Thursday, 27 March 2014

Rupee rises

Courtesy:- MALIK MUHAMMAD ASHRAF

The finance minister has beaten the speculators at their own game
 Depreciation in the value of the currency of a country against dollar or any other international currency with which they are linked or in which they pay for their imports and meet international obligations, is always a cause of worry for the governments due to its negative impact on broad spectrum of the population. In the same way, the appreciation in the value of a currency symbolises strength of an economy and generates positive economic activity in the country benefiting the masses due to its trickle down effect. Although fixing and maintaining the value of a currency is not the part of the economic strategies of the governments and it is mostly determined by the market forces, yet no government could afford to neglect the phenomenon. The slide in the value of a currency also becomes a political issue and the detractors of the government invariably use it to cavil at the inadequacies of the economic policies of the government.

Friday, 14 March 2014

Terrorism and NISP

Courtesy:- MALIK MUHAMMAD ASHRAF

Staying the course

Terrorism is the ultimate escalation of political violence with characteristics of ethnic, economic violence and religious extremism. Sometimes the lines between terrorism and political violence become so blurred that it becomes difficult to distinguish between them. Terrorists are an intangible and faceless entity striving to terrify the society, create anarchy and cause complete collapse of the state apparatus. They have a welter of convoluted motivations as individuals and as groups.

Tuesday, 11 March 2014

Economic growth belies unwanted criticism

Courtesy:- S RAHMAN

Rebuilding a tattered economy is an uphill task and Prime Minister Nawaz Sharif's economic team led by Federal Minister for Finance Ishaq Dar must be commended for achieving this uphill task belying the claims of political detractors that dollar would reach the Rs 127 mark with no likelihood of the buck coming down below Rs 105. 

The steadfastness and sagacity remained the predominant features of Nawaz government's finance team ever since its coming into power following the last general election. It was also promised in the election manifesto by PML(N) leadership that it would leave no stone unturned for the revival of economy. Now that destination doesn't seem to be far away. 

Monday, 10 March 2014

Privatization and economic necessity

Courtesy:- Malik Muhammad Ashraf

It is estimated that State Owned Enterprises (SOEs) are collectively incurring an annual loss of between Rs.400-500 billion; more than 25% of the total revenue receipts of the government in a fiscal year. Keeping them afloat, therefore constitutes a huge drain on our precious national resources which could have been invested in vitally needed projects of socio-economic development. The government, presently, is running 126 such entities including big money guzzlers like Pakistan Steel Mills PSM), PIA, PSO and Railways among others. Pakistan Steel Mills alone suffered losses to the tune of Rs.200 billion during the last five years and the government had to give four bail-out packages amounting to Rs.40 billion to keep it on the ventilator. There are no two opinions about the fact that these entities owe the current state of affairs to inefficient management, corruption, political interference by successive regimes and recruitment of excessive personnel on the basis of political affiliations rather than actual needs of the organizations.
No developing country like Pakistan faced with a perennial scarcity of resources can afford the luxury of feeding these white elephants indefinitely. Therefore something needed to be done. In the early nineties when the PM(N) government was in power, an initiative was taken to disinvest the sick units and sell them to the private sector. Over the years some progress was made in certain areas but it could not be accelerated due to a number of factors including political opposition to such a move. 
Privatization of some of the major loss incurring units and restructuring of others to turn them into profitable entities is an integral part of the economic agenda of the present PM (N) government. It has already decided to privatize 31 SOEs in three years, including PSM, Pakistan State Oil and a number of power producing and distribution companies. Privatization of the SOEs is also a conditionality of the IMF. The detractors of the privatization policy however oppose the move apprehending that these units would be privatized at throw away prices in a non-transparent manner. Further the government would be able to privatize only profitable units and would still remain burdened with running the loss accruing units; a proposition that in the long run could result in loss of massive revenue to the government. They are emphasizing the restructuring of the SOEs and tuning them into profitable entities, rather than indulging in the indiscriminate and hasty privatization.
The apprehensions of the critics seem to be based on assumptions rather than the ground realities. According to Chairman Board of Investment (BOI) the policy of privatization of SOEs is aimed at reducing state losses and attracting foreign investment in the crucial sectors of the economy. The successful implementation of the policy of privatization and restructuring, he believes, would reduce national losses by Rs.500 billion. As is evident, the government is not contemplating to privatize all the SOEs. It is only going to privatize the sick and non-profitable units while there are plans to restructure those entities which can be revived and made profitable. The privatization is being done through a board of directors in a transparent manner. Move to revive Railways is a vivid example of restructuring some of the strategically important state owned enterprises. Railways, which incurred losses of Rs.35 billion during the financial year 2012 and due to the paucity of funds and the dilapidated conditions of its locomotives, perforce had to discontinue a number of trains including goods trains---the most profitable of its operations--- and had to seek a bail out package from the government, has finally started showing signs of revival. According to the Railway authorities 6.12 million passengers traveled on trains during August to October as compared 4.63 million during the corresponding period last year. The revenues earned during this period amounted to Rs.5.319 billion as compared to Rs.3.954 billion during the same period last year. The trend is really encouraging as more and more people are now coming back to travel by train. The improvement in standard of the services, public facilitation and punctuality of trains is also quite visible. Similarly, the government, reportedly, has also decided not to privatize PIA. A plan has been approved to increase the number of flight worthy planes to 43 from the present 25, by December 2014 through the addition of 10 narrow body planes on dry lease as well as to carry out necessary restructuring. Apart from Railways and PIA, there are many other commercial concerns that can be revived and made profitable through sagacious policies and initiatives such as injecting required resources for their revival and running them on purely commercial lines by employing competent and truly professional persons with proven expertise and track record in those particular areas. 
The truth is that it is not the job of the governments to run commercial concerns except those of strategic importance and public-welfare oriented units. It only has a regulatory role to ensure that there prevails a healthy competition in the market. Many other countries including Britain have taken such decisions to rectify the economic maladies and improving the health of the economy. The decision to privatize the non-profitable SOEs is economically prudent and would contribute tremendously to the process of revival of the economy. However the government must make sure that the concerns expressed by the opponents are properly addressed; utmost transparency is observed and seen in the privatization process and the rights of the employees of the privatized units are protected to avoid any political and social backlash.

Tuesday, 4 March 2014

Restructuring, reforming and reviving the Planning Commission

Courtesy:- Professor Ahsan Iqbal

Pakistan’s road to development has proven to be a turbulent one. While the changing nature of the global political economy has been a key factor in determining the scope of economic planning in other countries, in Pakistan shifts between the military and democratically-elected governments played a major role.

One effect of this instability is that the role of the Ministry of Planning, Development and Reform has oscillated between extremes of being the birthplace of leading development ideas like Human Development and being reduced to a rubber stamp organization as a post-office of PC-1s under other governments.