“Corruption through Privatization… A Contagious Disease” (From Musharraf’s Government to PPP’s Government)

There has been massive corruption during the eight years of Musharraf-Shoukat power period from 1999 until 2007. It is very clear that the privatization process has not been proved as a key to economic development as was claimed by the government, but instead a total disaster for the economy.

On 12 November 2007, the former Prime Minister Shoukat Aziz claimed that we have earned 417 billion Rupees ($6.41 billions) through privatization, a record amount according to him. While, only 57 billion Rupees ($.870 million) were fetched altogether from 1991 until 1999 by the civilian governments, he said the corner stone of our economic growth has been liberalization, deregulation and privatization.

A record 700 billion Rupees ($10.76 billions) of corruption has taken place during the privatization of financial institutions. When Habib Bank Limited (HBL) 51 percent shares were sold out to Agha Khan Fund For Economic Development in December 2004 for only 22 Billions Rupees, its total assets were more than 570 billion Rupees ($8.76 billions). While another large bank, United Bank Limited (UBL) was sold out only for 13 billion Rupees. HBL had 1437 branches and another 40 branches abroad in 26 countries with ownership of the buildings that the branches are functioning. The sale of these two banks on a very throw away prices is the largest financial scandal in Pakistan history. The 26 per cent shares privatization of Pakistan Tele Communication Limited (PTCL to Dubai based Aitsalat with management rights for only 157 Billions Rupees ($2.59 billion) is another gross violation of the rules set up even by Privatization Commission Pakistan. The Aitsalat bought PTCL after a 10 days strike against privatization by workers was crushed by the military regime in June 2005. The company then refused to take over and wanted more concessions. At the demand of the private company, it was agreed by the PC that another $370 million be reduced from the original price and the rest of the amount to be paid in installments.

Etisalat announced at the time of privatization in 2005, that none of the 70,000 workers would loose their jobs. However, in 2007, the company has kicked out 30,000 workers on the name of so-called voluntary scheme.

Karachi Electrical Supply Corporation (KESC) was sold out for only 16 billion Rupees. It failed to improve any electricity supply, on the contrary, there has been regular load shedding and most of the political parties have demanded to renationalize the KESC.

There has been a severe crises of agriculture due to the privatization of fertilizer public companies. Pak Saudi Fertilizer in Mir Pur Mathelo wan handed over to Fauji (military) Foundation in 2002 for just 8 billion Rupees. At the time, it annual profit was more than 4 billion Rupees. At Multan, Pak Arab Fertilizer was handed over to Arif Habib Group for only 13 billion Rupees. The price of the land of this factory was over 40 billion Rupees at the time of sale in 2006. On 15 July 2006, the largest Public sector factory Pak American Fertilizer was handed over for just 16 billion Rupees.
After the privatization of these factories, the price of a pack of fertilizer has gone up from Rupees 1300 to 3700 Rupees. This has put a massive extra burden on the peasants and all agricultural inputs have gone up.

 
 Unfortunately, the present Pakistan Peoples Party government has continued the policies of the former Musharaf Shoukat regime. The former government proudly declared that three main pillars of the Pakistan so called economic growth rest on liberalization, deregulation and privatization. The PPP government has no different options than these three.
The new finance minister of PPP has been the chairperson of Privatization Commission and minister privatization during the previous two periods of Benazir Bhutto government (1988-90, 1994-1996). He declared on 30 April 2008 that we have learned a lot from our previous experiences and we will do a “clean” privatization. He also tried to justified privatization as “pro worker and pro-people”.

The issue is not of clean or corrupt privatization. The process it self is anti worker and anti people as has the experience shown in Pakistan and internationally. The result has been that it has promoted unemployment, price hike, monopolization, low quality, inefficiency and huge profits for the rich.

Still, the website of Privatization Commission updated in March 2008 announces the planned privatization of Pakistan Railways, Pakistan International Airlines (PIA), State Life Insurance Corporation, Oil and Gas Development Corporation, Sui Northern and Sui Southern Gas Companies, Faisalabad Electric Supply Corporation, Peshawar Electric Supply Corporation, National Fertilizer Corporation, Port Qasim Authority, Civila Aviation Authority, Karachi Port Trust, Printing Corporation of Pakistan, All Utility Stores and Corporation, Rice Export Corporation, Cotton Export Corporation and Convention Center Islamabad.

We demand from PPP government that it stop the process of privatization. An independent commission should be established to investigate the corruption involved in the previous privatizations. Abolish the Privatization Commission and Privatization Ministry. The Protection of Economic Reform Ordinance should be withdrawn. The Ordinance gives constitutional protection to the process of privatization which is clearly doing nothing else than ruining our economy.

A Video Representation Of The Blog "Political Economy".

Political Impact on Economy

G

overnment to the People, by the People and for the People. I am not sure whether I had put this proverb right, but to be very honest, this is how I would want to interpret this. Pakistan is a country of Power politics and not Welfare Politics. As a nation, we were earned back in 1947 as not an Islamic State but as a Islamic “Welfare” State. Welfare means Wellbeing, Happiness, Benefit, Good and Safety. As you will go on reading my article, you can expect the usage of the above five synonyms in one context or the other but would find it a herculean task to figure the last time you, if reading my article within Pakistani borders, experienced such things.

Pakistan’s foundation is currently stumbling on these four pillars; Executive, Judiciary, Legislature and the new one, Media. The Executive, commonly referred to as the Political Leadership, of the country is the sole responsible to ensure the smooth running of the economy. The legislature formulates the law and agenda of how to go about it; the judiciary “should” hold you responsible while the media bring your faults to public.

Political moves decides how well the law and order situation would be in the country which is what decides how well the industries would fare in the economy. Just a few years ago, Pakistan’s law and order situation started to get further worsen, and was being taken as a Sole reason for the economic demise of the country, but now the energy crisis seems to have taken its toll as well. Would you imagine if your government tells you that the Vehicles would not be provided with the fuel they run on 3 days a week, how you would feel if your national government tells you that your textile industry would be deprived of gas and electricity for 3 days a week. For answers, you may refer this to an ordinary citizen from Karachi and an ambitious person from Faisalabad. To add insult to the injury, the government seems to have no plan in order to mitigate this energy crisis. In my sense of mind, it should not take ages for you to answer this question. Explore and seek fuel and energy from other natural sources.

Thar Coal project, owing to a nature coal treasure embedded in the national soil, can provide us with a continuous supply of Energy and Electricity of 50,000 Mega Watts for the next 500 years. But the current national government would want to rely on an alleged corrupt model of “Rental Power Plants”. Dams have become a major political manifesto points for the last one decade. It was the Musharraf regime that started the work on the Diamer / Bhasha and the Kalabagh Dams but eventually succumb of to the opposition of the minor interest groups. Imagine how these water reservoirs could have acted as a source to build in energy and would have prevented the interior villages from the gruesome floods that took their lives and livelihood both. But eventually, the result is the same, no progress and small hope.

Foreign Direct Investments have decreased by 86% in the last 10 years. There’s no electricity for the machines to run, why would someone want to risk their stake in a hell hole. At the same time, the government keeps on making tall claims of increasingly better relations with the other countries. What better relations would earn for us if these alliances don’t end up in a trade for Pakistan. It does not take you to be a rocket scientist to answer my questions.

A deteriorating economy brings in longitude and latitude of social problems for the country as well. Recession, a dive in the economic activity, decreases the average purchasing power of a lay man, causes a fall in the output and eventually lay-offs from their work. In a populated country like ours, one man on an average earns the bread for the next 6 or 8 people. So the loss of income of one man forces the others to suffer as well. Now this is what forces people to take extreme measures. By extreme measures I mean, suicidal successful or partially successful attempts or taking the law and order in to their hands to earn their living. So in effect, an economy whether successful or otherwise, would decide how the wheel of life would eventually run and who would eventually control the smooth running of the economy, no prizes for guessing, the ruling government of the country.

The value of money has deteriorated fast in Pakistan. Rising imports and surplus printing of money has not helped Pakistani Rupee much, giving further strength to Foreign Currency and the value of Pakistani Rupee has further gone down the drains. So much so that we had to print a 5,000 Rupees note. This new development says a lot on our economic platter.

The deficit now stands at whopping PKR 3,000 Billion Rupees which is ever increasing because of rising imports and falling exports. Tax revenue is being used for other non-development expenditures and so to call “private benefits”. I would leave this judgment on your good self of what the new government should and should not be doing to help this make look a bit better

Written By

Fizza Kamal BSS-7

Treatment of the Blog.

Treatment Of Blog

Political Economy

Politeconomy.blogspot.com

Overview: The blog political economy strives to look deep into the relationship between politics and economy. Politics and economy are two separate phenomena string bound to each other. In this blog we’ll try to explore the eco-political problems of our country Pakistan and International community. We’ll also try to establish connection between the international scenarios and their effects on our local economy. Finally we’ll try to find multilateral solutions to these problems through extensive research.

Outline:

Beginning: The blog will see local and international programs entertained in blog posts alternatively on different political economic issues.

Middle: In the posts leading to the first two blogs more international and local problems will be entertained with their background of origination and their current status.

End:  In the end we’ll try to seek multilateral solutions to all the problems that we’re facing internationally and locally and their inter-relationship

Logline:  A deep look into the background of international and local political economic problems and a presentation of their multidimensional solutions.

Scope: The blog will cater the audience who want to understand the reasons of different issues that have an amalgamation of politics and economy.

Length, Distribution and Media:

Length: The blog will continue to serve the audience for times to come.

Distribution: Blogspot.com is being used to distribute the ideas to the audience.

Media:

Videos will be made to give to the audience an extensive and elaborated view of the problem.

Pictures will be used to add interactivity in the text of the blog.

Production Elements:

Text can be produced using research material and internet.

Pictures will be taken from Google for international and local topics because while explaining the history of events one cannot take fresh snaps using camera.

Videos will be made using Windows Movie Maker.

Subjects:

Many political and economic connoisseurs can be interviewed to take extensive details and insightos on topics both local and international.

“Treatments of all Blog Posts” (Fizza Kamal)

Treatment of Article 1

Largest Loan, to the Country of the Future IMF

Overview

The article “IMF largest loan to the country of the future Brazil” as the title says it all that it is regarding the issue which took place in 2002 when in the history of world’s largest lender IMF, announced the largest loan of 30.4 billion to Brazil. It was given to overcome Brazil’s fear of economic decline and being unstable due to the elections which were to take place in Brazil. This standby arrangement by IMF helped restore confidence, calmed the financial markets and stabilized the Brazilian economy.

Scope of work

The article basically caters the audiences that are interested in political and economic affairs of the world. It makes the reader aware of the international issue regarding the economic conditions of Brazil and its relation with IMF.

Treatment of Article 2

Culture and Politics

Overview

Culture and politics is designed in such a way that it offers profound analysis of the role of culture in shaping our political, economic and social lives. The article discusses some social movements regarding culture one of which is the clash of the civilizations by Samuel P. Huntington. Later the article explains culture and identity in comparative political analysis which helps in creating an understanding of how culture can be used as a framework for organizing the world, for grounding an analysis of interests, for linking collective identities to political actions.

Scope of work

The article helps the audience to understand the true meaning of culture and its surreptitious relation with politics and economy. It tells the reader how culture can improve the economic performance of a country and how it helps in motivating people and groups toward some actions and always from others.

Treatment of Article 3

Fighting Terrorism with Foreign Aid

Overview

The topic “Fighting Terrorism with Foreign Aid” is one of the most talked about issues nowadays in the international arena. The article discusses the role of foreign aid in countering terrorism and what kinds of effects it has on it. The article also tells us that how US is only concerned about protecting its own interests and showing that how US has dramatically increased foreign aid to a handful of countries which play an important role in the war on terror. Later the article will tell the reader if aid can reduce poverty and some don’ts and do’s of fighting terrorism with foreign aid.

Scope of work

Fighting terrorism with foreign aid will help the audience of international affairs in understanding the true motives of US and its foreign aid in fighting terrorism. The article gives the audience a clear picture of what foreign aid is, how it is used for a country’s own interest and what are its consequences. The article shows a link between foreign aid with economic growth and development which ultimately reduces the level of grievances, mobilization and willingness of individuals to join terrorist organizations.

Treatment of Article 4

Political Impact on Economy

Overview

The article revolves around the idea that how a country’s political environment can affect its economic stability and development. The article highlights some of the important issues regarding the development and progress of Pakistan’s economy. It tells the reader about how our government is using the resources we have and also how our economy is deteriorating day by day.

Scope of Production

The audience is being given a clear picture of our corrupt political system through the article. It tells the reader about our government and its leader’s actions which are dragging us all towards a living hell. The article in way helps us in opening our eyes and mind and make us think from a new point of view regarding our political and economic situation.

Treatment of article 5

Non-development Expenditure

Overview

The article throws a light on the true meaning of development and how Pakistani government has failed to understand the meaning of development and progress. It explains how Pakistan is caught up in a war commonly referred to as war on terror which was never for us in the first place. Further it discusses some of the key issues which explain non-development expenditure of Pakistan. In the end the power of politics and its relation with the progress and betterment of the country is discussed which our country has failed to understand.

Scope of Treatment

The article keeps the audience reading by making them believe and understand the meaning of development and where Pakistan stands when it comes to the betterment, progress and prosperity of a country. It provides the reader the information about how poor our political system is in developing the nation.

Treatment of Article 6

European Debt Crisis

Overview

The article throws light on the European debt crisis which started in late 2009 and there was fear of sovereign debt crisis which developed among investors concerning among European states, intensifying in early 2010. The article discusses some of the key factors regarding the issue and it also discusses some of the controversies and provides us with solutions.

Scope of work

The article gives the audience brief information about the European crisis, its impacts and solutions. It makes the reader aware of the latest crisis in Europe which is affecting the international market and changing the world cause of the recession.

“Treatments of all Blog Posts” (Abdul Majid Awan)

1. The shift… Blunder or Loyalty to the state?

Over view: The transition from Centrally Planned economy to Free-Market Economy is very time consuming. The process of transition also has loopholes that can be used for satisfying the greed of corruption. The blog-post shows some of the efforts of the Pakistani Governments to move to privatization; some of them proved fruitful while other went down the drain because of corrupting factors.

Scope: This post will help people to understand that the shift from a centralized economy to a free-market economy is a healthy step but it has some infirmities that come in the path. It is not a one-go process, it has a lot of factors which contribute to a healthy shift.

2. Military Expenditure… a necessary evil

Over view: Military is supposedly an institution that is required to safeguard the nation-state from any internal and external threats of assault. In Pakistan the military is playing its role very efficiently but our economic conditions do not allow such high expenditures on military equipments and training. The budget deficit is growing every year but military expenditures never crawl down instead they are always on the rise. The blog-post addresses the role of military in politics and the solutions to cut down military budget to facilitate the process of economic development.

Scope: Readers can get a clear picture of the scenario that excessive military expenditure is causing to our economy. And together with that a subservient part of the blog also shows the role of military in causing political instabilities through the manifestation of military dictators.

3. Corruption… a contagious disease

Over view: Corruption has been an influential part of Pakistan’s political economic history. From the very birth date of Pakistan we’ve been facing the manifestations of corruption in many different forms. The blog-post searches the biggest corruption cases, their history and their after-effects and the jurisdictions against these cases.

Scope: The readers can understand the factors and notions that sum up to facilitate the people to carry out corruption. The role of people, law enforcing agencies and judiciary to question the cases is highlighted.

4. Recycling industry… Takeover by the Afghanis

Over view: Pakistan is one of the biggest consumers of polythene bags and plastics products. The recycling industry in Pakistan is yet not on the most efficient paths. But the basic control has been taken by the Afghan refugees and their young children. The children collect recyclable materials from the garbage disposal places and then the masters sell this stuff at high prices for lucrative profits. The blog-post addresses this problem with seriousness and also focuses on the steps that government should take to legalize the process of collection of recyclable material.

Scope: The blog tries to explicate the importance of recycling industry and it also focuses on the revenue that can be generated thorough this potential industry. It directly questions the role of government which is not showing any special interest in this potential industry which can generate substantial revenue.

5. Unemployment… Political instability is the major problem.

Over view: The clash of ideologies, stance, mandates and race forces the political parties to stay in a state of war. Time span of one hour is enough to turn any city of Pakistan into a battle field. The notable cities of Lahore, Karachi and somewhat less but also exposed to such conditions Islamabad have faced this scenario several times. This condition of fluctuation of circumstances in no time leads the foreign investors to flee away from Pakistan. The impending investors also seek a refuge in other countries because of the wavy conditions of our major capital producing cities. This creates mass unemployment which leads to the menaces of street crimes and robberies. The blog-post seeks to find solutions to this problem of political instability which leads to a very big economic problem.

Scope: The blog post will serve the readers with a dose of the medicine to cure the illness of unemployment and it will question the role of political parties in the production of this problem.

6. Tax Collection… Justly done, billions we’ll earn.

Over view: The problem of tax collection has been evident from the day Nawaz Sharif announced that he pays Rs. 5000 as income tax even after being the owner of big sugar mills and many other enterprises. The blog posts will try to explore the history of tax systems in Pakistan. It will focus on how big fishes of our sea escape easily using their resources. It will also propose a tax system which can be used as an efficient tool for collection of tax.

Scope: This post basically deals with fact that collection of income tax and other taxes leads to an accumulation of capital which can then be used to pay off our debts and can also be applied for development projects in the budgets. The main benefit for the audience will be that they’ll know that if everyone pays his part of tax loyally, we can generate a huge amount of revenue just from tax collection.

IMF's largest loan to the country of the future, Brazil.

South America’s largest country with maximum population, Brazil has been hit by a number of internal and economic crisis, but it did not collapse.

“For so long, Brazil was a nation brimming with potential but held back by politics, both at home and abroad. For so long, it was called a country of the future, told to wait for a better day that was always just around the corner. My friends, that day has finally come. And this is a country of the future no more. The people of Brazil should know that the future has arrived. It is here now. And it’s time to seize it.” Those were the strong and inspiring words of US President Obama during a speech in Rio de Janeiro in March 2011, and rousing applause that followed was proof that Brazilians agreed. Brazil is the country of the future. But when it comes to books, is the situation the same? Are their indeed opportunities for international publishing companies to participate in this gigantic nation’s booming economy?

We are aware of the fact that Brazil is one of the most powerful country in South America in economic terms and thus is leading the other countries in South America. In the global economy Brazil has acquired a strong position as it has large and growing agricultural, mining, manufacturing and service sectors. According to the World Economic Forum, Brazil was the top country in upward evolution of competitiveness in 2009, gaining eight positions among other countries, overcoming Russia for the first time, and partially closing the competitiveness gap with India and China among the BRIC economies. Important steps taken since the 1990s toward fiscal sustainability, as well as measures taken to liberalize and open the economy, have significantly boosted the country’s competitiveness fundamentals, providing a better environment for private-sector development.

Those who have watched financial crises in emerging economies over the past few years would have noticed that there has been a high concentration of financial crises in Latin America. In mid 2002 Brazil’s economy was suffering from persistent fiscal and current account problems due to which the Brazilian economy  was on the verge of a crisis and feared that the economic policies would be significantly altered after the elections. The presidential elections in Brazil in October 2002 had put a great pressure on Brazil’s economy as the left – leaning  candidate would win the elections. The likelihood that Luis Inácio Lula da Silva might win the election caused substantial capital outflows, as markets worried that existing market-friendly economic policies could be overturned. To over come Brazil’s fear of economic decline and being unstable, a stand-by arrangement by International Monetary Fund helped restore confidence, calmed the financial markets and stabilized the Brazilian economy. The loan given by International Monetary Fund to Brazil is the largest ever made by the institution. 

The loan announced by IMF to support the Brazil’s economic and financial program was about $ 30.4 billion. The $30 billion that the IMF lend to Brazil over the next 15 months was in addition to $15 billion that the country received a year ago that was supposed to help prevent its economy from being infected by financial "contagion" from Argentina. Most of the $15 billion loan was already drawn down. The IMF managing director Horst Kohler while making the announcement noted that "the new program will contribute toward ensuring the maintenance of sound economic policies. In this regard, the commitment that the leading presidential candidates has given to the core elements of the program already appears to have helped market confidence. As the next government builds on progress achieved with this macroeconomic policy framework, Brazil could be expected to progressively regain market access."

Lula da Silva’s election victory improved Brazil’s economic and financial situation. The country's new government pursued policies that were both prudent and courageous, combining fiscal and monetary discipline with critical initiatives to relieve poverty. The contribution given  by IMF was basically to restore the confidence so that the new government would have time to put in place its policy framework. Brazil overcame all the challenges coming it’s way in 2002 only through good policymaking and sound choices. This shows that a good political system is one of the most crucial elements to make a claim and important status on the international front as well as bringing one country from rag to riches.

Other countries have received packages that are bigger if bilateral aid from the United States and other wealthy countries is included. But none of them got as much from the IMF as Brazil, and financial markets have often treated pledges of bilateral aid as suspect. Under normal circumstances, Brazil is entitled to borrow only up to about $12 billion from the IMF. Today, the Brazilian economy is reaping the benefits of the continued implementation of strong stabilization and social policies, in the context of a favorable external environment. Real GDP growth is projected to rise from 3¾ percent in 2006 to 4½ percent in 2007. Strong social policies have recently helped place Brazil among the high ranking countries in the UN Human Development Index.


Fizza Kamal (BSS-7)