development
Open and shut case?
A local government can function only if it becomes capable of generating its own revenue
By Dr Noman Ahmed
If one goes by the announcement made by the Prime Minister during October last year, the year 2011 should be the election year for local bodies. It is hoped that the chief executive of the country and other power-wielding interest groups will not go back from their commitment on this count.

Cobweb of spy network
Raymond Davis case basically has reinforced what has been known even before; the manipulative role the CIA and the US security establishment play all over the world to secure its interests and pursue its objectives
By Imtiaz Gul
Let us first briefly recap the circumstances surrounding agent Raymond Davis to put things in perspective. The Guardian, London broke the story and leading American newspapers and tv networks, including the Washington Post and the New York Times, followed suit. They all broke their silence, and, quoting US officials, said Raymond Davis worked for the CIA as a security contractor.

A moment to act
The big question is how to avert Mr. Cohen’s premonition about approaching total state failure and consequent anarchy
By Tasadduq Mukhtar
Stephen Cohen’s recent article, "Pakistan’s road to disintegration", which makes a chilling assessment of today’s Pakistan and asks the US to brace for its possible breakup in 4-6 years, has been spotted by our media. In the context of extraordinary political and natural disasters in Pakistan over the past six years or so, the report only strengthens widespread concerns about state failure in Pakistan. The shock is just in the imminence of the disaster forecasted by an American authority on Pakistan.

Pakistan’s current foreign debts have crossed $55 billion mark or equivalent to Rs4675bn. This amount is apart from Rs5500 billion (or Rs5.5 trillion) loans taken from different domestic sources. So, the total debt, both external and domestic, has crossed Rs10 trillion figures.

With these figures each Pakistani is under debt in the range of Rs60,000 and paying the price of those loans that have never reached to him/her. Though the per capita rate of loans is slightly lower than other highly indebted countries of the world, ironically no clear investment or income plan has been made to guarantee repayment of these loans or rid the country of these debts. The interest rate of Rs10 trillion, which is almost 70 percent of the GDP, is being paid with new loans.

The domestic debt is increasing with at a fast pace. Domestic debt hit the mark of Rs5.50 trillion in December 2010 because of the present government’s borrowing policy. In December 2009, the domestic debt/liabilities stood at Rs4.447 trillion rupees which increased to Rs5.5 trillion by December 2010, showing an increase of Rs1.53 trillion in just 12 months.

Out of the total $55 billion foreign debts $46 billion are from public and publicly guaranteed loans and $8.9bn of International Monetary Fund (IMF). The country had paid $1.13 billion loan in 2007-08, $2.5 billion in 2008-09 and $2.3 billion in 2009-10 along with the interest worth $982.6 million, $872.9 million and $775.4 million, respectively.

During the last two years, the World Bank (WB) and Asian Development Bank (ADB) had provided $47.2 million grants and a loan worth $4.2 billion to Pakistan. According to government sources, these amounts were disbursed in power, agriculture, infrastructure, education, health, poverty alleviation and environment sectors.

Pakistan has so far received $1.68 billion aid and loans out of $2.33 billion committed by the countries after 2005 earthquake, which had hit most parts of Azad Kashmir and Northern Areas and claimed around 73,000 lives. The country has yet to receive $651 million as the amount was with donors and would be provided to ERRA through withdrawal applications. Similar situation exist for the pledged amount for relief, recovery, and rehabilitation after 2010 floods and till to-date only a fraction of this amount has been received.

Foreign debt stands out as the major problem of Pakistan’s economy with lowest growth rate among under-developed countries. In October 2010 State Bank of Pakistan reported that country had to pay loans $1.669 billion as debt servicing (interest) over the first quarter of fiscal year 2010-11. Scale of debt servicing increased by over 49 percent as compared to debt servicing made over the same amount of not too long ago.

In 2008, financial crises developed in Pakistan and forex currency market reserves almost finished, resulting from high valuation on oil. In those days the country had to borrow loan from IMF as several friendly countries refused to extend any major financial support. The IMF agreed for $11.3 billion but attached harsh conditions for reforming the economy. General Mushrraf’s regime secured that loan and signed on the dotted lines without consulting political leadership or evaluating the implications of that loan.

The price is very high and the present government is still struggling to meet those conditionalities that include higher electricity tariffs and removal of subsidies from essential services. Now the country’s capacity to repay external debt is doubtful as any uncertainty in oil prices could erode the whole reserves.

The problem of rising debt is rooted in ways our institutions, ministries, and rulers work. Among several systemic reasons of this rising debt is low revenue receipts, increase in government spending, and misplaced economic priorities. Over-spending is instutionalised in most of the state and government ministries and departments.

Most of the public institutions are being run on subsidies and none of the institutions has the ability or desire to meet their own expenditures. The government is providing an annual subsidy of Rs400 billion to different ministries and institutes. The treasury is facing an additional burden of Rs14 billion due to 12 percent increase in military pensions in 2007-2008.

The system of applying for more loans is not under any democratic control or scrutiny and is still under experts and bureaucratic controls, thus no disciplines or filters are applied anywhere in repayments or applying for more debts. Who takes care of the conditionalities attached to such loans? Who decides? Who evaluates these conditionalities and their implications on the society and economy of the country? All these and several other questions are unanswered.

In many cases of loans from WB, ADB, IMF and other consortiums the conditionalities are harsh and have serious implications on country’s economy and politics. People of this country need to know all the details as they are the one who ultimately pay back these loans though, one can argue, not a fraction of this money is spent on projects of their interests.

External factors also cause problems, such as international oil prices. There is an acute energy crisis in Pakistan and it depends upon the oil-powered or thermal power stations for generating electricity. If oil prices again raise it’ll cost a higher price where there are chances that reserves will erode quicker.

The problem with Pakistan is that while it has internal resources to bridge the budgetary gap tax collection system is in a bad shape and tax to GDP ratio is lowest among under-developed countries. This is not the way to run an economy because fiscal slippages are the root cause of recurrent bouts of macroeconomic instability, high debt levels, excessive bank borrowing, a crowding-out of the private sector, inflation and a fragile external position.

Pakistan’s’ economy has mostly been dependent on foreign debt. Now it’s time we become less dependent on debts by ensuring our revenue in such a way that no need arises for foreign debts in the near future. It is easy to walk into debt but difficult to crawl out of it.

The civil society has demanded for Pakistan’s debt cancellation because it is suffering from disasters, economic recessions and heavy cost of its involvement in war against terrorism. These factors are legitimate reasons for a country to demand debt write-off but it seems the developed world is not willing to give this country a chance to grow economically and clear its internal problems.

The cost will be bigger in case these logical demands are not accepted by our governments or international donors. Recent flood damages will also cost heavy toll on the ailing economy and will reduce country’s capacity to pay back its loans.

Similarly, the country needs strong political leadership that should decide to run the country according to the aspirations and priorities of its people and not on the dictates of external forces.

The failure of Federal Board of Revenue (FBR) in widening the tax base and improving tax-to-GDP ratio - despite having generous foreign funds and advice from IMF and World Bank - proves beyond any doubt the ‘efficacy’ and ‘usefulness’ of this federal revenue authority.

The official claim of average annual growth of 12 percent to 14 percent in tax revenue collection in real terms, after taking into account inflation, is in fact in the negative. We have been repeatedly highlighting in these columns that this so-called growth is being achieved by shifting the burden of taxes on the poor by relying more and more on indirect taxes, even in the garb of income tax.

The most disappointing area of FBR’s reforms since 2003 - the year World Bank funded Tax Administration Reforms Programme (TARP) started - is failure to tap the real tax potential by not bringing the rich and mighty in the tax net.

The strong agriculturist lobby - 5pc landed aristocracy - is not paying any personal income tax on their colossal income from land. The urban landed class (rich property owners) earning millions as rental income is taxed at the reduced rate of 5 percent to 10 percent. Because of these two factors, we have failed to improve tax-to-GDP ratio (presently just 9.5pc) despite the imposition of all kinds of regressive taxes and unprecedented high-handedness by tax officials.

In the financial year 2009-10, FBR failed to achieve the target of Rs1600 billion - it just collected Rs1328.6 billion. It could have collected Rs4rillion in that year if exemption (unjustified) was not extended to capital market, and rich absentee landowners were taxed on their wealth and income. During the last many years, collection could not cross the figure of Rs1.5 trillion whereas actual potential is not less than Rs4-5 trillion. It clearly indicates that the existing tax machinery is not capable of tapping the real tax potential - main reasons being corruption and inefficiency.

The policy of squeezing the existing taxpayers to the maximum extent and not bringing into tax net at least 25 million potential taxpayers is the real issue that remains unaddressed. It is an admitted fact that the main collection of FBR is from import-based taxes and withholding of money at source from people who do not even have taxable incomes. Revenue target of Rs1600 billion for current year, as we mentioned earlier in these columns, is under-fixed as real revenue potential is four to five times more.

The real tax potential can only be tapped by forcing the rich to pay taxes according to their ability. There is a consensus between official and independent quarters that Pakistan needs to strive very hard to come at par with many developing countries in achieving a desirable tax-to-GDP ratio of over 25pc (presently it is dismally low at 9.5pc).

Some radical changes like reduction of exorbitant sales tax rate, equitable tax base and simpler and fairer tax procedures are required to encourage investments and savings. The government needs to re-prioritize its tax goals while preparing budget for fiscal year 2011-12 to improve tax-to-GDP ratio, attain better compliance and collections, coupled with rapid industrial and business growth.

It is a tragic fact that successive governments - military and civilian alike - have showed least concern to tax undocumented economy and benami transactions. The mighty sections of society are engaged in these transactions and FBR, being their handmaid, has neither the will nor the ability to tax them. Multinational companies, through abusive transfer pricing every year, avoid billions of rupees in tax, but FBR instead of recovering it, gives them awards for "excellent performance", thus exposing the effectiveness of FBR as an institution to tap the real tax potential of the country.

It is an undeniable fact that there prevails massive evasion of customs duty and sales tax coupled with non-reporting of income in Pakistan. The government must tackle the issue of tax evasion, avoidance and under-reporting on a priority basis.

Taxpayers should be given tax benefit/incentive which would help promoting tax culture, documentation and collection of taxes without raising hue and cry from any segment of the society. A well-thought-for incentive scheme is required that should not only check leakages in tax collection, but also encourage the people to file their income tax and sales tax returns.

The twin goals of expanding tax base and combating tax evasion should be attained simultaneously. Present massive evasion in customs, income tax and sales tax can only be tackled through implementing Tax Intelligence System (TIS) which is capable of recording, storing and cross-matching all inflows and out flows.

FBR must develop an online database and registration mechanism for registered persons. It is suggested that the government in the coming budget, after levying VAT at a reduced rate of 10pc and abolishing all exemptions, except on books, eatables and medicines, announce the following scheme:

Anybody who pays VAT in a financial year should be entitled to claim refund of 20pc of the amount paid. The procedure for claiming refund should be simple i.e. he should send invoices to Central Tax & Refund Depository, which would authorise refund from the nearest branch of National Bank, after verification of genuineness of the invoice (by checking sellers’ registration number). In this way FBR can develop data base about sales and services provided by all registered persons and then cross verify the same with the particulars declared by them in their VAT/income tax returns; or alternately

Any person who pays VAT may be allowed to claim credit say 10pc against his income tax liability by producing all VAT invoices obtained by him throughout the year. Detailed mechanism could be devised to cater for the situation where income tax liability is less than amount of credit of VAT.

In this scheme, the people may choose not to claim full credit of VAT paid by them in the event of their disability in justifying sources of their full expenses. To overcome this situation the government could announce immunity for 3 years from scrutiny of their expenses declared through VAT invoices. This scheme would encourage people to obtain VAT invoice which is presently not being insisted upon, for each transaction.

The State must remember that if taxation is viewed as being unfair or favouring some chosen ones, it remains counter productive in the long run. Special efforts and rational policies are needed to restructure the tax system and restore public confidence in the tax officials. Even a good tax system would not work if the prevalent negative mindset of the tax official persists. There is an immediate need to improve both the system and the human fabric that controls it. The tax system must provide:

"Rule of law;

"Principles of proportionality, efficiency, effectiveness, flexibility, continuity, reciprocity, certainty, fairness and equity

"Tax harmonization

"No double taxation or intentional non-taxation

"Non-discrimination

"Strict anti-tax evasion rules

FBR instead of performing its prime duty of collecting revenues where due but avoided, is busy in legislating laws-issuing notifications, circulars and what not. The root cause of the problem is FBR’s unwillingness to perform its duty by indulgence in activities that fall outside its mandate or domain.

On the directions of foreign donors, who have given loan of millions of dollars for tax reforms (sic), FBR has assumed the role of legislator and policymaker, which is highly lamentable. FBR should be an autonomous body insulated from political, financial and administrative pressures, but in no way should it be permitted to assume the role of legislator and policymaker, which under the Constitution is the sole prerogative of the people of Pakistan through their elected representatives. The Parliament should devise, through democratic process, a rationale and acceptable tax policy after taking input from all the stakeholders and experts in the field. This alone can help in bringing more and more people of tax roll leading to respectable tax-to-GDP ratio.

Strangely enough, livestock and dairy development department in Pakistan has no powers to authorise and monitor veterinary drugs and services, which is obstructing hassle-free delivery of these services and creating complications for the stakeholders, primarily farmers.

Though the livestock department is better equipped, trained and capable of doing the work well, it has been denied these powers and the sector is being supervised by the health department at both federal and provincial levels.

At present, there is no separate veterinary drugs’ registration and regulation authority in the country. The health department issues licenses to animal druggists, monitors veterinary medicines and services and checks the sale of counterfeit veterinary drugs but it obviously cannot do that efficiently not only for being overburdened with responsibilities but also for being not properly trained for the purpose.

There is a dire need to shift the onus of registration and regulation of veterinary drugs and services to its parent and concerned livestock department rather than assigning the task to an already overburdened health department. The move will ensure efficient and effective delivery of veterinary drugs and services and improve their monitoring and reporting systems.

President all Pakistan Veterinary Medical Council Muhammad Arshad, says "Departments that have been formed for a purpose should be dealing with their respective task and not vice versa as is the case here. The health department officials are simply not qualified and lack the required expertise to oversee the veterinary sector properly. These responsibilities should be handed over to the livestock or food and agriculture department,’ he says adding, "There are highly qualified specialists with the livestock department who know the drugs and the nature and requirements of veterinary ailments. They will ensure effective monitoring of the sector."

But, unfortunately, the health department has taken advantage of its clout to first take and later maintain the sector under its ambit though it is utterly unjustified if considered from the point of merit and farmers’ welfare," he says.

Dr Ghulam Muhammad, a veterinary expert, says a separate veterinary drugs’ authority under the livestock department was urgently needed and the government should legislate for the purpose. "The posts of veterinary assistants can be upgraded and they can be authorised to ensure the availability of veterinary drugs and services to farmers. They are trained and possess the requisite expertise for working in the sector and will be dealing it better which will help farmers," he says.

"Health inspectors or officials may be competent persons but only a veterinary expert knows well if a particular animal-specific drug or equipment is permissible or otherwise," he argues.

"At present, substandard livestock drugs are openly sold in the market. To add to farmers’ woes, there are countless livestock quakes providing unauthorised diagnosis, therapy and prescription services to farmers with the result that the livestock suffers from ailments like low productivity of milk and meat," Dr Ghulam informs.

Arshad says there are over 100 lawful veterinary manufacturers and about 200 veterinary drug importers in the country. "Illegal manufacturers are in thousands and are supplying animal drugs under the garb of herbal drugs. There are laws to stop the practices but health department officials have done nothing about it," he says.

Director General Livestock and Dairy Development Khyber Pakhtunkhwa, Dr Sher Muhammad, says his department intended to legislate and request the government to hand over the responsibility of checking and monitoring the veterinary drugs and services to the livestock department. "Devolution of departments to the provinces is underway. When this process completes, we will come to know which components of the department are assigned to the provinces. Then we’ll prepare legislation and request the government to pass it from provincial assembly," he says.

Haji Naimat Shah, vice president of Anjuman-e-Kashtkaran Khyber Pakhtunkhwa, is unhappy that manufacturing and selling of substandard veterinary drugs and unauthorised services to farmers continue unabated.

"Weak coordination and communication between the livestock and health departments cause delay in taking actions against the culprits selling, for example, fake veterinary drugs and working as animal doctors unlawfully", he says.

While several veterinary drugs require freezing temperatures to maintain their efficacy, they are kept at normal temperature for lack of refrigerators and air-conditioners at the stores.

The livestock and dairy sector accounts for 52 percent of agriculture, 11 percent of gross domestic product, around 9 percent of exports, and feeds about 50 to 60 million people in the country. It also accounts for 51 percent of provincial GDP in the Khyber Pakhtunkhwa.

More than 90 percent livestock is owned by small farmers and it is their main source of income. By patronising and developing the livestock sector, their financial position can be improved which will push them away from extremist forces in the country.

Even though total veterinary drug sales exceed billions of rupees per year in the country, it covers just about 10 percent of the total livestock industry potential in Pakistan. With a very large livestock population and progressing poultry industry, there is great potential for investment in the veterinary pharmaceuticals.

Officials of the health department agree that there is a need to do more work on the subject to improve the efficiency of the livestock department. Drug Act of 1964 would have to be amended to give the livestock department more powers. "We should think and plan about increasing the capacity of the livestock department as the health department might lack the required expertise," says a health official who does not want to be identified.

I admit it. I’m addicted to twitter. Like many others, the first time I heard about this ‘social networking tool’, my initial response was, "What’s the point?"

It was in spring 2006, at the end of a journalism fellowship in the USA. "Try it," urged Jeb Sharp, a radio journalist. "It’s cool. You can update friends about what you’re thinking or doing and you have to do it in 140 characters or less."

Out of curiosity, I made myself a twitter account. The whole thing seemed a bit silly. The twitter icon is a little blue bird. The messages you post are called ‘tweets’. It all sounds very fluffy and twittery. And why create a twitter account if you have facebook?

So my twitter account just sat around until last year. I would occasionally post the odd tweet but what really sucked me into it was something my techie friend, Jehan Ara introduced me to, while we were waiting to board a plane at Karachi airport. We had our laptop computers and wi-fi access, and I saw this application on her screen. As she explained it, suddenly, twitter made sense.

It’s called Tweetdeck. You can download it to your computer and it opens in its own browser-like window. Every time someone you ‘follow’ posts a tweet, or tags you, a little sound alerts you (If you find it distracting you can de-activate it). The window, with several columns, is like a long excel document; you can scroll left or right. One column might contain your timeline — your tweets, and those posted by people you follow. Another column might be dedicated to ‘mentions’ so you can see who is re-tweeting or tagging you with something for your attention. One column can have direct messages that are private and don’t appear on your timeline — only people you follow can DM you.

Once I could see which of my posts had been re-tweeted, and who had messaged me, twitter became more interactive and interesting.

I learnt that you can set up columns to follow something you’re particularly interested in, say the floods that hit Pakistan barely two months later. I set up a column for the ‘hash-tag’ #Pkfloods, collating all the posts hash-tagged #Pkfloods. This proved to be a gold mine of information and a great way to coordinate relief efforts.

When the Egypt uprising began, ‘tweeps’ (as twitter folks are called — yes, I know, it’s silly) following #Egypt or #Jan25 — the date on which the uprising started — were getting blow by blow accounts of happenings there often before the news channels reported them. These days, it’s #Libya.

Not surprisingly, the most ‘trending’ topics usually have to do with mindless entertainment — like the teen idol Justin Bieber or whatever. But as I write this, #Gadafi is also trending as #jan25 was some days ago.

So what? Well, it’s another way of disseminating information, faster and more interactively.

Social networking or tweeting will never replace on-the-ground activism, but in today’s digital world it can certainly trigger off that activism, as Egypt showed. It would be unfair to dismiss what happened there as a facebook or twitter revolution because even when Mubarak turned off all internet and cell phone connections, Egyptians kept pouring into Tahrir Square until there were so many that the dictator had no choice but to leave. But twitter was a powerful tool of getting the word out. Even the major news channels quoted tweets from Tahrir to give viewers a flavour of what was happening.

Politicians and government functionaries on twitter are more accessible and accountable. Punjab Governor Salmaan Taseer was a wonderful presence on twitter, with an abundance of wit and political insights. His twitter account is kept alive and so is the issue of his murder, to a far wider, global community than if the issue was restricted to local news channels.

My colleague Vidyadhar Gadgil of Himal Southasian posted a cartoon to his facebook account, with the comment: "As often before, Dilbert makes things clear. Now I know why I sometimes log on to social networking sites — it has become a job requirement."

If one goes by the announcement made by the Prime Minister during October last year, the year 2011 should be the election year for local bodies. It is hoped that the chief executive of the country and other power-wielding interest groups will not go back from their commitment on this count.

It is important to note that many key issues have to be addressed before the stride towards an electoral process is made. The provinces, by and large, show a general dissatisfaction towards the local government system that was installed through the moribund National Reconstruction Bureau in 2001. Balochistan government decided to undo it in May 2010 through a provincial bill.

In Khyber Pakhtunkhwa, the same political environment is set. A senior provincial minister has opined that experimental local body systems are routinely devised by dictators.

Sindh displays a different power equation. MQM, which is a coalition partner in the provincial government, is an ardent supporter of an autonomous and potent local government system. The party has one full section of its previous election manifesto which underpins its commitment to urban development.

In contrast, the PPP is interested in saving more powers to the provincial administration. Gilgit Baltistan has yet to frame a valid statute to launch a local government system. And the Punjab administration is cautiously weighing its options about the future complexion of local government in the province. Despite the conservative outlook pertinent to local government, its importance cannot be overlooked in the wake of some fresh emerging realities.

At present, hoards of institutional arrangements are at work to undertake development work. Provincial departments, donor-supported new institutional outfits, directly extended projects/programmes by the donor agencies and leftover federal or autonomous bodies are some examples.

Despite the well-intentioned approaches of respective managements, the outcomes seldom benefit the respective sector and context. For example, millions of dollars have been spent by UN bodies and allied stakeholders towards the preparation of a sanitation policy at the national level.

Expensive consultancy assignments, more costly meetings as well as consultative processes were done in the recent past. With a lack of vision and primordial understanding about local governments, the bureaucrats swiftly surrender and accept whatever is doled out to them. No local political vision of any kind exists to question the validity or otherwise of these unsustainable and costly development doses.

While the country is urbanising fast, the preparedness to deal with essential matters is quite weak. Absence of qualified and competent technical human resource is a serious issue. With the passage of time, infrastructural bodies and technical departments have not been able to train cadres of engineers, technicians and foremen that have either retired or left the jobs for better prospects.

Besides, job conditions and methods of hiring are anything but desirable. Many water and sanitation agencies do not even possesses the capacity of contract management, leave alone in-house capability of operation and management. It may be remembered that hundreds of thousands of dollars have been spent by the International Financial Institutions (IFIs) under the head of capacity-building.

Still, these programmes end up in the form of costly foreign trips, short courses in expensive overseas institutions, or a plethora of workshops and seminars abroad. In 1994-1995, the then Chief Minister of Sindh was taken to France to observe the virtues of private sector in water supply sector. What came out was a most controversial private sector participation strategy for Karachi Water and Sewerage Board aimed to selling the utility to foreign multinationals. After stiff resistance from civil society and media, the move was aborted through intervention of the judiciary.

A chronic ailment that has marred the functioning of local bodies is the inability to generate revenue from their respective sources. True, the Local Government Ordinance 2001 had prescribed several avenues of taxation to generate funds through variety of formats but they were not applied. The absence of political will, a weak taxation culture, poor capacity of tax collection and limited innovation in revenue generation are some points in this respect.

As the local governments have spread-out functions to perform, they have to be totally dependent on the federal or provincial transfers. In urban areas, the untapped resource basket is very large and diversified. Property tax, motor vehicle tax, infrastructure and many other avenues can be focused and expanded.

A true local government can only function as a potent tier if it becomes capable of generating its own revenue for its corresponding portfolio of expenditure. There should be an open debate among political parties to formulate a consensus on this vital issue of governance that is key for implementation and management of service delivery and development work.

Let us first briefly recap the circumstances surrounding agent Raymond Davis to put things in perspective. The Guardian, London broke the story and leading American newspapers and tv networks, including the Washington Post and the New York Times, followed suit. They all broke their silence, and, quoting US officials, said Raymond Davis worked for the CIA as a security contractor.

The American newspapers also explained that the US government had asked them to withhold Davis’s CIA affiliation out of concerns for his safety in prison (WSJ, NYT, Washington Post, Los Angeles Times, ABC News). Davis was essentially a security guard providing physical protection to those affiliated with the embassy and consulate, attached to the CIA’s Global Response Staff, and was reportedly carrying out "area familiarization" - basic surveillance designed to allow operatives to become familiar with their surroundings - at the time of the shooting on January 27. (Foreign Policy Magazine, Feb 22nd).

Davis has also worked for the security contracting company formerly known as Blackwater, according to US officials, and the CIA team he was affiliated with in Lahore reportedly tracked Pakistani militant groups, including Lashkar-e-Taiba, though US officials deny that Davis himself was involved in militant surveillance.

One would presume that these revelations should come as an embarrassment for both President Barack Obama as well as the Secretary of State Hillary Clinton who conveyed their concerns to President Zardari and Prime Minister Yousuf Raza Gilani and pressed for the immediate release of Davis, who they insisted was a diplomat.

The deluge of information in the US media on Monday, on the other hand, also exposed the duality of the US media - their propensity to act in cahoots with the security establishment when it comes to the US interests. It matters little, so it seems, at what cost do they all secure the US national interests. They seem oblivious to the interests of countries where these agents operate - regardless of whether they kill people or infringe upon local sovereignty or trample laws.

Now back to the cobweb of spy networks that CIA and Pentagon contractors set up in countries where the US establishment decides to operate. The revelations in the American papers that Raymond Davis had been in contact with 27 militants of Tehreek-e-Taliban Pakistan terrorists (according to The New York Times, Washington Post, Feb 21), are quite startling and certainly not unfounded; if extremely well-placed officials and a couple of private sources were to be believed. Minutes before his deadly act against two Pakistanis, Davis had held meetings with members of jihadi-looking people at a popular hang-out in the Minare Pakistan area. (For security reasons we would prefer to withhold the identity of the people and place involved).

An article in The Daily Beast by Tim Sharrock (a Washington-based investigative journalist and the author of Spies for Hire: The Secret World of Intelligence Outsourcing) offers a very instructive reading on the network of private security contractors in service of CIA and the Pentagon. Sharrock calls them the mercenaries "being hired in unusual numbers."

"The Obama administration has greatly expanded the outsourcing of key parts of the US-led counterinsurgency wars in the Middle East and Africa, and as a result, for its secretive air war and special operations missions around the world, the US has become increasingly reliant on a new breed of specialised companies that are virtually unknown to the American public, yet carry out vital US missions abroad," Sharrock writes.

It would not be out of place to mention that when a Jordanian al-Qaeda bomber blew himself up at the US Champan base in Khowst on Dec 30, 2009, two of the seven people killed were Blackwater operatives. (Although in those days the US establishment had been insisting it does not work with Blackwater any more).

Quoting observers, Sharrock fears that the widespread use of contractors for US counterinsurgency efforts in Afghanistan, Pakistan, and the Horn of Africa could deepen the secrecy surrounding the American presence in those regions, making it harder for Congress to provide proper oversight.

Sharrock says that even in Iraq, where the US has ended combat operations, the government is "greatly expanding" its use of private security companies, creating "an entirely new role for contractors on the battlefield," Michael Thibault, the co-chairman of the Federal Commission on Wartime Contracting, recently warned Congress.

Late last year, Pauline Neville-Jones, the UK’s minister of state for security and counterterrorism (and a former executive with QinetiQ PLC, a major intelligence contractor) told an audience at the Brookings Institution, Washington that "we have something of a crisis in Afghanistan partly because of the largely unregulated private sector security companies performing important roles there".

The Pentagon’s Central Command had nearly 225,000 contractors working in Iraq and Afghanistan and other areas at last count, doing tasks ranging from providing security to base support. Intelligence agencies such as the CIA and the National Security Agency field thousands more under classified contracts that are not publicly disclosed, but extend into every US military command around the world. (According to reports in The Nation http://www.thenation.com/blog/156765/not-so-secret-anymore-us-war-pakistan and elsewhere Blackwater has contracted to send personnel into Pakistan to fight along with the Joint Special Operations Command.)

This alarming context prompts questions as to whether Davis is part of networks that have been involved in "false flag attacks" on Pakistani interests such as those on the GHQ (Oct 10, 2009), three ISI regional headquarters (Lahore, Multan and Peshawar 2009-2010), the deadly attack on Parade Lane Mosque, Rawalpindi (Dec 4, 2009), and sacred sufi shrines (Data Darbar in June 2010, Abdullah Shah Ghazi, October 2010).

Most of the people arrested in connection with many of these false-flag attacks were either from Waziristan or break-aways from the Punjabi militant groups. Were these militants enlisted for acts of terror by mercenaries commissioned by the CIA or Pentagon? Are these clandestine operations meant to blow holes into Pakistan’s security apparatus and make it appear vulnerable? Are they aimed at softening and defocusing the Pakistan army by engaging it all over, and thus forcing it to change its policies?

Well, if the United States and its allies including India consider the Pakistan army as the source of problems in South Asia and Afghanistan, it would make sense for them to prick Pakistan army through private contractors wherever possible.

Raymond Davis case basically has reinforced what has been know even before; the manipulative role the CIA and the US security establishment play all over the world to secure its interests and pursue its objectives. Books such as Confessions of an Economic Hitman, Devil’s Games, Obama’s Wars offer plenty of evidence on the role of the US security establishment - for its commercial as well as security interests. And private security contractors serve as the mainstay of this power play.

Stephen Cohen’s recent article, "Pakistan’s road to disintegration", which makes a chilling assessment of today’s Pakistan and asks the US to brace for its possible breakup in 4-6 years, has been spotted by our media. In the context of extraordinary political and natural disasters in Pakistan over the past six years or so, the report only strengthens widespread concerns about state failure in Pakistan. The shock is just in the imminence of the disaster forecasted by an American authority on Pakistan.

Extraordinary events like the earthquake in 2005 to Taseer’s assassination in 2011 have all wrecked everyday life in Pakistan. Consequently, with the economy’s limits to shocks, government is again looking at the IMF, and with a rock solid begging bowl that extends by default in every crisis so that outside world now dubs us as a ‘nation living on charity’. No one in government seems to bother about how the largely squandered debt would be retired by our posterity. But the costs of this economic meltdown are more immediate.

Until the eve of 2011, a lot of us thought that terrorism or its support was the culture of a small minority comprising fundamentalist and anti-state elements. However, Taseer’s brutal killing and the consequent reaction by a significantly young segment of society that approved summary execution without due process has exposed cleavage in the society at a fundamental level.

While this so-called radicalisation of Pakistani society in particular has been a hotly debated topic, its socio-economic underpinnings in turn, rooted in the failure of political modernists to deliver on governance on one hand and provide intellectual leadership on the other, need a deep thought, awakening to realities and action.

For those in a usual state of denial, Mr. Cohen’s assertion about state’s failing fundamental signs is the voice of every common Pakistani. People didn’t expect miracles from the incumbent elected government. But they did need direction and hope during extraordinary crisis. However, instead of introspecting and reforming, politicians have blatantly repeated mistakes of the 1990s.

Corruption is now a given in governance. The public sector economy is monopolised by oligarchs across parties and interest groups. While the two main parties are cooperating in the department of ‘protecting civilian rule’, they are playing an irresponsible game of political point-scoring and deception.

Apart from their intriguing ‘cooperative rivalry’, their luxurious manners across the board belie their supposed democratic connection with their electorate engulfed in great misery.

Till date, the governments’ deafening silence on and indeed direct role in the loss of economic activity is telling and strengthens the common perception that politicians are working with a daily-wager’s mentality. With the resulting nadir in governance, people’s morale and support for democracy have reduced to cynicism.

Pakistan continues to be the land of unequal opportunity and injustice, an antithesis of Jinnah’s vision. Indeed, any political change would now be welcome to replace the same party that came to power on the strength of massive public sympathy or even excited support. Much has been said in the media about this. The big question is how to avert Mr. Cohen’s premonition about approaching total state failure and consequent anarchy, civil war, or disintegration.

The most logical remedy is to restore with highest sense of urgency the people’s trust in the government and hope in their future with the state. Those in power should realise that state’s capacity for their malpractices has run out and it’s time for an incisive surgery.

One prescription says the present set-up should be dissolved and a long but defined interregnum should precede new elections. An interim government should be formed comprising politicians, technocrats, and business leaders of highest credentials. That government should question the fundamental ways in which the country has been governed in our recent history. They should tap the best talent to prepare a substantive, wide-ranging reform agenda.

Long-term anti-corruption and anti-terrorism measures, political reforms, economic plan enabling and leveraging Pakistan’s strengths, and administrative reforms emphasising merit as a cardinal principle should be addressed.

Looking inwards rather than outwards for answers and sincere actions are all that’s needed. With a genuine change process set off within, the outside world would also come to trust and invest with us. From economic perspective, reducing uncertainty is more than half the job done in a market economy.