Is RGST the only solution?

Startling disclosures by Wikileaks, though, have put the Reformed General Sales Tax (RGST) on lesser priority of public debates; yet, the issue cannot be overlooked as it carries the potential of having serious impact on political economy of the country.

Rational and spirited arguments are being given in favor and against the RGST. Some say it will add to inflation and others claim that it is necessary to bring people in the wider tax net and RGST is meant to fulfill that objective. If RGST’s purpose is only to document the economy and not the revenue collection per se, then the rate could be suggested @ 10%. Had it been so, the idea of documenting the economy through RGST could be sold to the nation effortlessly and tastefully. But that is not the case in reality. Fact of the matter is that government is cash-starved. IMF’s assistance depends on implementation of RGST with stiff commitment otherwise the Fund may delay the release of assistance and functioning of government machinery may face serious troubles. Against government’s argument for more documented economy, the counter argument is that instead of widening the tax net, it will burden those that are already paying the taxes. Heavy opposition from the political parties, particularly those in the coalition government, coupled with lack of effective collection mechanism, is perhaps a true reflection of public views against RGST.

Government can negotiate this conditionality with IMF provided it brings honesty and financial discipline in its own working. From 1998 to 2001, Musharraf regime was running the affairs of country with only 10 ministers and without any nostalgic feelings. The current government has an army of around 40 ministers and 17 state ministers and their performance on ground is highly questionable. The money spent on the maintenance of ministers and state ministers could be saved to off-set partly the adverse impact of RGST. It was surprising that recently two more ministers have been added despite the fact that larger group miniseries is causing a heavy burden on national exchequer.

The larger cabinet has not been able to function effectively. In fact, it has raised the standards of corruption to new levels. According to Transparency International, the average expenditure on bribery/household is Rs 10,537 per annum. Based on a population of 169.58 million and 8 members/house, the cost of bribery works out to Rs 223 billion; an increase of 11.37 % from 2009 which was Rs. 196 Billion. According to an estimate, the amount of tax evaded is in the range of 50 to 60 billion rupees. If the government can plug the points of corruption and reduce the size of ministries to at least half, majority of the financial woes of the government can be solved without such conditionality.

Mounting budget deficit is also a major cause of concern, although the government is directed by IMF to curtail budget deficit at 4.7%, economist fear that with the going trend, it will be in the range between 6% to 6.5%. It is highly debatable that in this situation, increasing tax revenue will not benefit the public at large, but the fear is that the additional money will be siphoned off due to massive financial indiscipline. Luckily, international oil prices have recently come down from over $80 per barrel to around $78 per barrel. This phenomena, if continues, will be a bit of relieve on the current account, but increase in the inflationary pressure from a manageable 10% over 15% coupled with a decline in the economic growth from expected 4.5% to current 2.5% might push the country in the negative real growth trajectory and coming out of this situation will require massive revenue generation and business friendly reforms, particularly in the area of agriculture tax, privatization and introduction of Code of Corporate Governance in the State Owned Enterprises.

In conclusion government must focus on reviving businesses that are already affected due to energy crisis, reducing the cost of doing business, and combating corruption. Pakistan is certainly market economy, once businesses have confidence in government policies that are providing a level playing field, jobs will be created resulting in revenue for the exchequer.

Positive Side of Floods

Although Pakistan is still reeling in sprinting waters of the worst floods, that is only one side of the story. Every cloud has a silver lining and the floods, having claimed many lives and caused displacements and destruction, have also brought many opportunities that our nation can leverage. First, it is an opportunity afforded to us by nature to ponder and reflect upon our past policies related to water conservation and building of water reservoirs. If we don’t awake and reflect NOW, then when will we?

The floods are a wake-up call for the entire nation to come out of political agendas and start thinking how to build water reservoirs that can be channeled to create energy and irrigate fields. We are an energy-starved nation and will create electricity only if we put wanton waters on a tight leash. Nations get united in calamities and catastrophes and which bigger calamity or catastrophe we still wait for? Is this the last flood? Nobody can say. What if next monsoon rains repeat the same behavior?

Second, floods distribute large amounts of suspended river sediment over vast areas. In many areas, this sediment helps replenish valuable topsoil components to agricultural lands and can keep the elevation of a land mass above sea level. In the disguise of destruction, maddening waters bring nutrients and micronutrients which our lands desperately need to enhance per acreage yield. The Indus River will refresh and reshape its river bed and may transfer rich sediments to the canals linked with it. Floods, in their flow, shake up the soil to a sufficient depth, oxygenate it, empower its richness and restore its strength. Lands, severely struck by floods, will produce more crops in the next seasons.

Many areas of Pakistan are facing problems with water salinity and acidic potable water. Reservoirs of flood water will help push salinity and acids to a sufficient depth into the water beds. The potable water will be purer and more hygienic in these areas. The water beds in northern Sind and southern Punjab provinces are losing their levels. These water beds are slipping downward incessantly. The recent floods will help increase the surface of water beds to the required level.

Third, another area where floods have played havoc is the livestock. According to estimates, over 100,000 cows, buffaloes, goats, sheep, horses, camels and donkeys have been lost and 3,000 fish farms and 2,000 poultry farms destroyed across the country. For economic empowerment, besides providing shelter, there is a greater need of livestock and therefore it is an appropriate opportunity to import best breeds of animals and distribute them among farmers.

Fourth, with destruction of infrastructure such as roads, bridges, telephone and electricity poles, there is a bright economic opportunity for sectors related to construction like cement, bricks, paint, iron, etc. Internally Displaced People (IDPs) whose main livelihood hinged on agriculture or livestock could find immediate jobs in the construction sector giving them temporary relief from unemployment caused by loss of crops. The floods are providing bright opportunities of consistent employment for unskilled labor over the next at least five years.

Fifth, the irrigation sector of Pakistan was already in a shambles before the floods. The slippage of water upstream and inability to reach the needy areas was a hallmark of the system. According to irrigation expert, Idrees Rajput, “Water levels in Sindh rose to similar high floods in 1992 and 1976 but the impact was not as huge. This time, flooding has been exacerbated only due to decades of government corruption and neglect (in irrigation departments).” That is a great opportunity to raise and re-build the entire system of irrigation utilizing the latest technologies. Private investments can be wooed to build and operate the systems.

No doubt the floods have made a deep impact on the country’s resources but at the same time there are opportunities in many sectors. To safeguard the interests of young and upcoming generations, the need of the hour is to absorb this catastrophe with patience, wisdom, good planning and implementation instead of continuous squabbles!

Nightmare of Post Floods Land Management in Pakistan

Living in the modern age of computerization and digital identification, Pakistan still languishes in an era of stone-age Land Management System. According to a study Land Administration System in Pakistan – Current Situation and Stakeholders’ Perception conducted by Zahir Ali and Abdul Nasir, the current land administration system in the country aims at land revenue assessment and tax collection for fiscal purposes. This system is structured on the traditional land registers and cadastral maps in paper formats, and their maintenance is mainly dependent on local land administrator, the so-called “Patwari”. Although the local administrator reports all changes on land rights and boundaries of land parcels to the higher level of government authorities, the maintenance and quality of these registers has always been questionable. The limited accessibility and reliability of these records restricts the operational and legal usefulness for securing land ownership as well as for carrying out reliable planning and development activities. Additionally, Privatization program of Pakistan has also suffered from this lack of clean title and property rights. The government had sold to Etisalat 26 per cent shares of country’s telecom operator in July 2005. According to a news item of 18th June 2010 because of a dispute over the legal transfer of land and property titles, buyer has been holding back payment of about $800 million of the $2.6 billion PTCL’s privatization proceeds.

The land management system in Pakistan will now be put to its ultimate test by the nature in the form of floods of the century. When the floods recede, one of the most serious after-effects will crop up in the shape of land grabbing and fake demarcations of boundaries washed away by wanton waters. While In Punjab and Sind, the computerization is in bits and pieces, most of the land record in Khyber-Pakhtunkhwa was still being maintained manually. In cases where the record has been computerized, the land demarcations can be verified by retrieving the data but it would be next to impossible to stop land grabbing of areas with damaged or lost record. The demarcation of land holdings of farmers, erased by the flood water, would be difficult to locate, especially in case of small holding, in all the affected provinces. Venal minions of revenue department will have hey days in connivance with unscrupulous and conscienceless land-grabbers. 

'Do or Die' situation will evolve for the farmers whose livelihood mainly hinges on the small tracts of land they hold. Before starting the rehabilitation and resettlement process, the revenue departments have got to act at meteoric speed to remove these fears and take immediate concrete steps so that land grabbers find it extremely difficult to rip off the already devastated farmers with their piercing fangs and talons. 

One of the major problems that will emerge in Sind is that in 'Katcha' area where most of the people move from one place to another without having any proper land ownership documents. The government must take this task seriously and provide these people some documents to confirm their legitimate ownership. However, the areas that are fortunate enough to have been safe from floods, it is expected that the land record would be safe. So, no excuses should be allowed to play for drawing fake lines of demarcation. 

To ensure transparency in the entire process of land demarcation, government must constitute committees consisting of peoples’ representatives, retired judges and social workers are known for their honesty, integrity and uprightness. 

In case, the respective provincial governments failed to rise to this humongous challenge thrown by the nature, there will be deluge of civil litigation, feuds and murders down the road. The judiciary and civil administration is already over burdened. An injudicious and myopic handling of the land record phenomenon will unfold into situation that our generations will rot in the courts to seek justice which will remain will-o'-the-wisp for the common man for centuries.

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Fighting War with Raging Waters: Bad Governance is a Big Stumbling Block

According to UN report, the furious floods Pakistani nation is facing have caused more damage than the Asian tsunami of 2004 and Pakistan’s earthquake of 2005. So far, around 2000 lives have been lost and 20 Millions of people are homeless. They are heartbroken and hopeless not only by raging floods of apocalyptic proportions, but also due to lack of disaster management and support from official corridors. This calamity has come after the earthquake of Haiti coupled with other events and there continues to be worldwide recession. At the same time, not to surprise of many, due to poor credibility of the government for not maintaining the transparency and governance in managing the aid given in earth quake of 2005, majority of the donors, rightly so, are channeling their limited aid through United Nation, The Red Cross and the Red Crescent so that it reaches the affected areas. Pakistani media quoted last week ERRA (Earthquake Reconstruction & Rehabilitation Authority) official that “they are unable to carry the task of building infrastructure due to non release of funds by the government”.

One of the organization studied the 2005 earthquake relief, showed that the most money flowed to the districts least affected by the earthquake whereas the most damaged areas received less rehabilitation support. All this happened despite the fact the government, military, and international donor community spent a great deal of time and effort reassuring people that relief funds would be spent in a transparent and accountable way. Yesterday UK’s Guardian Daily reported that 300 million pound sterling aid given for earth quake was diverted to other projects. Though Finance Secretary denied use of funds for other projects, his ministry has not given the detailed account of the amount spent from the donors’ aid and the reason for not building the promised new Balakot City when fifth anniversary of the earthquake has just passed, Thus, there is a growing mistrust on the part of donors that bad governance prevalent in Pakistan will miscarry the utilization of funds. The donors’ suspicion is two-pronged: either the government is incompetent or lacks character to deliver. Whatever, it is, the final victims are those who are already being marauded by raging waters unleashed by nature. 

Due to malaise of bad governance, the Pakistanis at large are giving donations to NGO’s such as Edhi and The Citizen Foundations and several others with proven track record. At the same time there is continued confidence in sending “in kind contribution” to Pakistan Armed Forces who besides carrying out massive rescue operation are involved in distribution of relief goods. In these testing times there is also growing mistrust amongst those running the federal government and the provinces, On Friday last, Khyber-Pakhtunkhwa (North West Frontier Province) Minster the PM for diverting the aid to his city Multan. The feudal and farmers in Sind are accusing those in power that they have managed to save their lands from floods. This kind of feeling and statement are alarming and will create further divide between the provinces. The calamity is so huge that the Government of Pakistan will need to rework all its development and non development budgetary expenditure and in doing so, the leadership of the country must not think of provinces but of Pakistan and allocate the resources where needed.

According to the UN paper titled “What is Good Governance,” international donors and agencies now view governance in any country only in terms of “bad” or “good”; there is no in-between. Bad governance represents “one of the worst features of society, and a major cause of its dysfunction.” A government is the prime actor in good governance but not the only one. There are other actors, such as political parties, military, media, NGOs, religious leaders, finance institutions, business leaders and corporations. Good governance occurs when all actors involved in it are facilitated by government to play their respective inherent or constitutionally assigned roles to the full extent. The primary responsibility for good governance, however, remains with the government, which is something no administration can abdicate, or pass the buck on. Strong and well-functioning institutions not only encourage good governance but also sustain it against corrupt elements. But, one of the biggest reasons for the country’s consistent governance disasters is the absence of strong institutions.

In the above context, it is therefore heartening to learn that at the suggestion of former Prime Minster Nawaz Sharif, the sitting PM Gilani has agreed to set up a “National Commission of highly respectable and credible countrymen to ensure the money people of Pakistan and foreign governments contribute for the rehabilitation of flood victims is spent transparently. Now the $ 64 million question is as to when this commission will start its work and will it function independently based on good governance principles and support from private sector or on the pattern of ERRA, another organization namely FRRA (Flood Reconstruction & Rehabilitation Authority) will be created.

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