government
could also have a handle on smuggling and hoarding . Reportedly,
there are significant wheat losses at the post – harvesting
stage. Modern storage system should be introduced both at farm,
district and provincial level.. Modern storage system increases life
and hygiene of the stored crop. These storages can be made in 2 or 3
months. Private sector could be involved in building and renting out
such storage facilities ala IPPs in electric power sector. Countries
like Turkey,Iran and now India have introduced such facilities at a
large scale. This is a standard practice. Long term storage should be
built at sea ports and other efficient locations.

Outof total of $ 17 billion of exports in the year 2007,$ 10 billion of
export was to Europe and the US. Imports from South East Asia are $10
billion, from the Middle East another $10 billion .With Africa, all
of it, exports are $1000 million and imports are roughly the same.
Similarly to South America, exports and imports remain at under $300
million each.

Exports of processed food is only $258 million, vegetable/ horticulture
another $1600 million and animal products at$ 245 million o/w
fisheries products are about $180 M. This all adds upto $US
2000million . With modest effort this figure can be doubled in a few
years and in a time frame of five years, this can go upto 10 Billion
US dollars, bulk of it to the Middle East, consumes of Halal food,
where Made in Pakistan brand would be an advantage

Metal products including light engineering, cutlery, surgical goods are
less than 500 M$. Other light manufacturing is around 300 – 500
M$ range. There is a potential of guadrupling these exports in the
next five years to 5 Billion dollar level, and has potential of
replacing textile made ups, and became number one export sector. For
a period of 5 – 7 years, a target of 20 billion US dollars
should be made. How could this be achieved would be out lived at same
length in the other sections.

Much can be done to export regional trade which stands at 1700 Million
US$, a region with a population of ----. There are political problems
with India, but how about Iran.

Broadening and deepening democracy

Trade Gap;
In the year 2003, there was virtually no trade gap with exports of
11.160 billion US$ and imports of 12-.22 Billion US$. Five years
hence in the year 2007 size of the economy almost doubled from 75 B
US$ to 140 B US$. Exports did not double, and stagnated at 17 BUS$,
and imports increased by 2.5 times to 30.5 B US $, resulting in a
trade gap of 13 B US dollars. In this period economy grew at an
average rate of 6.5-.7% p.a. Agricultural sector grew but at an
unstable rate with highs of 5.0% to 6.5% and lows of 1.6% to 2.4% ,
giving an average of 4%. Manufacturing sectors growth has averaged to
7.42%, with a high of 14-15% to a low of 5.2%. Median figure for
inflation has been 8-9% p.a. Lending rates have increased from. 8 to
12%, while deposit rates increased for 2 to 4% - giving an enormous
spread of 7 present to the bankers, contributing to hefty
profitability to the latter, and bad debt for the depositors and
borrowers both, having negative effect on savings and investment. In
terms of physical output in the period 2003-07, sugar fertilizers and
chemicals stragnated at constant level. Textile yarn and cloth
increased by 50%. Cement and tractors output doubled. Motorcycles
production became 5 times, leaving cycles behind. therefore the
growth scenario has been rather satisfactory.

Going to South America & Africa

The two continents have a combined population of ------, and total
imports of -------, Pakistan textile exports should be promoted in
both the regions. Light engineering and other manufactured items have
a lot of potential in Africa. American items have a lot of potential
in Africa. American & European goods and capital projects are too
expensive and there are travelling issues of time and security etc.
Our SMEs from Gujranwala can do wonders in African countries, who
donot have a lot of money to spend on expensive plant and machinery.
We can be highly competetive in installation, commissioning and
training as well setting up of workshops, light engineering
factories. A wide variety of machinery and capital goods are produced
in Gujranwala belt. These are enterpreuners require support in
initial match – making, documentation and some engineering
management capacity. This is all feasible. It is not Utopia. It can
be done. Some body has to provide leadership and institutional
support. Engineering Development Board in cooperation with the TDAP
should launch a programme in this respect.

ICT in Export Promotion:-

Is is extremely difficult for a foreign buyer to approach Pakistani
exporters. They have to almost always resort to physical travelling.
In textiles, quite a few buyers community has become familiar with
the Pakistani producers,but the basket is too small. Mostly larger
companies are known. Rest steal buyers address from custom documents.
There is a thriving small business going on providing such services.
In the industrialised countries,Thomas Register kind of suppliers
directory were well known. Now Thomas Register has gone global,
instead of being an American companies register. It is now available
on the net. There are similar other business portals, linking buyers
with sellers. A recent success story is Alibaba, originally a
Singaporean software portal, but seems now to be bought by Chinese.
Ali Baba is playing a major role in boosting Chinese exports, through
linking foreign buyers with Chinese producers and exporters. A
similar portal is badly needed for Pakistani exporters. TDAP could
buy services from portals like Ali Baba. It should, however be noted
that it is not simply an IT or ICT issue. A major effort would be
required to prepare the database of Pakistani companies products and
profiles in major sectors of interest like textile, food engineering
, furniture etc. Perhaps more than 100 sectors, 5000 products and
10,000 companies. But it would certainly go a long way towards
boosting Pakistan expors.. Imagine a buyer sitting in Kenya or
Ethopia linked to our producer in Gujranwala and making a deal on
the net. Most such portals are only informational and transactions
are not conducted on it. TDAP may support establishment of B2B
transactional parts as well

Provisionof ICT based market Research Tools:-

While reportedly, export promotion bureau has been commissioning studies on
international markets of interest, more focussed initiative is in
order TDAP could lend a supporting hand in acquiring access to
international data bases. A useful online database an international
trade is a UN portal, which is available at reasonable prices. Few
people in our business circles know about it and still fewer would
know how to use it. TDAP would do well to familiarise itself with it
, providing and encouraging regional chamber of commerces to acquire
access rights to these databases. Workshops should be conducted to
train the marketing and research personnel of the industry in
efficient uses of such tools. There are new 200 countries, not just
20 or 30 which our companies do business with.

Quality Initiatives and Revamping of ISO-9000 Systems:

ISO 9000 had been a global initiative by world businesses to standardise
quality systems and introducing certification to ease national and
international trade. It is now more than two decades that it is in
vogue, and a lot of body of knowledge has been developed and linked
to it. Export Promotion Bureau, the predecessor of TDAP had invested
considerable resources in popularising ISO– 9000 and created
capacity in ISO -9000 services sectors. It even provided direct
finances to companies for acquiring ISO - 9000 system and its
certification. Such initiatives even continue todate under ADB
supported programme.

However, the impact of ISO – 9000 in either enhancing quality and
consequently enhancing exports has not been a significant one. This
is rather unfortunate world wide business and companies have been
able to improve quality through ISO – 9000 processes and the
momentum is carrying on and even expanding to include environment,
safety, corporate social responsibility.

As is normal in Pakistan, ISO – 9000 became perverted in Pakistan.
Many companies have acquired the ISO – 9000 labels, but very
few could improve their quality – Reason, the “DO number”
culture prevailed . Companies got interested in just buying the
label and an army of service providers including consultants,
trainers and certification companies started issuing false or near
false ISO – 9000 certification. The fact that certification
companies are based in UK/ Europe, USA, with their representatives in
Pakistan, where regulatory control is excercised.. They were however
interested in making money through issuing certification. And why
should they be interested in genuine efforts for improving our
quality systems, if we are not interested in it ourselves. The result
ISO – 9000 certification of Pakistan companies does not impress
any buyers. They are convinced, it is fake. Majority of ISO –
9000 manuals and documentations are locked in cupboards and are
treated as confidential documents. Every year or so the certification
companies are issuing certificates of compliance of renewal of

It should be remembered that ISO – 9000 system is a first step in
the long drawn and continental process of improving quality. It is
not the last. And if the first step is faulty, what can be expected
of the next.

TDAP should take stock of the situation. Fortunately PSQA has acquired
quite some infrastructure. Some legal and administrative steps should
be in itiated. Certificate companies should be warned and blacklisted
if they don not reform themselves.

PSQA should initiate additional initiatives to improve upon the situation.
TDAP/ PSQA combined should be able to deliver in this respect as
well. The new leadership at TDAP has an immediate task, if he wants
to go getting, before the sitting bureaucracy pollutes and absorb him
into complacency and contempt for new inititiatives.

Goneare the days when people used to buy their food from near by street
vendors selling new vegetable, meat, fruit and the milk man. This may
still be in vogue in Pakistan, but is fast changing due to the
induction and proliferation of retail chain stores/ departmental
stores like Metro/ Macro etc. The trend would further expand, broaden
and deepen. Elsewhere in the world it is established. Even street
vendors sell processed and certified food. In Pakistan a major issue
in the expansion of food processing and its export is the poor
hygiene and harsh hot climate. If any head way is to be made cool
chain from farm through transportation and processing has to be
established. Such facilities are lacking, where they are, output and
sales are limited and expensive eg., processed milk. Ironically most
milk vendor shops have installed rather innovative refrigeration
products made out of stainless steel, giving a very attractive look
and providing adequate hygiene. (16)

The need is to introduce, popularise and support such innovations at all
levels, small, medium and large enterprises. A particularly deficient
area is refrigerated transport especially of milk, meat etc.
Companies and technologies are there in Pakistan who can provide cost
effective solutions. TDAP has to provide leadership and initiatives
in bringing the users, producers and bankers together with some seed
money for development of models and prototype facilities that may
later be replicated. With the continuing sacriligious activities of .
European food exporting companies, and the credibility of Halal
nature of Pakistan food products, food exports can be quadrupled in
not such a distant future. Such initiatives could be indigineous or
joint ventures could be encouraged with multinationals. However, one
should not be mistaken about the food processing industries already
established in the middle eastern countries, especially Saudi Arabia.
Saudi JVs in Pakistan can be very successful integrating market and
food chains in the two countries. Pakistan Horticulture Board was
formed with some very competitive professionals, some 5 – 7
years ago. I do not know where it is now. It is not visible. Either
close it down or re energise it, if it is not already closed. The
problem in Pakistan is that initial enthusiasm is evaporated very
soon, if immediate successes and break through do not occur.
Sustained effort or a reasonable period is a normal requirement, if
one wants to achieve anything. One should think beyond one’s
tenure. New comers reap the bounty of the predecessor work. Seeders
and harvesters are never the same in the development process

& Human Development:

World Economic Forum has announced its Global competition indices/
rankings for the year 2008.

Pakistan is among bottom one third of the countries, ranking 92 among 131
countries. This is almost identical with HDI – Human
Development Ranking. The two rankings lead to a very straight forward
conclusion. The lower the human development, the lower the
competitiveness. Gone are the days when competitivenesss was based on
keeping people poor, and a devalued currency and cheap raw material.

There are 50 other countries who are in this game. There is no bottom.
Todays competitiveness lies in productivity, which comes out of
rising wages (chicken – egg relationship). The highly
competitive countries have high salaries, strong currencies and after
poor raw material base.Pakistan

GCI has been washed out at 92, as composes to ----- for India,
------- Malaysia, ------- China, ------- Sri Lanka, ------
Bangladesh. We are slightly better than Bangladesh, but lower even
with Sri Lanka. India is even more, while Malaysia and China may
always remain as unattainable. The bad news is that our
competitiveness is stagnating. It has even slipped down from 91 to 92
(higher number indicates lower achievement; America has a CGI rank of
1. One should not be that dependant.One point of difference can be a
margin of error of measurement. Afterall these ranking s are based on
opinion surveys rather than hard data.

My old friend who died recently, a consummate patriot and super
efficient bureaucrat, always faulted the GDP system for measuring the
welfare, output and stage of development. He did not like being
classed as low GDP country. Similarly, these days, my patriotism is
demanding fro me some fault finding with GCI and HDI, which bring a
bad name to our country and give a jolt to the happy elite.

Competetive Support Fund Pakistan , an organisation supported and funded by the
US AID, has further analysed the issue of Pakistan competitiveness
and has released its report.

Before I deliver further into sectoral aspects of competiveness, let me beat
the relevance of human development once again, Today’s
competitiveness and productivity drives from literate, trained and
healthy workers. Public spending on education and health must be
doubled as is being demanded for more than two decades by informed
people. The current level of social sector spending can only produce
efficient suicidal terrorist. How to do this is not very difficult.
Reduce unproductive expenditure on military & bureaucracy and
divert the same to social sector. For foreign resources in addition
to lender’s economy conditionalities you have to permit bombing
on your territory by the so called friendly forces.

An important and depressing finding of the WEF survey is s significant
fall in Business Competitive Index from ------- to -------. The
archaic seth culture, antiquated management, penny wise, pound
foolish expenditure syndrome, poor human resource practices are to
name the few. Therefore in addition to training our workforce, we
should train our entrepreneurs also, imparting management,
entrepreunal advice and training much to the chagrin of our often
cockey local mouthed seths and business men. The good news, and a
positive contributor to our GCI ranking, has been the improved
banking and financial sector, thanks to our erstwhile obedient Prime
Minister Shaukat Aziz. Perhaps the only laurel in his basket. We
should not forget to include Mr. Ishrat Hussain the former state bank
governor, who while criticising the elites in his laudable book
joined the elite or was naturally absorbed. Life is too short; learn
to benefit and enjoy as soon as you can.

Improving and Planning & Planning Commission:

Planning Commission has traditionally been a PC–1 processing house,
among other tasks such as sectoral planning. For a number of decades,
the PC-1 system has worked well, largely for physical projects. There
are four such proformas; PC-1 for project planning; PC-2 for funding
request for pre-planning work and studies & PC-3 for progress
monitoring and PC-4 for post-project evaluation. One comes to see
and hear more of PC-1. There is less talk of PC-3 and still less of
PC-4. Many involved and knowledgeable people have not even seen a
single PC-4 in their life time.

There is a need for improving upon these planning proformas. While PC-1,
may still continue to serve well for physical projects, having fixed
shapes, inputs and outputs. It is highly unsatisfactory for programme
planning especially in the social sector. PC-1, there is to be
augmented with LFA – logical frame work analysis, widely
understood in the international donor circles and fairly developed
methodologies and formats. The need in this area perhaps has not been
felt, because most programme planning is done by foreign consultants
who are already aware of these techniques and activities these
systems abundantly

Local know-how should be developed for past-project evaluation. That is the
assessment of achievements of project or program goals, targets,
impact, outreach, efficiency, sustainability or replicability and the
lesson learned. PC-4 was reportedly designed for this. Currently,
foreign consultants undertake such mission, wherever local “also”
play some role in the appraisal mission teams. But how about local
programmes and initiatives. Capacity should be built in this area
training local consultants, 3rd party experts, programme
mangers, NGOs etc.

Improving the effective and efficiency in project and programme planning,
monitoring and post fact evaluation would go a long way in speeding
up development activity.

the business leaders:

There are thousands of experienced professionals and businessmen in the
private sector who can help develop policies and assist in their
implementation as volunteers. These successful professionals and
businessmen would not demand any remuneration. But recognition.
Currently only very limited number of such people have been inducted
in the governmental system. In order to encourage such participation
of individuals and experts in assisting the governments development
work and schemes, civil awards system should be liberally extended to
include such experts who may have made useful contributions currently
only government , military persons, artists and social workers are
awarded Tamghas, and Hilals. I have seen government functionaries
with rather modest contributions, getting away with Tamg

Reform SMEDA or close it down:-

SMEDA had been formed by the Newaz Sharif government in 19??, as the name
implies to support the development of SMEs in all sectors of the
economy. Mr. Sharif and everybody had a lot of hope from this new
organisation, which had been headquartered in Lahore. Mr. Nawaz
Sharif reportedly heard even some junior executives of SMEDA to
elecit useful ideas for promoting industrial development.
Unfortunately not much output has come out of this organisation. A
Performance review of SMEDA should be undertaken with a view to
either close down this organisation and divert the resources to
better use, or reorient it to be able to perform its designated
functions. All we see is a website on which some data feasibility
studies and a few soft wares are listed for free down load.

Our SMEs are run by people of modest means and education. They require
down-to-earth practical guidance, institutional facilitation, export
market linkage assistance, access to finance etc. They do not need
long speeches and seminars in five star hotels. Instead of opening
their offices in bazars ,industry clusters and adopting a lifestyle
that could foster communication with their target group, they have
chosen to sit in aloof air conditioned offices, where access of
ordinary folks is hardly encouraged. The writer himself a former
technocrat had difficulty going past the security operators of their
office(s), much before the current problem of terrorism. They are in
need of complete transformation. The should be asked to vacate their
posh offices, and rent modest facilities among the target group,
without air conditioning and fancy furniture. English should be
banned from these organisations and they should be asked to speak in
regional or national language. They should ride motor bikes and wear
Shalwar Qameez. Acquire skills, be ready to sit together with SME
people, develop comraderies with them and solve their problems of
accounting, finance, materials technology etc. With the kind of
prescriptions that I have made, the sons of elite and near elite
would leave the organisation and vacate the place for induction of
people from poor and lower middle class who would have an
understanding and cultural affinity with their target group. As a
model, study the extension officers of the agricultural department.
The way they work, live and move about, although that is another
extreme. As always, mid path is always better.

Engineering Development Board
It is another white elephant and drain on national exchequer. As the
word goes by, EDP was established by a powerful technocrat for
keeping multiple options for his-------, should things get difficult
at several positions that he wanted to cling with at the same time.
Having been retired recently due to government change, at a very
advanced age but declared very low in the official records. If he
does not manage to come back, EDB would eventually be phased out.
They have literally no output or usefulness. Whatever little they are
doing may be done by expert consulting groups or external
consultants. If government somehow does not want to cause
unemployment, it should either merge this board undertake reform and
restructuring with a worth while programme and output. I am afraid
that same powerful cronies may discourage this to be a good parking
place to engage in ego busting and draw perks and give life to it for
another five years. This life would go on.

It is time for putting in life into this dead organisation – which
has reduced itself to collecting rent of the PIDC building and
providing a safe place for surplus staff of the privatised public

PiDC had done wonderful job in industrialising Pakistan in the Ayub era
identifying, launching and developing most of the important public
enterprises in almost all sectors of the economy. It was considerably
weakend with the advent of sectoral corporation like PACO, PERAC etc.
PIDC had the scale of economies to accumulate the pool of expertise.
A lot of policy advice came from PIDC. As said earlier, corporations
and public sector DFIs started playing major role in advice and
development of government policies. Now all these being gone, there
is a need for a dedicated and central organisation for launching a
3rd or 4th round of industrial revolution. If
you will after Ayub, ZAB and Zia. I am not including Musharaf as his
contribution lies with mobiles, media, banking and stock market. PIDC
should be energised, with the merger of small and failed
organisations like SMEDA, EDB, ----, and inducting fresh blood, a
private sector board and professional cadre and leadership. After
1980s, no new industrial technology (except mobiles) has been
introduced in Pakistan.

We have been eating the fruits of the eartier initiatives. There are no
fruits, as the trees are no more or are too old. A lot of saplings
ought to be planted. Our Chinese friends are reportedly eager to help
as they did in 1970s with HMC, HFF, --- etc There are additional
reasons for Chinese involvement which would be elaborated elsewhere
in these lines. I would only hint at “China Plus One”
policy of western nations in making DFIs in China. The y want to have
an alternative to China. It can be Pakistan and with the assistance
of China itself.