Jalal Ahmad Khan - The crux or bottom line is that economically we are Consuming more and Producing less.
Devaluation is no answer it only brings inflationary pressures especially for us.
I remember 1975 I was working in Dubai one Dirham was Rs 2.50. In 1983 $ was Rs 9.90 it was devalued to Rs 13.30. After Zia I remember Nawaz Sherif devalued from Rs 33 to 47, Shaukat Aziz brought it to 60 and now it is 105.
After De Gual France devalued its currency. It is meant to increase country exports by making Export cheaper in foreign markets. However the problem is it makes the imports expensive also. After a year or two the cost of production again rises and your products again become expensive and noncompetitive in the world markets. You plan your next devaluation.
In case of Pakistan Re value going to 105 from 60 all imports has become 50% more expensive. Agriculture fertilizer, pesticide tractors, fuel for transport and crude oil required to produce electricity. With transport cost raising all agriculture produce transported from village to city markets and everything becomes increasingly expensive creating Inflationary pressures.
Currency devaluation can only be a useful tool for a country where its imports are let us say 30-40% of Export value. In such a case currency devaluation will boost exports and offset any effect of inflation brought about by expensive imports.
In order to introduce proper social and economic Justice in our society we need to introduce another strong layer of judicial officials/ Judiciary who should be authorized to record all evidence within say two week of the crime. This should be considered as final and courts should thereafter be left to give Judgments. Superior court judges should suggest a new code of Criminal and civil Procedures to replace the present old ones. These need to bring in line with what is being followed in China, Iran and Saudi Arabia. All effort should be made to have these amendments passed by the National Assembly. Grievances of different sections of the society should be listened to and some code of right and wrong other then sheer might be evolved. Society should be unwounded serenity and calm among different sections should be restored.
What is a conceptual framework and how does it effects an administrative decision. Case of Steel Mill, PIA and Railways are discussed to make this view more explicit. Steel Mill was established in 1982. It has lived its useful life. The technology has also improved. The Mills life is over, call it a technological scrap with high running cost not worth running. We need a replacement. What is the answer? Give it to a buyer for Rs 1 only on condition 1. He will put up a new mill. 2. He is not allowed to resell the mill property. 3. Will not be given any foreign exchange from our export earnings to import raw material 4.He Must invest heavily in mining of iron ore and other raw materials required for the steel Mill. We must turn our own dust into Steel for our self and for export to other markets. The F 16 that we buy from US from raw material to other components all is earned by the US.
The story of PIA is even more interesting. Our Airline has in fact created the Arab airline whereas we are running into losses for number of years now. The major Components of an airline cost are 1. Aviation fuel 58%, financing Cost of the airplane and airport landing costs. The Arabs by selling expensive Aviation fuel instead of selling crude oil are making good money. They have partners in the west who are making good money on sale of aircraft and its financing which is their area of business. We have neither, so in this competitive world we cannot run the show in the old style.
We can now be only a regional airline using old aircraft that cost less lease money. We should not think of buying new aircraft, live on old ones to keep cost low and not think of running long routes any longer. We can possibly enter into some agreement with Emirates, Saudia or Iran Air for passenger sharing in exchange for low aviation fuel cost.
We need to decentralize the decision making process by creating number of smaller administrative provinces and within them the District Nazims. I do not think the Govt. servant in our culture can ever be independent to take independent decisions. The owners of this country, the people and their elected representatives should take decisions. Except for a few ministries all should go to provinces. The Provinces should not look towards the centre for funds. These should be locally generated. This is the Chinese Model .Each province should try to live within its means like our Government did 1947 to 1958. Austerity should be the hallmark. All decisions should be taken locally by elected people and the far placed Govt. in Islamabad or Lahore should be restricted to major decision. The disjointed decision making process with no sense of accountability, missing values of right and wrong has enabled politicians of all parties to amass wealth immorally, many a times illegally. The money thus looted from Pakistan and stashed in a foreign country is invested in the trade and Industry of that home country and these countries are not likely to return the money to Pakistan.
The present tax system that the central govt. forcefully collects taxes and uses it in unknown areas is a system not very well suited to our culture. People of Pakistan have a large heart and it is said they are one of the front runners among nations is personal donations/ charity. Edhi , The Citizen Foundation, and others are making a good use of public trust and donations. In my opinion Govt. should give out Govt. schools to people who are willing to run it. Govt. job should not be in management but direction.
We may say that we have depended too heavily on Western markets and Japan for our exports. However they have not given us access/ concessions as they have given to China, Bangladesh and some other countries. We are also indebted to these nations. Unfortunately even remittances sent by our nationals living abroad have not been good enough to pay for our import. The population living in Pakistan cannot pay for their import bill. These facts have created a precarious financial condition putting us close to a financial default and at mercy of our lenders.
Imported Energy has simply become too expensive to be used by us in Electricity and Industrial use. We need to use our own Coal, Oil, Gas resource to reduce our import and bring them within affordable limits.
We need to invest in Coal, Oil drilling, Gas finds, our own fertilizer& pesticides, Saindak Gold & Copper mines and also investments to revamp PIA, Railways and Steel Mills. Honestly we have no money and are already heavily indebted. China to develop some economic sectors has diluted its Govt. ownership. UK has even privatized its Post Offices, Railways and Airlines. Keeping our emotions aside we need to follow China and UK in this regard and privatize Public corporation. Chinese, Arabs, Turks and Russians should be encouraged to invest in these critical areas. It would be a folly for a badly financially placed country to keep bleeding valuable resources in loss making corporations.
Devaluation of our currency offers no substantial solution to our economic problems. We should drastically reduce our import by creating resources at home as suggested. An easier alternative is deal with Iran Energy against food.
To effectively meet the challenges of our time we need to reorganize our social structures.
* Cities are becoming bigger and new towns are developing. Rural population is constantly migrating to cities. By some assessments urban population now is somewhere between 55 to 60%. Population Censes need to be urgently undertaken in order to give more representation to urban population who can change the style of governance.
* Decision making need to be decentralized. For this purpose effective and powerful elected district govt. should be established. If need be more Provinces need to be created.
* Criminal and Civil procedure codes need to be amended and judiciary expanded to meet requirements of speedy justice on lines of China, Iran and Saudia.
* All backlogs of cases be cleared. All grievances be attended and genuine reconciliation among various sections of the society be undertaken.
* Huge Investment 5 to 7 times of present spending is needed to educate the masses. This can only be raised by effective local Govt. through public contribution. Mass mobilization effort is required in this field and also in family Planning and Population control.
* The richer section of the society feels it unsafe to retain money in Pakistan. We find even our own leaders investing in foreign countries
Unless we introduce social and legal Justice in our society and thereby bring peace and tranquility we cannot rise as a nation to meet the challenges that we face today.
Given suitable conditions the Chinese and Indians living abroad have returned home in large numbers and have brought home new knowledge of doing work and their capital to help their nation to develop economically and socially. For new ideas, knowledge and wealth we need to also adopt this path.
We are a hard working nation with lot of resilience to face odd times and with plenty of natural resources. The present political elites have not been able to understand and respond to changing times. However as they say time and tide do not wait for any one. Both as a nation and a region we will respond to the call of times.-(Writer is a Visiting Faculty at IBA Karachi)