A future to look forward to
By Shahid Kardar
ALLOW me to reproduce a passage for you to guess the name of the country alluded to. I am willing to lay a small wager that Pakistan's name would immediately come to mind, the situation sounds so close to home. Well, it is not. The name will appear at the end of the article. But to minimize your agony let me reveal that this was the state of affairs 48 years ago in what is today an undisputed industrial giant.
"... labour ... shunned hard, productive jobs and sought easy, merchant-like work. ... workers' productivity had fallen, wages were too high, and enterprises were inefficient and heavily subsidized. The country had virtually priced itself out of international markets and faced a severe competitive threat from newly industrializing China and India. It was overpopulated and becoming more so. This would be the last opportunity, concluded the prime minister... to discover whether his country would be able to stand on its own two feet or become a permanent burden for the rest of the world."
I have quoted extensively from this report: (a) simply to illustrate that extraordinary progress is possible even when there is an all-pervasive sense of doom and gloom, if nations are determined to turn their fortunes around; and, more importantly, (b) to make the point that whereas it took this country less than 40 years to achieve current levels of prosperity, today, thanks to the rapid pace of technology development, the lessons that can be learned from the experiences of other successful countries, the process can be shortened significantly. Britain grew at 3% per annum, Japan at 5%, Korea at 8% and China at over 10% a year.
My wife, as a rule, refuses to read anything I write because she calls me a prophet of doom. Hence, this article is more out of deference to her and, as an outcome of the realisation that, despite the lack of any reason to cheer and a future to look forward to, we must not (and cannot, for the sake of our children) afford to lose hope. For most of us, this land, for better or worse, is our home and this is all we have; we have nowhere else to go. This piece is, therefore, being written simply because this writer believes that we have to be optimistic about the future, for if we are not, despair is more than likely to become a self-fulfilling prophecy.
If we were to take a snapshot today both of the country's profit and loss account and of its balance sheet,
it would present a fairly dismal picture. But it is an article of faith with this writer that the country can be turned around with just a few years of good governance, a leadership displaying a greater sense of determination and a wee bit of honesty, a slightly less selfish elite, prepared to share the burden of structural adjustment more equitably, to ensure its own long-term interests, and not lose sight of the long-term while fire-fighting short-term crises like fiscal deficits, debt servicing, etc., not that these do not matter but that we could easily lose our way, and, as a result, forget the ultimate destination.
All we need is to get just a few things right. I would pick the following and believe that everything else would fall in place. At first sight the agenda may look formidable but in reahty it is not if there is a small commitment to change. I remain optimistic about Pakistan, wtiile fully realizing that implementing any of these proposals will be far from easy. The leadersilip that guides our destiny today may not inspire confidence, but then can we afford to lose hope?
Today, a social consensus has emerged around the need for accountability and austerity. The people are eager to put in place credible accountability systems for the long-term viability of state structures. To strengthen the accountability system a number of measures need to be taken to make public office less attractive to those with suspect credentials. The following proposals will help reduce the incentive to acquire public office to promote personal interest at the expense of collective good.
* Improve the integrity and quality of public representatives by opening up the national and provincial legislatures only to the educated and to those whose assets are commensurate with their legitimate sources of income.
* Make it mandatory for all legislators and every public servant appointed as head of one of the armed forces, or secretary or head of a ministry or a department to submit, as pubhc documents, their own income and wealth tax returns, as well as those of the members of their family (including married daughters) during their term in office and three years thereafter. Simultaneously, to prevent such persons from holding assets in fictitious names, the Law ofBenarni Transactions should be withdrawn. The latter is, in any case, required to facilitate the documentation of the economy and to check tax evasion.
* The president, the prime minister, governors, chief ministers and all ministers and advisers, both federal and provincial, should be required to abstain from conducting any business or commercial activity that conflicts with, or in any way compromises, the office that they hold.
* All powers of the executive to relax rules should be withdrawn especially the powers to disburse funds, allot plots at prices below market value, to give tax-related concessions, to appoint public servants without regard for laws and give them jobs beyond their competence, to get their wards admitted to educational institutions without merit.
* Public representatives and public servants should neither be entitled to nor given plots of residential, commercial or agricultural land.
* In the interest of transparency and to uphold the sovereignty of parliament all taxation should be sanctified by an act of parliament. Therefore, all administrative notifications regarding amendments in tax rates should become effective only after parliamentary ratification.
* All agreements with multilateral lending agencies and other international agencies should be ratified by parliament.
* Expenditures on visits of public representatives for haj, umra and ziarat, and on the travel and accommodation of spouses, other than those of the president and the prime minister, accompanying public representatives on state visits, should not be paid by the government.
* Strengthen the Ehtesab Commission through the induction of experts in different disciplines and ensure administrative accountability through quasi-judicial institutions like the institution of the ombudsman in organisation providing utility services, etc.
* We need to further liberalize and deregulate the economy. As a first step banks and insurance companies should be privatized and trading enterprises in the public sector should be closed down. Moreover, to prevent further financial haemorrhaging, till such time that public sector financial institutions are privatized, they should be stopped from making additional loans to the private sector.
* Improve the transparency in the award of public contracts tlirough better developed specifications, widely publicized evaluation procedures and by promulgating and making more effective the law in respect of freedom of information.
* Amendments should be made in the Representation of the People Act, 1976, to prevent floor-crossing, wllile protecting a legislator against the designs of an unscrupulous party leadersilip provided a reasonable number of legislators of a party opt out on an issue of principle or conscience.
* The public sector should be down-sized drastically starting with the rationalization of the various divisions and line departments into logical entities. * The independence of all key positions in the public sector should be strengthened by putting in place transparent procedures for the appointment of the Auditor-General, Attorney-General, Governor State Bank, Corporate Law Authority, the heads of the PTV and the Pakistan Broadcasting Corporation, Chief Election Commissioner, the Chairman of the Federal and Provincial Public Service Commissions and the Chief Ehtesab Commissioner. These positions should be filled on the basis of parliamentary ratification after parliamentary hearings. Once appoint their tenure should be protected by supportive legislation.
* The salaries ofpubhc servants should be increased to enable the public sector to compete with the private sector for scarce skills. To minimise the impact on budgetary resources, the increases should be programmed in a phased manner as perquisites currently available to them are withdrawn and all real estate providing housing to public servants is auctioned.
* Quotas should be abolished. Other institutional arrangements and procedures should be drawn up for helping the disadvantaged groups in society, without seriously impacting upon the quality of human capital available to the public sector.
* Hidden subsidies should be phased out and replaced, wherever necessary, with transparent procedures under which grants should flow directly from the budget.
Over the years Pakistan's tax system has evolved in response to the exigencies of the government's revenue needs and the pressures exerted by different lobbies. The attempt to use the taxation system to serve a variety of social and economic objectives has created distortions and made the structure rather complex and non-transparent. It has thereby weakened its potency as a revenue operation instrument, while adding unnecessarily to costs. There is, therefore, an urgent need to develop an equitable system of taxation, by:
* Taxing incomes from all sources equally; * Quickly phasing out geographical and sectoral tax and duty exemptions; * Taking immediate steps to improve the documentation of the economy; and
* Placing greater focus on the collection of taxes by withdrawing political support to persistent tax evaders, by modernizing tax administration and by ensuring better enforcement, involving heavy fines on evaders, without discrimination.
A future to look forward to II
By Shahid Kardar
The government has taken some major steps to make the industrial sector more efficient and competitive, so as to ensure that the domestic consumer does not continue to be penalised.
The incentive structure should focus on the export sector and should promote enterprises in the high-tech and high value-added sub-sectors of industry and services and those making innovative efforts. Other policies for the industrial sector should include the following:
Availability of raw materials and intermediate goods at world prices should be ensured to the export sector.
The efficiency of industry should be increased through a credible exit policy that facilitates the closure of less efficient enterprises. In this regard foreclosure laws need to be made more effective to enable banks to effect speedy recovery of loans from defaulters.
The health of industry should be improved through the consolidation of inefficient enterprises by giving tax reliefs on earnings of financial institutions derived from services rendered in connection with mergers and acquisitions.
In the foreseeable future the public sector development programme should lay a lugh priority on the speedy development of recently developed gas fields Qadirpur and Kirthar.
To achieve universal primary education by the year 2005, allocations for education should be protected through a constitutional amendment whereby not less than 5% of GDP should be earmarked for this sector from the year 2000, and not less than 10% of the GDP beyond 2010.
Inefficiencies, corruption and lack of accountability of public servants results in the absorption of a lot of resources by the systems for social service delivery. Only a minuscule amount percolates to the intended beneficiaries. These leakage's can be checked and need-based services affordable to the target population can be provided if decision-makers work in close contact with users, and thus be exposed to
more effective scrutiny and greater pressure to deliver services.
The institutional structure at the grass-roots level should be based on the principle of accountability of the service providers to the beneficiaries of these services. This objective of accountability of service providers can be achieved through an institutional involvement of the communities in project identification, in the planning, design and citing of services (like education, primary health care, drinking water supply and sanitation), and in the selection, appointment and salary disbursements of the local functionaries responsible for the operation and maintenance of facilities. There are some successful examples of the participatory approach, like the Aga Khan Rural Support Programme, the Orangi Pilot Project, the Citizen Police Liaison Committee in Karachi, that can be replicated.
Accountability can only be demanded by those holding the purse strings. Therefore, mechanisms should be designed for the flow of funds directly to the community-based organisations (CBOs). Also, to check the leakage of funds, and in the interest of greater accountability, it should be mandatory that information be made public about works executed, the budgeted expenditure and the actual expenditure incurred, say by displaying this information on the walls of the local mosque.
In conclusion, let me name the country discussed in the passage, whose people, led by a capable and dedicated leadership, transformed itself in a short span of 40 years. The country is Japan. To reiterate, contrary to popular belief, the path to growth and prosperity no longer requires long years of pain and toil. Thanks to technological progress, the lessons learned from the experiences of other countries and the host of instruments available for accelerating growth, it is possible to telescope decades of progress into a few years. Today, it is possible for a country to leap-frog several stages of development.
Not long ago the grinding poverty of developing countries was attributed to the lack of capital and savings required to put the growth process into motion. But now, as we all know, capital is no longer an overriding constraint. The high mobility of capital has made it possible to access the savings of the entire world, provided the domestic system is fair, equitable and merit-driven and ensures that all are equal before the law; the policy environment is right, the incentive structure is attractive enough for private capital and basic skills are available to utilise this capital efficiently. And even for developing these skills we do not have to wait for decades to educate the nation.
It is possible to create islands of excellence so that a sufficiently large body (just absolute numbers rather than proportions would do to get the process underway) of high-quality engineers, computer scientists, researchers, business administrators, accountants, economists, etc., is produced with the necessary skills and expertise to be harnessed for broadening and deepening the infrastructural and industrial base. The task of raising the national rate of literacy and ensuring the availability of good-quality universaV basic education can be initiated simultaneously so that the process of growth can become self-sustaining.
Concluded
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