FOR the past several decades, in fact going back to the early days of its existence as an independent state, Pakistan has not used trade and economic relations with the world outside as determinants of economic change and development.

This is unfortunate. As several countries in East Asia demonstrated so vividly, trade can play an important role in producing growth and in changing the structure of the economy.

Other types of economic relations with the world also matter. Among them are foreign capital flows and the involvement of diasporas in the development of the homeland. All three aspects of international economic relations are important for Pakistan if it is to emerge from the difficult economic situation it faces today and if it is to set the economy on the trajectory of long-term growth. If economics is to be the main reason for international relations, Pakistan must begin with the countries in its immediate neighbourhood. Of all the countries with which Pakistan shares borders, India matters the most.

This approach of not building strong economic relations with neighbouring countries was adopted soon after Pakistan gained independence. It has remained that way for more than six decades, and it once again threatens to affect how the country develops its economy. If Islamabad is to concentrate on economic development as the main focus of the government’s attention, it should adopt a very different approach towards India, its neighbour, compared to the one into which it is drifting because of the force of long-established habits.

There is a default position into which Pakistan retreats whenever relations with India become difficult. This needs to change. The change must also come in India which has its own default position of blaming Pakistan for many of its problems.

Pakistan has allowed its international economic relations to be determined by its strategic imperatives, the foremost of which was to protect itself from the perceived Indian threat. That initially the Indians and their government wished Pakistan ill was demonstrated by a number of measures adopted by New Delhi as Pakistan, a new political state, was struggling.

The government of Jawaharlal Nehru blocked the release of the funds owed to Pakistan by Britain in return for the war effort mounted by British India. The series of agreements that led to the creation of Pakistan, an independent state for the Muslims of British India, included apportioning British funds between the successor states of India and Pakistan. Once India and Pakistan became independent, New Delhi, that controlled the funds, refused to disburse them and give Pakistan its share. Even Mahatma Gandhi’s intervention did not persuade Nehru to adopt a gentler approach towards its sister state.

The authorities in Karachi, Pakistan’s first capital, drew the obvious conclusion: that the government headed by Nehru in India wished to strangle its neighbour at birth. This was in 1947-48 when Pakistan needed a great deal of support to establish an independent and functioning economy.

The impression that that may have been the Indian intention was further strengthened when two years later, in 1949, New Delhi suspended all trade with Pakistan. The reason for that move was the decision taken by Pakistan not to devalue its currency with respect to the US dollar. That was done by all countries that belonged to the British Commonwealth, including India. Pakistan refused to follow, believing (I think correctly) that given the demand for jute, its most important export, a lowering of its price through devaluation would not help the economy.

In retrospect it seems odd that a decision with respect to the rate of exchange for the domestic economy would be resented so much by a neighbouring country as to bring to a complete halt all trade. But that is what happened.

The Indian decision to apply such severe sanctions on Pakistan was to have significant consequences for the development of the country’s economy. For decades a succession of governments neglected the sector of agriculture in order to concentrate on the development of an industrial base. The policymakers in Karachi felt that they needed to have the new economy of Pakistan self-sufficient in most items of everyday consumption. Previously these were imported from India. With the need to move quickly, Pakistan, unlike India, gave space to the private initiative to develop the industrial sector. India had put the public sector on the commanding heights of the economy.

The Indians also took an aggressive approach towards the use of the waters of the Indus River system in the two Punjabs. Since they controlled a number of canal headworks, they could block the flow of water to the irrigation system that served Pakistan. In the early 1950s when the Indians threatened to divert water for their own use, Liaquat Ali Khan, Pakistan’s first prime minister, threatened war.

This problem was resolved a decade later when President Ayub Khan signed the Indus Waters Treaty with Prime Minister Nehru in 1960. The treaty resulted in the division of the tributaries of the Indus between India and Pakistan, with the Indians given the use of the eastern rivers (Beas, Ravi and Sutlej), while Pakistan was left with the Indus itself as well as Jhelum and Chenab.

One important consequence of the preoccupation with India and the perceived existential threat from the neighbour was to bring the military centre-stage of Pakistani politics. As President Ayub Khan, Pakistan’s first military leader maintained, only the military could take care of the country’s strategic interests. This perception was to be the basis of the military’s repeated intervention in the political system.

The military’s involvement in politics had a number of consequences for the development of the economy. Two of these are worth underscoring. First, it diverted a significant amount of the government’s resources towards defence. With the military claiming such a large share in public funds, not enough was left for economic and social development. Second, with the military intervening regularly, Pakistan opted for extreme centralisation in the style of governance it adopted. This put Islamabad in a commanding situation. The interests of the provinces were often neglected. This slowed economic progress.

Poor relations with India, therefore, pushed Pakistan in the direction in which it should not have gone. Looking at India from the prism of economics rather than that of national security would introduce a different set of dynamics to economic decision-making. Bringing about this reorientation requires both the exercise of political will and the education of the citizenry. n


I HAVE learned one thing from my various visits to Cuba over the years, and that is not to predict the demise of the regime. I did that sometimes in the past, if only to offer a bit of hope to various despairing individuals who thought that a visiting foreigner might know more about their future than they did themselves. But the brothers Castro are still there and they have just celebrated the 50th anniversary of their revolution.

Nevertheless, change may be lurking around the corner at last, for Barack Obama represents the greatest danger that the regime has faced since the collapse of the Soviet Union and the end of its subsidies 17 years ago. The survival of the regime is due in large part to the unremitting hostility of the United States, which lets it appeal to Cubans’ patriotism, and to the trade embargo that gives it an excuse for its economic failures.

Obama is clever enough to understand that the best way to kill the communist regime in Cuba is with kindness, and he has no domestic political debts that would keep him from acting on that insight. In particular, he owes nothing to the Cuban exile establishment in Florida, which mostly voted for Bush.

He could start right away by ending the rule that allows Cuban-Americans to visit their families on the island only once every three years, and limits their remittances to $300 every four months. Even within the Cuban exile community in the United States those restrictions are controversial, as it is hard to see how they hurt the Cuban regime.

Once the question of where to send the remaining Guantanamo detainees has been resolved, Obama could close the base down entirely. Indeed, he could give the land back to Cuba as a free gesture, since it has no economic or strategic value to the United States. That would seriously undermine the communist regime’s argument that the United States is an implacable enemy that Cubans must confront with discipline and solidarity.

Then he could get to work on the ridiculous embargo on trade and travel to Cuba. The sanctions have been written into law in recent years, so he would need Congress’s assent to remove them. But if he got it, all the mechanisms of control built up by Fidel Castro over the past fifty years would probably begin to crumble.

The real question is: what happens then? The last time the fall of the Castro regime seemed likely, a couple of years after the collapse of the Soviet Union in late 1991, I went to Cuba in the guise of a tourist (there’s nothing like having a baby along to make you look innocent) and talked to a great many people informally.

Most of them expected the regime to fall soon, and a majority (though not an overwhelming majority) welcomed the prospect. However, they were all frightened of what might come next, for two reasons. One was the fact that at least 10 per cent of the Cuban population — over a million people — were true communist believers, and they were armed to the teeth. Would they let their dream die without fighting to save it?

The other was that the exiles would come back from Miami and take over. Their money would let them buy up everything of value, and those who had endured decades of poverty under Castro would stay poor and marginalised. Even the few good things about “socialist” Cuba, like the healthcare system, would be destroyed.

Well, my last trip to Cuba was less than two years ago, and things had changed. The poverty, the oppression and the despair were the same, but the true believers who would kill and die to save the revolution were noticeably scarcer.

This visit was part of a project in which various western embassies, thinking that Fidel Castro’s illness might mean that big changes were on the way, brought in “experts” to talk to the Cuban elite about how things were done in democratic countries. It was pretty pointless work, frankly, but it did offer unusual access to the apparatchiks who really run the show in Cuba.

Most of the officials were about what you’d expect: loyal, fully institutionalised servants of the regime. But very few of them were passionate ideologues who would launch and fight a civil war to save it. Generational turnover had done its work, and these were just people who were glad to have their jobs and the few privileges that came with them.

Generational turnover has been at work in Miami, too. Fifty years on, the original generation of Cuban refugees is gradually giving way to an American-born generation who still care about the country, of course, but are much less interested in going back and re-creating the Cuba of the 1950s. n


IN the 17th century in England a man named Chandelor purchased from a man named Lopus a certain stone for the princely sum of one hundred pounds. The stone was reputed to have magical healing powers.

Soon after the purchase, however, Chandelor discovered that the stone had no powers whatsoever, let alone magical healing ones. Outraged, Chandelor took Lopus to court.

Before the court, Lopus dispassionately explained that although he had affirmed that the stone had healing powers, he had not warranted that it did. The court accepted Lopus’ argument. And while Lopus was allowed to keep the money, Chandelor was left merely with a stern warning: caveat emptor — let the buyer beware!

This warning resounded in the ears of consumers throughout Britain and the Empire until Britain enacted the Sale of Goods Act, 1893. This law provided some respite to consumers: a buyer could now examine goods supplied to him by the seller and reject these if they were not in accordance with the contract between them.

In certain circumstances, the buyer could cancel the contract and in others sue the seller for damages. Britain’s colonies and dominions welcomed this law and adopted it without much variation. In 1930, the Government of India followed suit and enacted the Sale of Goods Act, 1930. Post independence, Pakistan enacted the Federal Laws (Revision and Declaration) Act, 1951, under which it adopted a number of Indian laws. The Sale of Goods Act, 1930 was one of these.

For the next several decades, even as the nature of goods and services evolved, the rights of the Pakistani consumer remained dormant at 1950 levels. There was a ray of hope in 1985, when Pakistan adopted the newly formulated UN Guidelines for Consumer Protection. Adoption of the guidelines however did not automatically translate into progress in consumer rights within the country. It took Pakistan another 10 years to enact the first consumer protection law. Since then several more laws have been enacted on this subject. Has the enactment of these laws improved the lot of the Pakistani consumer compared to that of the hapless Chandelor?

The first consumer protection law enacted in Pakistan was the Islamabad Consumer Protection Act 1995. This was followed by the NWFP Consumer Protection Act 1997, the Balochistan Consumer Protection Act 2003 and the Punjab Consumer Protection Act 2005. Ironically, Sindh, home to Karachi, the economic hub of the country, to date remains without a consumer protection law. In 2004, Sindh had experimented with consumer rights by promulgating a Consumer Protection Ordinance, which would lapse in four months unless it was re-promulgated or converted into an act. The Sindh ordinance has since lapsed. From then onwards, other than paying occasional lip service to the protection of consumer rights, Sindh has allowed this matter to slide.

The striking feature of the Pakistani consumer protection laws is that these are provincial rather than federal laws. The reason for this is constitutional: according to Article 142 of the Constitution, for an item listed on the Federal Legislative List, only parliament has the power to legislate, for an item listed in the Concurrent Legislative List either parliament or the provincial assemblies may legislate and for an item not listed in either list, only the provincial assemblies may legislate.

Consumer protection is not listed in either list, therefore only the provincial assemblies are competent to legislate on this topic. While this has the advantage of enabling the provinces to make laws more suited to their specific conditions it has the inherent disadvantage of allowing the possibility of disparity on this issue across the country.

True to Murphy’s Law, the consumer protection laws are disparate: while the Islamabad, NWFP and Balochistan laws condemn “unfair trade practices”, the Punjab law allows claims on the basis of “deficiencies” and “defects”; while the Punjab law allows claims to be brought in respect of medical and legal services, the Islamabad, NWFP and Balochistan laws leave these out of their ambit; while the NWFP, Balochistan and Punjab laws place explicit and specific obligations on manufacturers the Islamabad law does not.

Consequently, the protection provided to consumers in Pakistan is, at best, uneven and a consumer travelling from one province to another does not know what protection he is likely to be entitled to should he purchase a product or avail of a service.

More disturbing than this disparity is the incompatibility of these laws with universally recognised principles of consumer protection detailed in the UN Guidelines. The most glaring instance of this is in the key area of availability of effective consumer redress. The NWFP, Balochistan and Punjab laws in Pakistan prove extremely inadequate on this count firstly because they presume a literate and sophisticated consumer who is aware of his rights, secondly because they mire him in procedural rules and thirdly because they purport to penalise him for bringing a vexatious claim.

The Islamabad Act had stipulated a simpler mechanism, which utilised the existing courts rather than setting up parallel ones. None of the later laws however followed this model.

The guidelines also mandate the protection of the economic interests of consumers by controlling restrictive and abusive trade practices. The Competition Ordinance, 2007 addresses some of these issues by seeking to check the creation of monopolies and cartels, prohibiting agreements that lessen market competition, and preventing deceptive market practices. The Competition Commission established in pursuance of this ordinance has already taken steps to check market abuses in a number of areas.

Given however that the actions of the commission have been challenged in the courts and that the ordinance itself is beset with constitutional as well as economic anomalies, it is too early to comment on their effectiveness.

The examination of these laws underscores Pakistan’s failure to foster a strong, coherent and uniform consumer protection policy. As a result, the Pakistani consumer, despite being made the subject of multiple laws, remains little better off than the unfortunate Chandelor.

Successive governments have relegated consumer rights to the backburner, not realising—or perhaps realising only well—that in promoting these rights they will be securing the welfare of the common man and strengthening the nascent foothold of democracy in the country. The PPP in its election manifesto had vowed that if elected it would reverse the order of priorities so that social policy objectives drive economic policy. It may consider taking the first step in this direction by setting out to provide meaningful protection to consumers. n

The writer is a barrister.

amber.darr@gmail.com


A MEETING presided over by President Asif Ali Zardari has sanctioned the release of Rs7.5bn for power generation. It is claimed that by the end of January 2,700 MW of electricity will be generated. This decision … will help overcome the power crisis … to some extent…. But the … solution would be a temporary one and the power crisis could resurface.

It has become crystal clear that the power shortage in the country is not accidental. In fact power plants were not generating sufficient electricity and this led to the crisis. If they were generating 11,000 MW of electricity, the power needs of the country could be easily met. The meeting observed that the problem was not of generation capacity but the shortage of funds.

The implications of the energy crisis for the economy are huge. Owing to the acute shortage of electricity, the industrial sector particularly the textile industry, has suffered a lot.

The situation demands a review of independent power plants. … Despite being a private sector company, the KESC depends on the government. When such organisations run on a profit they continue production without sharing any profit with the government. But when there are outstanding dues, they suspend supply or stop production. … These private companies indulge in blackmailing the people and government and cause heavy losses to the economy….

The people have every right to know how the willfulness of a company is causing heavy losses to the public and the overall economy, and creating a crisis. In the process of considering the interests of all stakeholders, particularly the people and industry, all national resources should be galvanised on a war footing. — (Jan 3)

— Selected and translated by Sohail Sangi

__________________
Regards,
P.R.