Tag Archive: Government

One of the major reasons for imminent collapse of Pakistan’s economy is senseless injection of liquidity into public sector corporations who suddenly started posting huge losses after the installation of the present government. This remarkable “turnaround” is rather mysterious. It is not so mysterious if a dispassionate analysis is undertaken with a non-political angle. These corporations including PIA, PSM etc have suffered due to the “doctrine of cronyism”, a hallmark of the governance of ruling party. This doctrine affected the economy every time the party came to power. According to a conservative estimate, the government in one year alone has injected liquidity close of half of its revenue receipts to keep these corporations afloat, and cronies happy.

In order to overcome its economic problems, the government was forced the other day to impose RGST and flood tax which can have severe political consequences for the ruling party. But oblivious to the ramification of its style of economic management, it is still considering injecting liquidity into the loss making corporations. It is like putting the blood of poor taxpayers into the veins of these corporations. Express Tribune has reported that the ailing state carrier Pakistan International Airlines (PIA) is asking the government, saddled with its own mounting debt, to write off losses of 1.7 billion dollars to save it from looming bankruptcy.

In a five-year survival plan submitted to the government, PIA has promised to make cutbacks and better its fleet in a bid to improve its fortunes, if the treasury agrees to cancel its debt and pay off other creditors. Blaming “bad policies of the past” for accumulated losses of 80 billion rupees (936 million dollars) and liabilities of 144 billion rupees, PIA insisted the airline is capable of future success.

The burden would be a massive undertaking for a government dependent on US aid to survive. A economic financial adviser to the government, Ashfaq Hassan Khan, said privatization was the only long term solution for the airline, which has failed to turn a net profit since 2004 according to its last annual report.

PIA was created out of private airline Orient Airways in 1955, just eight years after Pakistan came into existence, and today has a fleet of 40 planes, a combination of Boeing 747s, 777s, 737s, Airbuses and ATR aircraft. Performing well until the 1970s when corruption and overstaffing hit company fortunes, PIA’s reputation was further battered in the 1980s as it failed to maintain its fleet, said economic expert Shahidur Rehman.

He said 1990 signaled further defeat for PIA, when legislation liberalized to allow more competition in the flight market. The state carrier remains the largest operator on Pakistan’s international and domestic routes. But union officials say years of corruption, nepotism, bad management and poor planning have pushed the corporation to its lowest ebb.

Secretary of State Hillary Clinton has put across her message without mincing words, “the Pakistani elite also need to pay up so that the world follows suit”, more or less like that. The issue of paying taxes by the salaried middle-class alone and the unjust taxation system has assumed so much significance and attracted so much attention that some pundits have started foretelling a public revolt, if not a revolution. And if Hillary can see it coming then it is coming, for sure. This elite-based taxation system will have to go away to make space for a just and equitable system in which all pay taxes according to their capacity.

So much has been written on this subject which is dry in nature and which creates bad taste at the end of reading an article on it. However, Saqib Omer Saeed, in his article appearing in the Express Tribune has approached this subject in an interesting manner. In view, the tax is a product which the government has failed to sell. Here are excerpts from the article:

Due to negative media portrayal, people look upon taxation as a monster. I can’t agree with classical economists, nor with the conventional discipline of tax science. To me, taxation is merely a product of the government. I know the objection can be raised that if tax is a product, we can avoid buying it. I think we need to ignore this aspect, however, and try to make one point: everybody has to buy this product. It is a product that works for the well-being of society and helps governments work towards social and infrastructural development. That means by ‘selling’ tax, the government can generate revenue that allows it to fund projects for the public good. As I previously stated, tax is a product; therefore it follows that we, the clients, are the kings.

They need to be careful not to make the “product” (i.e: tax) too expensive. It is actually revenue that is taxed, not businesses or individuals. The government needs to make sure that they take care of their clients’ revenues, for their own good. It is not advisable for them to develop tax in a way that would harm businesses, or make people poor. The focus should be on increasing prosperity, for their own long-term benefit. In order to a good relationship with their “clients” (i.e: citizens), the government needs to help people earn. This means that they have to market effectively by increasing people’s wealth, so that they are able to afford taxes. No government can be efficient if they simply collect tax, rather than investing in it. Investment in taxes means that it is necessary to multiply the number of clients-those with income and earning. The best would be to invest in establishing businesses that can increase tax revenue in the long run.

It is always advisable to diversify the tax portfolio, rather than putting pressure on selling tax to just one strata of the economy. Diversification of taxes would be a great step in reducing the economy’s unrest. In countries like Pakistan, agriculture or capital gains are wholly exempt from taxation and only the salaried classes are taxed. This can lead to a point when people would rather ignore taxes than pay them. Those who are responsible for collecting taxes need to behave like salesmen. They need to discuss the means for increasing people’s revenue, so that they are able to pay more taxes. It is advisable for the government to survey tax-buyers to find out means for improving people’s cash flow. To create a tax culture, it is best to convince people that taxes are not there to harm them, but help create a more prosperous society in the long run.

New client development is another thing that would help promote taxes. The government has to plan a fixed percentage of tax revenue that will be invested in promoting entrepreneurs and small businesses. When businesses grow, it would automatically increase tax revenue as well. As a business, the government has to care for its own costs. They have to use intelligent means for tax collection and need to be cost efficient. During phases where the government is investing in taxation procedures, it must keep its running costs low.

In countries like Pakistan, taxes are becoming a symbol of terror. This is mainly because of the performance record of the government and their reputation for corruption. It would be best if people could pay taxes knowing that the money will be used for their own benefit. Generally, the government is thankful if if people pay the taxes that are imposed on them. Taxation should be a process whereby the taxpayer thanks the government for using his money to improve society. A little change of perspective is always required to cultivate an acceptance of something that is considered bad but may actually be very beneficial. If the reality can’t be changed for the time being, then changing perceptions may help create that change.

I think it is time for tax authorities and governments to rework the concept of taxes in Pakistan. They need to build credibility and educate people about how taxes are the way to a bright future, rather than a monstrous thing to be avoided. This would require a massive endeavor from the government. I know my post of will receive a lot of criticism, but if companies can sell cigarettes that are harmful to consumers, why can’t the government sell tax, which is highly beneficial (if used sincerely). It is a time to design a framework for developing taxes, rather than imposing them by force. The best way is to take the middle path. This will come from brainstorming: our country is unique and therefore needs unique solutions.


….but PPP leader’s ex-husband faces the axe.

Pakistan Government has won the first round of NRO case….Yes it wanted to delay implementation of NRO judgment and has won the first round. The case has been adjourned till November 1, 20210 giving a new lease of life to the government and dashing the hopes of “political actors”. On the other hand, the PM has started implementing NRO judgment of the Supreme Court, though selectively. The first one to face the axe is ex-husband of a PPP leader. The Express Tribune has reported from Islamabad that Prime minister Yousaf Raza Gilani has dismissed National Reconciliation Order (NRO) beneficiaries, convicted executive director of the Printing Corporation of Pakistan and managing director of the Federal Employees Benevolent Fund on Wednesday.

A notification from the Prime Minister’s house has been issued to both NRO beneficiaries. Director of the PCP, Pir Mukarum-ul-Haq had previously been sentenced by a Rawalpindi accountability Court to seven years rigorous imprisonment and 10 million rupees fine for wasting the state’s resources. MD of the Federal Employees Benevolent and Group Insurance Funds – Sadiq Ali Khan has also been dismissed. He was sentenced on 14th August, 2009.

The dismissals come at a time when the government is under considerable pressure as the Supreme Court is set to hear the NRO review case.

It has also been reported in the Business Recorder that Supreme Court accepted  Federation‘s plea seeking approval to substitute its counsel to plead its review case on National Reconciliation Ordinance (NRO) decision and fixed hearing of the case for Nov 1. The 17-member larger bench headed by Chief Justice of Pakistan Iftikhar Muhammad Chaudhry in its order said that keeping in view of the importance of all the aspects and in the larger interest of dispensation of justice, the application moved by Sardar Latif Khan Khosa was accepted, enabling him to argue the review petition on behalf of the Federation. The bench also directed the counsel to submit with the Registrar office a certificate obtained from the Pakistan Bar Council about revival of his practice. The further hearing was adjourned to next date after making it a subject to availability of the bench.

Sardar Latif Khan Khosa has resigned from the portfolio of Advisor to the Prime Minister and has been engaged by the Federation to represent its stance on pending NRO review petition. At the outset of proceedings, the bench asked Sardar Latif Khan Khosa to submit an application showing reasons for change of Barrister Kamal Azfar under Order 26 of the Rules 6 of the Supreme Court. The Chief Justice told him that previously the Advocate on Record was willing to withdraw the Federation’s plea and it was the bench that advised him to consider his client’s interests. Similarly, he pointed out to him certain implications in filing of amended review pleas. The Chief Justice said that a misunderstanding was created that the Court was not accommodating their pleas. Attorney General for Pakistan Molvi Anwarul Haq told the bench that Kamal Azfar was in fact made Advisor to the Prime Minster on Disaster Management.

On October 11, a three-member bench headed by the Chief Justice had declined Federation’s plea seeking reasonable time to engage another counsel in its review appeal against the NRO verdict after its counsel Barrister Kamal Azfar was made Advisor to the Prime Minister. Raja Abdul Ghafoor, Advocate on Record (AOR) had filed a Civil Miscellaneous Application seeking time to engage another counsel on behalf of the Federation in C.R.P No. 129/2010 in Constitution Petition No. 76/2007. The Federation requested that Barrister Kamal Azfar, who was representing Federation in C.R.P 129/10, has now been appointed as advisor to the prime minister and prayed for appropriate time to engage another counsel. The review cases relating to the NRO have been fixed before a 17-member larger bench for Oct 13 as Barrister Kamal Azfar, in his earlier application had also asked for general adjournment for a period of 22-09-10 to 10-10-10 which was allowed by the Chief Justice.

This is the news of the century. The Swiss accounts containing millions of dollars of hard-earned white money of the President of Pakistan, which were center of attention in the infamous NRO case, have been found empty and no one, not even the NAB, has any clue where the money has gone. The National Accountability Bureau (NAB) on Tuesday submitted a report on the Swiss cases to a 17-member larger bench of the Supreme Court (SC). The report that was submitted by the newly appointed NAB Chairman Deedar Shah, claims that there is no trace of money in the Swiss accounts of the president.

The Express Tribune has reported that the NAB report contains details about the controversial Swiss accounts, NAB cases and steps taken by acting NAB chairman Javed Zia on the directives of Supreme Court. Sources doubted the credibility of the new chairman, saying that he has no information about the money in the Swiss accounts. Chief Justice of Pakistan Iftikhar Muhammad Chaudhry had earlier directed NAB to submit a list of cases pending in foreign courts which had been withdrawn under the NRO. The chief justice had also directed NAB to trace over $60 million in the Swiss accounts case so that it could be brought back to the country.

The report will made public on Wednesday.

You can read a detailed description of Swiss cases in the Express Tribune by clicking here.

Those who were happy that the democracy has made Pakistan an investment heaven should be ready for another rude shock. The latest blow has been dealt by no less than World Economic Forum which says that Pakistan has now reached 123rd position amongst 133 countries as compared to 101st position in the last year in the competitive index. The Global Competitiveness Report 2010-11 released by the World Economic Forum has disclosed that 15 problematic factors for doing business in Pakistan.   These factors in the order of severity are corruption, government’s instability, inflation, access to financing, tax rates, tax regulations and foreign currency regulations. The report has kept in view each and every step and Pakistan’s ranking in each area.

In the ranking of institutions the country has been ranked at 112. 2nd pillar: in the area of infrastructure Pakistan has been placed at 110. 3rd pillar: Due to the vulnerable macroeconomic environment the country has been ranked at 133, 4th pillar: health and primary education 123, Efficiency enhancers 95th, 5th pillar: higher education and training 123rd, 6th pillar: goods market efficiency 91st, 7th pillar: labor market efficiency 131, 8th pillar: financial market development 73, 9th pillar: technological readiness 109, 10th pillar: market size 31.Innovation and sophistication factors 76th, 11th pillar: business sophistication 79, 12th pillar: innovation 75. From a list of 15 factors, respondents were asked to select the five most problematic for doing business in their country.

1st pillar: in the area institutions, property rights 107, intellectual property protection 86, diversion of public funds 92, public trust of politicians 91, irregular payments and bribes117, judicial independence 74, favoritism in decisions of government officials 87, wastefulness of government spending 58, burden of government regulation 72, efficiency of legal framework in settling disputes 103, efficiency of legal framework in challenging regulations 96, transparency of government policymaking 115, business costs of terrorism 138, business costs of crime and violence126, organised crime127, reliability of police services 119, ethical behavior of firms 100, strength of auditing and reporting standards 97, efficacy of corporate boards 115, protection of minority shareholders’ interests 94, strength of investor protection 27.

2nd pillar infrastructure: Quality of overall infrastructure 100, quality of roads 72, quality of railroad infrastructure 55, quality of port infrastructure 73, quality of air transport infrastructure 81, available airline seat kilometers 48, quality of electricity supply 128, fixed telephone lines115, mobile telephone subscriptions107. 3rd pillar macroeconomic environment: Government budget balance 90, national savings rate 89, inflation 137, interest rate spread 94, government debt 82, country credit rating 125.

4th pillar health and primary education: Business impact of malaria 111, malaria incidence 109, business impact of tuberculosis 114, tuberculosis incidence 113, business impact of HIV/AIDS 102, HIV prevalence 22, infant mortality 123, life expectancy 105, quality of primary education 103, primary education enrollment rate132.

5th pillar higher education and training: secondary education enrollment rate 125, tertiary education enrollment rate 121, quality of the educational system 87, quality of math and science education 90, quality of management schools 80, internet access in schools 84, local availability of research and training services 97, extent of staff training115,

6th pillar goods market efficiency: Intensity of local competition 87, extent of market dominance 65, effectiveness of anti-monopoly policy 73, extent and effect of taxation 46, total tax rate 37, number of procedures required to start a business 99, time required to start a business 71, agricultural policy costs 106, prevalence of trade barriers 106, trade tariffs 133, prevalence of foreign ownership 109, business impact of rules on FDI 73, burden of customs procedures 98, degree of customer orientation 97, buyer sophistication 62.

7th pillar Labor market efficiency: Cooperation in labor-employer relations104, flexibility of wage determination 104, rigidity of employment 110, hiring and firing practices 51, redundancy costs 111, pay and productivity 93, reliance on professional management 87, brain drain 68, female participation in labor  force 137.

8th pillar financial market development: Availability of financial services 101, affordability of financial services 85, financing through local equity market 43, ease of access to loans 40, venture capital availability 51, restriction on capital flows 83, soundness of banks 88, regulation of securities exchanges 76, legal rights index 60. 9th pillar technological readiness: Availability of latest technologies 88, firm-level technology absorption 88, FDI and technology transfer 100, internet users 100, broadband Internet subscriptions 103, internet bandwidth 111. 10th pillar market size: Domestic market size index 26, foreign market size index 61.

11th pillar business sophistication: Local supplier quantity 87, local supplier quality 95, state of cluster development 46, nature of competitive advantage 84, value chain breadth 69, control of international distribution 89, production process sophistication 76, extent of marketing 90, willingness to delegate authority 85. 12th pillar innovation: Capacity for innovation 58, quality of scientific research institutions 79, company spending on R&D 67, university-industry collaboration in R&D 81, Gov’t procurement of advanced tech products 84, availability of scientists and engineers 80, utility patents per million population 88.

With about two thousand people dead, millions homeless and deadly diseases spreading, mighty Indus is still furious and this death and destruction is only one side of the story. And its only the beginning.  Deadlier still are events unfolding as are the stories of Government’s incompetence to deal with this situation. The floods are an excellent recipe of disaster for Pakistan as a country, if those rich elite who plundered it do not cough up whole of the looted wealth or at least a fraction of it. Pakistan’s already creaky economy has been pushed to the verge of ruin by the devastating floods of the past month. With foreign aid only now beginning to trickle in, the impoverished country has been forced to take out further loans while pleading for outstanding ones to be restructured.

Already burdened by heavy debt, the country’s economy has suffered a major setback. According to the Independent, funds will have to be poured into reconstruction efforts while many sectors of the economy, especially agriculture, will suffer losses for up to several months, if not years.

So far, the floods have covered a fifth of the country, cost at least 1,600 lives, displaced 4.6 million people, destroyed roads, bridges and schools, damaged power stations and dams, and swamped millions of acres of agricultural land. About 150,000 Pakistanis were forced to move to higher ground yesterday as water from a freshly swollen Indus River submerged dozens more towns and villages in the south. Officials expect the floods to recede across the country in the next few days as the last river torrents empty into the Arabian Sea. Survivors may find little left when they return home. Already, 600,000 people are in relief camps set up in Sindh during the past month. The floods have affected about one-fifth of Pakistan’s territory; at least six million people have been made homeless, and 20 million affected overall.

Some officials estimate that the cost of rebuilding infrastructure could be $15bn, money that Islamabad simply doesn’t have. As of July, Pakistan had a debt of $55.5bn. That figure will jump to $73bn in 2015-16, as debts that were rescheduled after 9/11, in As a result of the tragedy, the budget deficit will grow, inflation will rise, and economic growth will slow – all areas where the fund had wanted to see progress in the opposite direction.

At the same time, Islamabad has secured loans of $1bn from the World Bank and $2bn from the Asian Development Bank to help relief efforts and begin the task to rehabilitation and reconstruction. Government officials say that they were left with no option but to approach the banks as foreign aid has generated only a fraction of what’s needed. The disaster has revealed decades of infrastructural neglect that damns successive governments. However efficiently the current government may have been able to mobilize resources, the state’s capacity was woefully lacking in the first place.

Some 17 million acres of agricultural land have been submerged by the floods, which are still raging in the southern province of Sindh. Key crops including wheat, cotton and rice have been affected. Pakistan’s economy has long suffered problems because of its embarrassingly narrow tax base. Broad sections of the wealthy, including senior politicians, pay little or no tax. But Mr Sheikh said that the crisis could be an opportunity to take tough economic decisions the government has long wanted to. “We could push through a sales tax, introduce a flood surcharge on well-to-do people and get some leeway from the IMF.”

Remembering Hakim Salik….

Floods are not the only catastrophe visiting this poor hapless country. The Almighty’s wrath is reflected in many ways; most notably for common folks, in the events being unfolded by Him every day, and the 18th day of August, 2010 was no exception. At around Iftar time, Pakistan‘s legendary herbal physician, who was honored with the civil award of Tamgha-i-Imtiaz in recognition of his meritorious services, Hakim N Salik, a poet of now-a-days rare classical order, an excellent human-being with the heart of gold and above all a great friend, suddenly left us all, for his heavenly abode.

This was a sudden shock to all of his friends, his admirers and his patients around the globe. He was not seriously ill, but he was a heartbroken man having lost his faith in his adopted country for which he had abandoned his kith and kin and which he served beyond his capacity. He was a Pakistani not by accident or compulsion like all of us, he was a Pakistani by choice. Lately, he was extremely disturbed on what has become of his adopted motherland in the last two decades. He would voice his concerns for the country and disdain for the perpetrators of its disaster very candidly. His patients all around the world would testify to his sincerity. He will be mourned by a widow, a grown up son, three married daughters and three sons of very tender age . He will also be mourned by friends, admirers and countless patients.  After having married off his elder son and three daughters, he had some sense of relief but they all are now devastated and will miss him at every step in life. Rest in peace Salik bhai, you may have left this world but you will always live in our hearts. We will always remember you in the hour of our pain and distress, that is if we ever forget you momentarily.

Click here to go to Hakim N Salik Herbal Medicine website.