Cost of NRO?

[Silent Spectator]

Asslamulaikum,

There have been several treatises written on the National Reconciliation Ordinance (NRO) from a politico-legal standpoint of how it is a means for the corrupt to not only get a free get-out-of jail card, if, that is, one was unfortunate enough to be in jail at the time of the notification of the NRO on the auspicious day of 5 October 2007; but to also enjoy the fruits of ones corruption without any further delving by the state into the source of these inexplicable strengthening of funds.



Recently the NRO has resurfaced, this time at the Islamic Ideology Council, which was going to debate whether it is Islamic to let the corrupt go free. However, the two-day meeting ended without any substantive discussion on NRO. Those who have benefited from the NRO continue to focus on the name of the ordinance rather than its content, in order to convince a wary public of its inherent merits: the country is in dire straits and requires reconciliation between all political parties.



The beneficiaries of the NRO argue that only a national government will be able to provide the country with the necessary political will to take it out of its mire of poverty as well as lawlessness that is no longer limited to our long porous border with Afghanistan. This may partly explain the minimising of differences between the coalition partners by the Asif Zardari led-PPP even as the country realises that there is nothing minor about these differences.



NRO was the culmination of negotiations between Benazir Bhutto and Musharraf. Those who allege that Benazir won a political victory because of the NRO, must recall two pertinent facts. First, Musharraf through the NRO succeeded in getting the PPP leadership to agree to an ordinance that would have destroyed part of its popular support, at least the liberal element if not the masses - a possibility that Ms Bhutto was aware of and had mobilised her media team to counter it. Second, Musharraf ensured that PPP could never reinstate the judges who may have refused to uphold his November 3 declaration of emergency; and exactly a week after the ordinance Chief Justice Iftekhar Chaudhry described the ordinance as against the public interests because it gave a blanket cover to people who had committed corruption and held that any action and benefit drawn or intended to be drawn by any of the public office holders would be subject to the decision of the five pending petitions.



Three of those petitions by Shahbaz Sharif, Qazi Hussain Ahmed and Advocate Tariq Asad were dismissed by the Dogar led Supreme Court because their counsel was not present in court. On February 27 2008 the SC vacated the order for freezing relevant sections of the NRO thereby allowing beneficiaries to access their frozen accounts. And, significantly, the apex court requested the courts to pursue pending cases with them in accordance with the ordinance that was declared as law. Malik Qayyum, Attorney General, stated that the NRO was protected and had assumed a permanent character that could be undone only by parliament - a stance that legal experts would, no doubt, challenge.



That there was also a significant economic cost to the NRO can no longer be denied. Given the state of the economy today, this aspect of the NRO should have received more attention than it evidently has; however so cleverly have the powers been manipulated to divert public attention from the economic cost of the NRO that we have very few members of parliament willing to actually speak of it. Included amongst those who are not willing to speak are the increasingly disgruntled elements of the coalition, and one has to add to them growing number of discontented PPP cadres who were close to Benazir Bhutto in this group, as well as those of the Opposition consisting mainly of the ousted PML (Q) who were a party to this ordinance.



Mian Nawaz Sharif rather circumspectly mentioned once that he would be willing to provide constitutional cover to the NRO, which may be taken to imply that he actually believed that the NRO was the major stumbling bloc in the path of restoration of the judiciary and the ouster of President Pervez Musharraf from the office of the President. But no one from the PPP beneficiaries has responded to this suggestion and the status quo remains.



By withdrawing all cases that were pending in the courts the government unfroze the accounts of those against whom the cases were ongoing. This unfortunately did not only include accounts held outside Pakistan but also the deposits of the NRO beneficiaries within the country. According to extremely conservative estimates an amount of over 10 billion dollars was held outside the country by the NRO beneficiaries. Taken in perspective, this amount is higher than what was targeted to be invested for social protection in this country for 2008-09 and greater than what is to be invested for health and services for the current fiscal year.



If this amount could be invested in Pakistan there is little doubt that economic activity would pick up significantly and would also generate employment opportunities. Concurrently, with a rise in economic activity tax collections would also have risen and with it the tax to GDP ratio. In other words, capital outside the country is hardly likely to do good to the people of this country. Thus with the NRO this money is now no longer accessible to the people of Pakistan.



Secondly, money was also unfrozen from domestic banks. According to some estimates, again considered extremely conservative, the NRO led to about 5 billion dollars outflow from the country. What this did to the foreign exchange reserves has been fairly evident and the people of this country are paying the cost of capital flight through a fast eroding rupee value. To assess the link between capital flight and an eroding rupee, it is relevant to draw some parallels to what happened in, say, Thailand during the 1997 Asian financial crisis.



The crisis commenced in Thailand with the collapse of the Thai baht caused by the decision of the government to float it, cutting its peg to the dollar, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven. In Pakistan, the over-extension was not by the real estate sector, in the throes of a 'bubble' but, as always, by private banks unable to recover the loans made to the influential.



In addition, in 1997, Thailand had also acquired a burden of foreign debt that was making the country bankrupt. In Pakistan, foreign and domestic debt are making the economy bankrupt - a factor that is further eroding the rupee value. In addition Pakistan's fiscal policies are not sound, to put it mildly, a charge that was also made by the Governor of the State Bank of Pakistan last week, and in this context it is relevant to note that this has further fuelled the crisis. Thus capital flight as a result of unfreeze of domestic accounts has undeniably contributed further to the current economic crisis.



It is a sad commentary on this country's politics that our rulers are hesitant to keep their personal assets in the country; while going on foreign trips at the public's expense, urging foreign investors to come to Pakistan and thereby help the economy out of its current mire of inflation, unemployment and growing poverty levels. [Courtesy Business Recorder]

Regards.