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Old Monday, September 12, 2016
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Default September 12th, 2016

Date: Monday, September 12th, 2016


Another loan for the energy sector


Pakistan recently requested the Asian Development Bank (ADB) to double its loan for energy sector reforms, taking the amount from $400 million to $800 million. Finance Minister Ishaq Dar made the request to the ADB country director and it was agreed that instead of a $200-million tranche coming in 2017 and 2018, the size would be doubled to $400 million each. The additional debt comes on the back of figures released by the State Bank of Pakistan that stated the country’s total external debt standing at a whopping $73 billion with GDP growth nowhere near to withstand the increase. It also highlights growing dependency of economic managers on taking loans to implement reforms, in which slow progress, ironically, makes the entire exercise seem like a waste.



Of course, like every loan, it comes with conditions. Pakistan has committed to reduce subsidies, fast-track privatisation and run the power sector on a commercial basis. Barring reducing subsidies — aided by the fall in international prices of crude oil — the country has failed to reform the power sector. Mr Dar boasts of having increased tax revenue by over 50 per cent in the last three years. He should also look at the increase in domestic, as well as external, debt during the period. Someone needs to question as to what has the country actually achieved in the name of power sector reforms in the last three years when it has saved on subsidies, cost of power generation, oil import bill, increasing tax rates and revenue, withholding refunds, inflating collection and getting billions from the IMF, the World Bank and the ADB. The answer is clear; very little. Privatisation hit a snag because power distribution companies didn’t allow for it. Protests happened on a grand scale and the government stepped back. LNG import may have started but reforms within the sector have been lacking. Healthcare and education remain on the back seat even as debt for future generations rises. Tax rates continue to rise and the centre’s interference in provincial tax matters continues to increase. Mr Dar may have said the country doesn’t need the IMF, but dependence on international lenders continues to exist — more so than before.

Afghan transit trade


For centuries, Afghanistan has sat at a crossroads. One of the landlocked Central Asian states, it has always been reliant on agreements for transit trade with its neighbours. Transit generates revenue for a country that has few goods of its own to export, and those that it does have are with a short shelf-life, mostly soft fruits. Into this precarious economic mix comes modern geopolitics, and neighbourly relations with India — a state that is a close trading partner for Afghanistan — and Pakistan with which relations are at a nadir. The latest development in an escalating disharmony between Pakistan and Afghanistan is that Kabul has threatened to close the transit routes for Pakistani exports to Central Asia if it continues to disallow Afghan traders to use the Wagah border in Lahore to conduct trade with India.

This has the potential to be a lose-lose for all concerned. Pakistan cannot afford to lose trading routes any more than Afghanistan. Pakistan may be a poor country but Afghanistan is impoverished and wracked by war. Much of the tension derives from new border arrangements made by Pakistan, which is now demanding that all Afghans coming in via the Torkham crossing must have a passport with a valid visa — a reversal of historic custom and practice that allows free and undocumented transit for Afghan citizens. Neither side has anything to gain by impeding the trade of the other, and the somewhat threatening tone of a statement by Afghan President Ghani has done nothing to ease tensions, indeed the reverse. Both sides need to step back and take the diplomatic equivalent of a deep breath before matters deteriorate any further. Suspicions that the transit trade may be a cover for terrorist arms and activity are not unfounded; they are real and on occasion proven. If the trust deficit could be seen as an opportunity rather than a threat, then there is a chance for the intelligence and security services of both sides to address what each acknowledge as an ongoing difficulty. A problem shared is a problem halved, and allowing safe transit is a moneymaker for all concerned.

Stagnation


Innovation, the ability to create new things, is not anyone’s birthright. One’s social status, nationality, the level of education and financial success are not linked with one’s ability to have ideas. But actually bringing them to fruition requires that they are generated in an idea-friendly environment. At a national level, an idea-friendly environment is one in which governments, through their budgetary allocations and policies, encourage individuals to take the risk of becoming researchers, entrepreneurs and inventors. This is dependent on education that focuses on fostering curiosity and scientific rigour, on infrastructure that facilitates learning and an economy that helps new business ideas to grow. Unfortunately in Pakistan, spending on research and development or education has never been a priority. Our output of university graduates, research papers, inventions and entrepreneurial start-ups is also low. There certainly are examples of individuals who have come up with brilliant ideas that are highlighted locally and internationally. However, such people succeed despite the system rather than because of it.

This is all reflected in stark terms in the Global Innovation Index report 2016 in which Pakistan is ranked 119th out of 128 countries. For a country which spends less than two per cent of its GDP on development, this is an expected result. This ranking reflects our inability to promote ideas, which has resulted in a society that relies on blind obedience and apathy to innovation. Not having been allowed room to breathe, creativity has fled to other countries where Pakistani scientists, educators, innovators and artists flourish unfettered. We must understand the tragedy of consistently losing out on this talent’s contributions. Our society has sunk into stagnation, which discourages newness everywhere, from classrooms to the halls of parliament. We must change or accept the fate of all those who refuse to change — being left behind and forgotten.

Published in The Express Tribune, September 12th, 2016.
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