After going through a nearly two-week long nosedive, the Karachi Stock Exchange (KSE) 100 Index finally crashed on Wednesday by 548 points, becoming the 'biggest ever single-day decline' in its history. In less than two weeks, the index registered a fall of nearly 2,500 points, bringing it to (at the end of the last week) at 9,775.04 points. This is a huge climb down from the exchange's 'highest historical peak' of 12,273.77 points recorded only two months ago. Wednesday's collapse wiped off a market capitalization of Rs 980 billion ($16 billion).

The crash closely followed last week's presentation by the government of its Rs1.3 trillion budget for 2006-07 and the subsequent announcement by KSE's regulatory body, the Securities and Exchange Commission of Pakistan (SECP), of initiating a probe into alleged market irregularities and manipulation.

Prior to the crash, the press had reported on the downward trend, linking it to various factors. The KSE's board of directors in a post-budget meeting had ruled out any connection between the chaos prevailing in the market and the budget, saying market volatility was a "normal feature" of any stock market, including KSE.

But some analysts have pointed out that the budgetary measure of doubling the Capital Value Tax (CVT) -- imposed on investment in stock exchange -- from 0.01 per cent to 0.02 per cent is a major reason behind the downward trend at the exchange. Another factor they point out to is the critically negative international reports issued on the budget, asking Pakistan to strengthen its economy rather than making political statements about it. The SECP's probe is also seen as keeping the big players away from the stock market, creating nervousness and panic selling.

Last week, SECP notified that it was monitoring the stock market movement and trading data, because it had prima facie evidence that some brokers were indulging in manipulative practices on account of blank selling, short selling beyond permitted limits, and misuse of continuous funding system (CFS) financed shares. The commission noted that while fundamentally nothing was wrong with KSE and other local bourses of the country, some big brokers wanted to reduce share prices in the wake of the government's announcement to privatise the National Investment Trust (NIT). The 15-member SECP team that landed in Karachi last week was reported to be scrutinising trading data of 40 brokerage houses.

Though the probe was generally welcomed, several analysts view it more as an act of authoritative assertion by SECP and a ploy to avoid a future blame game rather than as a meaningful investigation, considering that no time frame had been set for the probe to complete. This does not help that commission has already failed to expose those responsible for the March 2005 market crisis. The KSE, meanwhile, stated last week that it was fully cooperating with the regulator and had not registered any case of default in the market, terming its downward movement "regular technical correction".

Against this backdrop, Wednesday's crash did not come as a shock. In an emergency meeting that day, the KSE's board of directors had announced several measures in an effort to curb the fall. These included: putting lower circuit breaker at 5 per cent from the next trading day; putting temporary ban on short selling in future contracts; increasing CFS-financed scrips from 14 to 30 and allowing 100 per cent securities exposure in futures trading.

But these measures have yet to restore investors' confidence in the market. Rumours about manipulation are rife, especially among small traders who feel themselves perpetually at a disadvantage. Salman Ghaffar, a trader in Karachi, talks of a market situation in which he blames both big brokers and the government. In the day to day trading and frequent market volatility, he tells The News on Sunday, "only small investors suffer while big brokers can challenge the government to such an extent that Prime Minister's Economic Adviser Salman Shah had to declare that the situation was 'normal'".

Ghaffar says the SECP does not need a probe to know who did what because it receives daily reports on the market from its fully computerised system. "This investigation will not affect the KSE board members but only the clients who get worried which in turn affects the market," he says, adding that the KSE made no effort to clarify rumors and speculation on which the market was being driven.

This week's crash was fundamentally different from last year's when there was no money available for financing the share trading. Muzzammil Aslam, an economist working for KASB Bank in Karachi, says the current 'correction' was the result of the Asian market crisis (in which China and India were worst hit), and the rise of a "negative sentiment". On the net basis, however, he says the "fundamentals" of the market have remained intact this time round.

Aslam terms the SECP investigation a "positive step" against short selling, because of this step alone the market rose by 400 points after the SECP's decision was announced last week. He is of the opinion that big brokers are easy to identify and blame because of their market visibility. He also blames speculation and blame game for having a negative impact on the market. "But these trends will not last in the long run. Neither will the scope for manipulation."

For Aslam, the SECP's role is necessary for keeping the market stable. "When market grows people forget the SECP, but only when it crashes do people cry for the SECP." Investors should know the difference between fundamental change and speculation, he says. "The SECP does not have a magic lamp to control the market sentiment." Though every country has a regulator for share trading, he says, the onus for the markets' rise and fall everywhere lies with the investors' knowledge of market science. "Does the small investor understand the market?" he asks. "Now even the corn seller sitting outside my office has shares in a business." The market, says Aslam, belongs only to those who know "the ABC" of its dynamics. "If you don't know much but have pots of money and trying to step into the game for quick returns, you are bound to lose." Even those who complain, leave the market only temporarily and are back in business on the next trading day, he says. In Aslam's view, the only solution to the problem is that the entry into the market is allowed only to those who know the business and are prepared to withstand the pressures of its correctors.

For one, Asad Hussain, deputy director SZABIST-Islamabad and anchor of a private TV channel, knows the ABC of stock markets. Yet, he lost Rs 30,000 this week on his investment which, according to him, was "nothing" compared to other investors who lost millions in the downslide. "I took minimum risk, and I knew that I might lose money, but it's part of the game," he tells TNS.

Hussain sees no apparent reason for the crash. "The KSE hardly moves on fundamentals of economy or businesses," he says. If at all, these factors contribute only to 20-30 per cent of the market's movement, "while all the rest is speculation. "Today (Thursday) the index has gained 383 points. How? The market was down 500 points yesterday and now its 400 points are up. No clue."

Big brokers, he says, make money on both sides by blank selling and buying." In most cases, he says, whether the KSE moves up or down, "the Mafia" makes money all the time, while small investors always lose. "The SECP has miserably failed to put the house in order," he says.

Hussain is of the view that the SECP only moves when it faces public pressure. For him it is hard to believe the KSE's claims that no foul play is taking place. "Even if they attribute this crash to dips in the neighbouring markets, what about the last year's crash when there was no crash anywhere else?"

Hussain predicts that market volatility will continue for several years -- as long as blank selling is not stopped and the "Mafia of the big brokers is not exposed and punished". But he sees little hope for that.

KSE Managing Director, M A Lodhi, while talking to TNS, rejects the significance of the exchange's clarifications to traders on speculation. He says the KSE is not obliged to contradict or confirm every rumor circulating in the market. "Our policy is not to confirm or deny anything in the media.". But he rules out any foul play or manipulation of the market by the big brokers. "I do not believe in passing judgments on any player without proof," he said, adding that during all the market fluctuation, no violations of the market rules were observed by the KSE. "There is no cure for presumptions," says Lodhi, laughing off the strong impression among traders that market has become an arena only for those with big money. "If there are 4-5 big players who have done well for themselves, why are others jealous of them? They have earned it legally, and if there is proof that they have not, there is always the law."

But why did the KSE not act in time to stop the crash? Lodhi is at best vague about it. "The (KSE) board intervenes only after considering the seriousness of a situation and taking past decisions into account." He says the crash came about because of external and internal factors, that included dipping of Asian markets, the budget effect, and speculative rumors which led to panic selling, which according to him, is a "normal" occurrence. "Our risk management system is so strong that there was no default during the crisis." He also claims that when the market crashed last, there was no exit available for the traders but this year the KSE has provided traders with some relief for exit.

Lodhi brushes aside questions on the ensuing blame game between the SECP and the KSE on the failure to check practices that had weakened the market. "The SECP is our regulator. If it blames us, what can we do? If the SECP is investigating any foul play, how can I challenge it?"

The SECP Chairman, Razi-ur-Rehman Khan, was unavailable for comment.

Still a stock market analyst in Karachi, speaking to TNS on the condition of anonymity, because he does not want his views to reflect those of his company, claims the market is "definitely manipulated" but he rules out the contention that the SECP is part of the games being played in the market that remains "at the mercy of a handful of brokers and mutual funds".

He says the KSE board did not frame required policies because it is dominated by the members of the exchange who have vested interests in the market. "They only allow or facilitate policies that serve them personally," he claims. Like others, the analyst has little hope in the ongoing SECP investigations -- not because the SECP is colluding but because most manipulative practices are hard to identify and stop.

"But the SECP must keep up this practice," he says, "if for no other reason than to ensure that brokers and fund managers do realise that there is a regulator which is trying to ensure fair practice in the market." The solution to the problem, he adds, also lies in introducing universal identification, which the SECP had been trying to implement.

There are 32 cantonment areas across Pakistan yet very few Pakistanis realise why they exist or how they came about. Governed by the Cantonment Act 1924, these cantonments, according to Section 3 of this Act, are places which the federal government notifies as being required for the service of armed forces. The federal government can also de-notify a cantonment.

Cantonments were originally treated as barracks, a buffer zone in the times of British-India rule, in order to keep the civilians and the indigenous people away.

But over the last many decades, cantonments have become much more than just barracks. A large civilian population now lives there along with military personnel, making them subject to a number of rules and regulations specific to cantonments. For instance, a manifold increase in the property tax in cantonment areas since 2000 with retrospective effect and changes in lease regulations are causing serious problems for many civilians living within the cantonments areas. Some of these civilians living in Rawalpindi Cantonment have formed a civic platform named Citizen Forum to voice their concerns.

Aziz Ahmad, a retired civil servant who now works as the secretary of the forum, says property tax in cantonment areas has been raised to an unjust level: "A house annually taxed at Rs 3,750 in 1997, is being taxed at Rs 145, 000 now, tax rates for commercial properties have jumped from Rs 400 a year to Rs 2 00, 000 for the same area."

People are finding it impossible to cope with this dramatic rise in property tax. What is worse is that serving civil servants and military officials are given 60 per cent exemption from this tax while retired militarymen are entitled to a 100 per cent exemption. They enjoy this privilege even if they are not living in the property they own and instead have let it to someone else.

The tax rates are also being determined in an arbitrary manner. The law says that the taxes be levied according to the level of development in an area, yet in determining new taxation rates in cantonment areas, the developed and developing areas have been subjected to same rates. In 1998, the then Corps Commander of Rawalpindi formed a board comprising government officials and public representatives, like councillors, who divided Rawalpindi cantonment in three zones -- A, B and C -- with each zones having more sub-categories on the basis of facilities and level of development in various areas. The tax was to be levied on the basis of this categorisation but unfortunately, not much consideration is given to it in the actual levy of the tax.

For the last almost seven years, the Rawalpindi cantonment board has been working without any public representative. According to section 13-A (1) (b), 13-A (2) (b), 13-A (3) (b) of the Cantonment Act, every cantonment board has to have at least some elected members. There hangs a big question mark on the legitimacy and legality of the decisions made by a board which does not meet these conditions. "An appellant authority where people can take their concerns is missing altogether," explains Aziz. Before the devolution of power, Deputy Commissioner had the power to work as an appellant authority. In the current system of district governments, no provision has been made for anyone to work as an appellant authority for cantonment boards.

The problem does not lie just in the upward revision of tax rate, the retrospective nature of the tax is equally problematic for the residents. Again, the affected residents say this violates Section 71 of cantonment law which states "no person shall by reason of any such amendment of tax assessment become liable to pay any tax or increase of tax in respect of any period prior to the commencement of the year in which the assessment is made". The notices now being issued to property owners demand them to pay tax at increased rates with effect from 1997.

In order to satisfy the formal procedure of levying tax, laid out under Section 71(1-A) and Section 71 (2) of the Cantonment Act, a few civilian property owners were called upon by the board to voice their objections, if they had any. "But not even a single objection was accepted," says Nasim Akhter, a resident of Rawalpindi's Babu Mohalla, who is privy to the proceedings of the meeting between the board and civilian property owners.

While the residents of the cantonment have to pay property taxes even if they own a house just half a marla in area, people living in the adjoining civilian localities need not pay any tax on even five marla houses. "This practice violates the Constitution which demands that all citizens be treated equally," says lawyer Zahida Amin, who has been closely linked to property tax litigation in Rawalpindi cantonment.

"In July 2005, the then station commander announced in a press conference that five marla houses in cantonment will be exempted from the tax but later it was claimed that the announcement was just a proposal," says Aziz Ahmad of Citizen Forum.

Members of Citizen Forum argue that the only solution to these problems is to conduct elections in the cantonment areas to elect public representative to sit on the board.

The raised taxes are all the more questionable when seen in the context that properties in cantonment are categorised as 'lease' -- that the occupant of a piece of land is not its owner.

When a land is presumed to be on lease, the lessee is not liable to pay any taxes. The tax liability lies with people who award the lease and who actually own the land, which in the given case is the government itself.

If the cantonment authorities are demanding increased tax, they should then accept the ownership of the residents as absolute but if they want to retain the land as leased, then they should not be charging property tax. "At least one relief should be assured to the citizens," says Razzaq Mirza, a senior lawyer who is also the president of Citizen Forum.

Muneer Ahmad Paracha, who advises the Rawalpindi Cantonment Board on legal affairs, says the board has raised taxes because property prices have risen manifold over the last few years and not just in the civilian areas surrounding the cantonments.

Though cantonment board official don't want to be quoted on the exemption of smaller houses from the property tax and the difference between lease and ownership as a basis of levying taxes, inside sources tell quite another story. "Most of the big houses in the cantonment are owned by former and serving military officials and therefore are exempt from taxation. Taxing smaller houses is the only venue for the board to generate money," a source in the Rawalpindi Cantonment Board discloses.

Others say the distinction between the lease and ownership is not considered as basis for imposing tax because "in cantonments, civilian laws don't apply. It's the military law which governs these areas," according to another source in the board. The military being the owner of all the land in the cantonments "can devise laws to impose or waive taxes in cantonments without having to abide by the civilian laws operating in the rest of the country", the source says.

While addressing the National Education Conference in Islamabad on May 31, the Prime Minister committed to increase the education budget by 29 per cent. A large wish list was finalised at the conclusion of this meet to decrease illiteracy and raise the level of education. Creation of a new cadre of civil services titled as 'educational management service', launch of a national testing services with diversified roles and responsibilities, creation of literacy packages in the mother tongue of pupils, proper monitoring mechanism for private educational institutions, increase in the eligibility criteria of primary and secondary school teachers and development of a centralised mechanism for preparation of curricula were some of the key conclusions drawn at the close of the conference.

It may be remembered that these suggestions are not new. They have been cited by the various concerned quarters on more than one occasion. Similarly this government and few regimes before have also claimed to raise education budgets. The end results are, however, disappointing. Apparently, not all is well in respect of policy and application. Many core matters that are related to education need to be objectively examined.

The government intends to raise the literacy level from its present claim of over 40 per cent to 80 per cent by 2015. The issue of literacy is normally addressed on quantitative basis. Numerical values of illiterate people in the country, the number of primary schools and their enrolment, number of teachers, available hardware/props in institutions of basic learning, available (or desirable) funds and the allocated budgets are the usual parameters that are employed for different types of quantitative analysis. A jugglery of numbers is used to justify any proposed intervention in the sector or abandon any existing policy. Several important performance and qualitative aspects are conveniently overlooked. Whereas the government claims to enhance education budgets, it does not identify the performance measures of the previous spending in the utilization of budgets. Investigations have revealed that a sizable part of the budgets are spent in construction and maintenance of facilities. Very little budget is left for the management aspects of institutions.

Similarly the mechanisms to check the improper use of funds and downright pilferage are grossly inadequate. From technical oversights in the construction of schools to nascent bungling of funds, the losses are reported to be enormous.

Literacy cannot rise until and unless it becomes a felt need of the masses. This means that the illiterate masses find it difficult to appreciate the importance of learning in the real sense and the possible positive changes it can cause in their daily lives. Often they have to compare the utilization of their time in parallel pursuits which include earning a livelihood for survival, acquisition of a skill, forced clan obligations or literacy. When they observe the examples of literate or even educated people leading similar or worst lives, the significance of literacy further drops in priority.

Also, the social value of literacy varies with categories of stakeholders. Clan elders, religious leaders, feudal and their off-shoots and even typical village proletariat consider efforts towards enhancing literacy as a threat to the prevailing status quo and social order. Trends are obvious that wherever literacy abounds, social injustices are challenged or at least reported. Violence against women, rape, usurpation of property and other crimes are directly questioned through literacy.

Many powerful interest groups -- that are also deeply entrenched in the government -- adopt a hypocritical approach towards literacy. While constant lip service is paid through the media or seminar appearances, the real spade work needed for change is hardly visible. Without removing the administrative, cultural, social and political barriers towards literacy very little can be achieved.

UNESCO has published a very useful report on the subject titled 'Education for All -- Global Monitoring Report 2006'. It has highlighted several important determinants of literacy transitions that are worth considering for the policymakers in this sector. The report emphasised the significance of formal schooling as the most important contributor to the sustained expansion of literacy.

There is no denying the fact that school is a vital social institution. When it is firmly embedded in the societal context, the output naturally emerges in the form of enhanced literacy. Experiences from the literate and educated societies show that school soon acquires diversified role in the overall dynamics of the micro-society where it exists. Promotion of adult literacy, skill training, intensive utilization for multiple classes in shifts and educational meeting place are some key functions which are gradually facilitated through efficiently performing schools.

For this, certain pre-requisites need to be fulfilled. The school must be made a significant institutional space in the village/community hierarchy. Area influentials including elders, religious/spiritual/clan leaders and commoners must possess common affinity with its space and purpose. It must be physically accessible and socially open to all the people. And it must be looked upon as a catalyst to a positive change and not a threat to the social order. Its management must be considered as a common social obligation, not a derelict governmental responsibility.

In order to combat widespread illiteracy, many specially-designed mass literacy campaigns have to be applied. The UNESCO report cites many success stories from the contexts of developing world where effective outputs were achieved. Many countries combined the extension of literacy skills with application of literacy for specific purposes, empowerment and transformation in the society (see table). In Tanzania, President Julius Nyerere mobilised a massive campaign of adult literacy in 1970. As a consequence of efficient management, the figures doubled in a mere five years period. Brazil undertook several mass literacy campaigns since early 20th century. Adult literacy rate rose to 74 per cent in 1980 and had been continuously rising. Ethiopia, one of the poorest and most problem-ridden countries, fared well on the count of literacy. In a ten-year period between 1974 to 1984, 52 per cent womenfolk were able to pass the basic literacy test. The number corresponded to 20 million women.

Pakistan also embarked upon the mass literacy programmes during 1960s but its performance across various regimes remained extremely disappointing. The literacy level was below 28 per cent around 1972 and after. Among other factors, the confusion over the language of literacy was one prime issue.

It may be seen that most of the countries that attained positive results in the literacy sector imparted reading and writing skills in local languages. In cases where the basic framework and knowhow was not available, it was created on war footings.

Romanisation of Turkish language by the Ataturk regime after independence of Turkey in 1923 is a case in point. While Mustafa Kamal was vehemently criticised for what the conservatives thought as deformation of language, the change turned out to be positive. Turkey now possesses a very high literacy rate bordering 90 per cent. In East African contexts, the respective regimes undertook massive assignments to translate and mass produce necessary literature in local and regional languages. In the other cases, spoken languages were given written scriptures to speedily spread literacy.

The case example of Pakistan offers a dismal picture. According to the UNESCO report, the country possesses 72 living languages/dialects within its folds. Yet education is imparted primarily in English and Urdu with very little opportunity in regional and local languages. Unless the country's policymakers take cognisance of the importance of local languages in literacy, no real progress can be achieved.

And finally, the rise in literacy can only happen and sustain when an enabling environment for it can be created. In the prevailing media-led society, it has become very much possible. Emancipation from obscure social, religious and ethnic prejudices; enhanced participation in labour markets; increase in the participation level in the political and cultural life and an overall raise in the quality of life are some of the direct outcomes of literacy. In the world of today, tangible incentives are the only option to make the literacy programmes achieve the respective targets.

Pakistan's founding father had advised the nation to make earnest efforts to bridge the education-deficit "to make real, speedy and substantial progress." Addressing the first education conference in 1947, the Quaid lamented that under the colonial rule sufficient attention was not paid to education. He underlined the need to bring the country's education policy and programme on the lines suited to the genius of the people, their history and culture and having regard to the modern conditions and vast developments that have taken place all over the world.

The successive regimes, however, did not attach the priority to education that it deserved. The Federal Minister for Education told the participants of a recently held 'National Conference on Education' that the education in Pakistan "is in a bad shape" because successive governments had made a mockery of the education system.

Over the last decades Pakistan has been known as a nation of the 'drop-outs'. 45 per cent of the students enrolled in primary schools drop out. Basic facilities in schools are lacking, pay structure of teachers is poor and facilities for their training inadequate. A teacher gets less pay than a domestic servant.

Given all this, one should not be surprised if the country's professional institutes complain that they are not getting the right candidates to pursue higher studies. Their protests are genuine. How can one build an excellent university education with the products of a poor schooling system? One would like to share with the readers a true story, as told by a friend in the education profession.

The number of applicants for the LLB course was many times more than the available seats. The merit-conscious management of the institute decided to select the best through an objective test. The candidates were required to indicate the correct reply from three choices. The faculty of the institute was shocked to find that most of the candidates did not know the correct answers to questions like the year of birth of Allama Iqbal, the place where the Quaid started his law practice, the date of the first sitting of Pakistan's constituent assembly, the name of the first Chief Justice of Pakistan, etc. None of the contestants could obtain more than 50 per cent marks in the test. One of the members of the faculty asked one of his nephews, a primary class student in an English medium popular chain, to attempt the paper. The boy scored 90 per cent marks.

The story speaks volumes about the quality of education in the normal public schools versus the private sector schools in a country where one finds four types of school systems operating simultaneously. What else could one expect from the pupils of meagerly-paid unmotivated teachers of public sector schools, a majority of whom do not take up to teaching as a first-choice profession?

One is dismayed to find that a majority of the youth seeking admission to colleges have a poor general knowledge. They know little about the basic or elementary matters pertaining to disciplines in which they are anxious to pursue higher studies. They also lack the capability to compose a few original lines or even write routine applications, except the ones they practiced at school. The situation reminds one about the story of a Bedouin.

Once, a Bedouin left his son with a cleric, asking him to turn his lad into a scholar. Years rolled on and one day the Bedouin went to the cleric to update himself on the progress made by the boy. The cleric asked the boy to demonstrate his reading power to his father. The boy brought a letter and read it very fluently. The Bedouin was highly impressed. Thinking that his son has acquired sufficient education and could now read and write letters, the Bedouin thanked the cleric for equipping his son with knowledge and sought his permission to take the boy to the village. Back in the village, when the Bedouin received a letter, he asked his son to read it aloud. The boy looked at the letter, turned it from the front to the reverse side and from the reverse to the front side several times, and said: "I cannot read it. It's different from the one the cleric has taught me to read."

If one makes a comparative study, one would find that in a majority of the cases, the products of our education system are not much different from the one produced by the cleric.

The government of Punjab seems to have taken a lead among the provinces in upgrading and enhancing the quality of education, making a beginning with the primary education and the continuous in-service training of its over 144,000 primary teachers. The provincial government has revitalised its Directorate of Staff Development (DSD) for the continuous professional development of the capabilities and potential of the teachers who, as key players, constitute the main pillars of education system.

The DSD has adopted an innovative approach to teacher development. The essence of the new approach is that teachers must be supported on a continuing basis through multiple means which, amongst others, include: development of teacher standards, training, follow-up workshops and classroom visits, supervision, coaching, intra-school teacher visits, identification and refinement of teacher needs, development and supply of teacher support materials based on identified needs.

The programme, which has been launched in collaboration with the UNICEF, envisages an expenditure of Rs 3 billion over four years. It has four basic tiers, viz. school, cluster, district and province. Clustering constitutes the backbone of the new approach under which a centrally located school is identified to function as the focal point for cluster training and monitoring of a group of schools.

At the district level, a District Training and Support Centre (DTSC) is established to assume the responsibility of supporting elementary, secondary and higher secondary teachers and coordinating activities pertaining to teacher development. Each DTSC is equipped with a core team of teacher educators. The actual task of training, supporting, mentoring and assisting teachers has been assigned to the district teacher educators at the cluster level and Teacher Educators at the district level, both of whom have been selected from among the best teachers, and trained for the assigned roles.

Experience also tells that the extent to which teachers can be effective in their work depends on the amount of instructional leadership and administrative support that they receive from their head teachers and the District Education Department. Both the elements -- training of head teachers and capacity building of the district education staff -- constitute an integral part of the new training framework.

Increased teacher competence, studies reveal, contributes to student learning if an enabling environment is created for teachers through putting in place mechanisms for teacher standards, greater accountability, incentives, accreditation, certification and monitoring.

A strong system of public education requires a strong teaching force, one would therefore support the Punjab government's initiative in the hope that it would not meet the fate of earlier projects, launched half-heartedly by the successive governments in the country, to promote literacy and to arrest the decline in education standards.

It is high time that we accorded the right priority to our education system. We must remember that the GDP of even small nations in the West, having knowledge-based economies, far exceeds the GDP of much bigger but knowledge-deficit countries like Pakistan.

Alauddin Masood is a freelance columnist based at Islamabad.

E-mail: alauddinmasood@hotmail.com

Common causes

A number of South Asian conflicts have recently been in the headlines. In spite of their apparently different natures, they all have the same root causes -- underdevelopment and monopolisation of power by a small group.

The Maoist movement in Nepal has made news globally over the past few months. Its Indian counterparts have increasingly grabbed attention due to mounting clashes in India's tribal-populated regions. (The intensity of Indian Maoist movements is such that Prime Minister Manmohan Singh recently called them the "single biggest security challenge ever faced by our country".) The Tamil Tigers in Sri Lanka have bared their fangs again after lying low for some time. The Baloch conflict has dramatically intensified in Pakistan. The Kashmir insurgency has flared up once again. And then there is the bewildering array of secessionist movements in India's northeast.

On the surface, these conflicts have little in common. The Maoist insurgencies in Nepal and India are the crudest expressions of class politics. The Tamil-Sinhalese struggle is mainly ethnic, as is the Baloch uprising. The Kashmir conflict has religion as the apparent dividing line. And the insurgencies in northeastern India are based primarily on tribal and ethnic identities.

But the moment you dig deeper, you find more similarities than differences. All these movements are expressions of discontent at the lack of development on the one hand and political mismanagement by governments in the region on the other.

Now, I am not condoning any of these insurrections, nor their tactics. In fact, I abhor violence. But it is essential to understand such phenomena, and to understand is not to condone.

The most obvious instances to demonstrate that these conflicts have sprung from underdevelopment are the Maoist movements in Nepal and India. I've been to Nepal and, trust me, once you get outside Kathmandu, the level of poverty makes even the Indian Hindi-speaking belt look good by comparison. Similarly, the tribal regions of India -- the strongholds of the Indian Maoist insurrection -- are grossly underdeveloped. Even the formation of new tribal-dominated states a few years ago has done little to ameliorate the abject poverty there. Born out of these circumstances, the Nepali and the Indian movements have taken a blunt class-based approach to violently agitate for an alternative model of development.

But even the other insurrections -- which on the surface seem to be motivated by a variety of other reasons -- are actually in response to the political marginalisation of entire populations and their lack of sharing in the fruits of development.

Northeastern India is peripheral to the country: literally and in myriad other ways. The response of this political and economic sidelining has been that almost every state in that region has a violent insurgency, with some having more than one movements. The longest-running of these, the Naga rebellion, has been going on since 1950s and has claimed more than 100,000 lives, according to BBC. While all of the northeastern insurgent groups are ethno-tribal on the exterior, they have arisen as a consequence of the lack of attention paid to the people of the area.

The Kashmir insurgency came about due to the strangling of the political processes in the state. Sumit Ganguly's Kashmir in Conflict: Portents of War, Hopes of Peace convincingly demonstrates that the rebellion sprang up due to the thwarted aspirations of the Kashmiri people. A series of blatantly rigged elections was mismatched with rising level of awareness in the state. The fixing of 1987 elections proved to be the last straw on the camel's back and gave rise to the insurrection that continues to plague the state and the subcontinent.

The situation in Sri Lanka is similar in terms of frustrated political aspirations, and is made even more tragic by the fact that Sri Lanka is the only nation in South Asia with comparatively impressive socioeconomic achievements due to extensive social spending by successive administrations. (The country ranks dozens of places above all other South Asian countries on the UN's Human Development Index.) Sri Lankan leaders have practised from the onset of independence the most cynical brand of politics, consistently favouring the Sinhalese majority at the expense of the Tamil minority, accompanied by periodic anti-Tamil campaigns. The situation has deteriorated rapidly since 1970s, as the Tamils grew increasingly militant and secessionist. The Tamil Tigers were formed during this time by Velupillai Prabhakaran, and the rest, as they say, is history.

I don't need to give Pakistani readers a history lesson about their own country, but just want to call attention to the fact that the various nationalist movements have been to a large extent the result of a Punjabi domination of the system, coupled with neglect of other provinces. (BBC journalist Owen Bennett Jones's Pakistan: Eye of the Storm has a chapter laying out the dynamics of these movements.) The Baloch uprising has grown out of resentment at the control of oil and gas resources by the federal government and the marginalisation of the Balochs by the power structure.

These conflicts plaguing South Asia are perhaps not all that astonishing.

The governments of the region (with the partial exceptions of those in Sri Lanka and the South Indian state of Kerala) have failed the common man. The only region that does worse than South Asia on human development is sub-Saharan Africa, and even Africa sometimes performs better on significant fronts. For example, according to a recent report, the level of child malnutrition in South Asia is almost double that of sub-Saharan Africa! Why would people be eager to stay a part of countries like these?

Coupled with a disregard for the common person is a monopolisation of power by a small group, either ethnicity-based or economically dominant or both. So Sri Lanka has historically been controlled by the Sinhalese, Nepal by a small coterie centered around the palace, and Pakistan by a Punjabi clique. India's economic decision-making has been maneuvered by a coalition consisting of big business, the middle-level peasantry and the civil service, as scholar Pranab Bardhan has so superbly documented.

Severe underdevelopment coupled with control of power by a tiny elite -- sounds like a recipe for disaster, and as recent South Asian history shows, it actually has been. The consequence has been the multiple mutinies that the region is facing. Unless the leadership in these countries drastically changes its ways, we can expect to see the current conflicts continuing in South Asia -- and quite possibly being joined by many others.

Amitabh Pal is the Managing Editor of an American magazine, The Progressive (www.progressive.org), a monthly political publication founded in 1909. This is first of his monthly columns for Political Economy.

There is an impression that the Central Board of Revenue (CBR) manages every year to collect more taxes than it had planned. This is a correct impression as far as numbers are concerned. Twice during the last five years, the CBR collected taxes higher than even its own upward revised tax targets. Both the times the extra taxes collected went to pay for higher salaries and even higher perks for government servants, including the military.

There are two ways of analysing this situation. One is from the point of view of the planner, the other is from the point of view of people. By people one means the poor, or 90 per cent of the population of Pakistan. The planner represents the elite, rich, entrenched classes -- he is the civil and military bureaucrat. The people are the voiceless masses. Let us look at what the budget has done this year vis-a-vis taxes. While claiming to have decreased their number, the government has imposed three taxes. They are: a 2-per cent capital value tax (CVT) on land and immovable property, with an exception being made for commercial property; a doubled withholding tax of 0.2 per cent on cheques over Rs 25,000, and a doubled CVT on stock exchange transactions to 0.02 per cent.

The number of indirect taxes has also been increased, though the theory, according to the finance minister, is that direct taxes are increased and indirect ones decreased. How this has happened, will be explained later in this essay.

The new taxes can be seen as a concession to the rich, otherwise why should commercial properties get an exemption from CVT? This means the poor pay more as they try to build a simple little home for themselves. The mention of CVT leads us to the debate on General Sales Tax (GST), which was, as the theory goes, expected to be decreased so that more and more people pay it, rather than continued at its current high levels which promote corruption among bureaucrats responsible for its levy and collection. That was not to be. Customs, excise and taxation jobs will remain the favourite jobs of up-and-coming bureaucrats and planners.

It's in this context that the debate over CBR always managing to collect more than it plans must be seen -- again, from two perspectives. The planners see it from a simple perspective. They claim that out of a population of 150 million, there are only 1.2 million tax payers. The poor have a different view. They say, and with much justification, that almost 80 per cent of the population live below the taxation line, near the actual poverty line calculated by the World Health Organisation. The remaining 30 million people, (or 3.2 million families, based on the average family size of 9.2 persons) are the ones who can be taxed. If we assume that over half of them live in the rural areas and are exempt from taxation, then it becomes easier to surmise how many people CBR has really got in its tax net.

If this is a correct statistic, and the reality will probably be more or less so, then just how does CBR manage to get as much money as it likes and always to exceed its target? The poor argue about it very differently from the way the planners do. They claim that if one is to analyse the average intake of an average family of Pakistan, which consumes wheat, rice, pulses, milk, tea, sugar, ghee, medicines, soaps, vegetables, clothes, and electricity, and spends money on traveling, education and house rents, it can be seen that the state takes away almost 37 per cent of the money spent on these counts in the form of duties, cesses and taxes, deducted at source or collected on the way to a retail outlet. This is an official figure.

If this is true, then it makes sense to declare that the poor are the only true tax payers in Pakistan. The rich, in relative and also in absolute terms, pay a fraction of what the poor pay. But then it is also true that the grip of the military-civil combine on the planning and politics is so strong that in the end the poor do not count.

Let's face this fact. The poor are officially treated as 'untouchables' in the decision-making process. Even the media, now the fastest expanding power in Pakistan, have joined forces with the civil-military complex to keep real issues at bay. This being the case, how do planners, or the rich, view this situation?

There is a school of thought, especially in taxation circles, which believes that the existence of a fiscal gap of even 7 per cent is something our economy can manage to ride over. The proponents of this school argue that the present 7 per cent rate of growth can be managed provided CBR manages to stick to a plan to achieve a tax-to-GDP ratio of 15 per cent, or of raising this ratio by half a per cent every year.

For the supporters of this prescription it does not matter if Pakistan is a developing country. Their theory is that tax-to-GDP ratio in the country is very low at the current figure of 9 per cent. The 2006-7 budget intends to take this ratio up to 9.40 per cent. The target promised to the 'real powers that be' -- or the international lending agencies -- is that in ten years time Pakistan's tax-to-GDP ratio will be near the 17 per cent mark. Even officially this target is acknowledged to be hovering around 13 per cent and 14 per cent.

For this, they will have to radically increase the indirect taxation levels, which will hit the poor even harder, will have to bring in the agricultural lobby into the taxation net, and will have to check civil strife -- that means having more of the same political structure and policies.

That is why every year more and more indirect taxes are levied. Though it is officially stated that the opposite is the case, the fact remains that CBR bosses, from top to bottom, 'fib' about this. Almost everyone now seriously doubts the figures provided by the government in its budgets. The government has apologised for this 'crime' twice, and again this year there are serious doubts being expressed about just how true are the figures touted in the new budget. Consider, for instance, the massive allocation for Public Sector Development Programme which is seen as a gigantic exercise in ensuring that the present dispensation remains in place. This allocation is needed more by the political structure that supports Pervez Musharraf than by the General himself. Talk of developing the 'infrastructure' is utter tripe. CBR is being made to deliver to save the civil-military combine by preserving the status quo.

But there are limits to what CBR can extract from the poor. The social pressures created by wrong economic policies in the Ayub and Bhutto eras, led to the downfall of their regimes. Will it happen again? Can CBR continue to stick to its target of very high indirect taxes to bleed the poor to exhaustion, creating acute social discontent? Can excessive consumption and imports be sustained by an economy that is not producing enough?

How do the poor look at this situation? It goes without saying that they are at the receiving end. The inflation they face in the shape of high mobility costs, very high food costs, exceptionally high education costs -- because of high 'indirect and invisible taxation' -- all undercut their earnings. Unfortunately they are presented in a package by the media, that inform the people, and incorrectly so, that the country is about to 'take off'. Imagine that!

As a student during the revolt against Ayub Khan's regime and during the Bhutto era, one got sick of this 'take off' stage. The higher we tried to fly, the deeper the country got into debt. Even today our external debt is higher than it was in the past, and through a series of 'not so clever' moves, all that the government has managed -- thanks to its assistance through sacrificing more of our boys than the United States and the United Kingdom put together in the 'fight against terror' -- is to postpone our debts. The interest, meanwhile, piles on. One 'wrong' move and the debt pressure will become unbearable. The bubble is already inflated to the limit and one day, maybe two years from today, it will have to burst. Of this have no doubt.

Add to this the fact that Pakistanis are very low savers (given high poverty levels, this is no surprise), that our financial institutions have a gap of almost 12 per cent between the rate of return they provide to their depositors and the interest they charge on the money they lend (this is an unbelievable gap level, given that banks all over the world operate at a 2.5 gap between their rates of return and interest rates), that internal investment is very low (at 20 per cent of GDP in 2005), that large-scale manufacturing is only 12.7 per cent of GDP, with small-scale industry contributing only 4.3 per cent to GDP (the lowest rate in Asia). Only now you have a complete picture of the financial sector in Pakistan.

While announcing the federal budget for 2006-07, Minister of State for Finance, Omar Ayub Khan, called the budget relief oriented and people friendly. Many a commentator since then has opined that the government by making these claiming is trying to use the budget as a ploy to win votes in the coming election in 2007.

This opinion became all the more credible when Federal Finance Secretary Tanwir Ali Agha some days before the budget announcement convened a meeting of provincial finance sectaries, asking them to prepare their respective provincial budgets with elections in mind. He advised the provincial secretaries to incorporate pro-poor and people friendly initiatives in their respective budgets.

What are the pro-poor and people friendly measures that the federal budget has announced? All the government employees have been given a 15 per cent dearness allowance on their running basic salaries. People who retired before 1977 are given a 20 per cent increase in their pensions and those who got retired after 1977 are given a 15 per cent raise in pensions. The government drivers, dispatch riders and non-gazetted officials working in grades 1 to 16 have been given 50 per cent increase in their conveyance charges. The government has also increased benefits for those who get pension under the Old age Benefit Act, 1976, from Rs 1000 to Rs 1300.

Some other measure include: Raise in grants from the workers welfare fund for every worker for the wedding of his every daughter from Rs 30,000 to Rs 50,000; raise in the money given to a worker's heirs after his death from Rs 150,000 to Rs 200,000; raise in the workers' share in profit of an industry from Rs 6000 to Rs 12000.

For workers in the private sector, minimum wages have been increased from Rs 3000 to Rs 4000 per month. The government has also announced allowances of Rs 500, Rs 700 and Rs 1000 for teachers as per their qualification. All these measures are over and above the subsidies worth Rs 109 billion that the government has announced to spend to keep the prices of daily use food items under control.

The question arises as to whether the above mentioned relief announced in the budget will help the government win the next general elections.

Political pundits are of the view that the government is perturbed by a major shift in the political landscape of the country caused by signing of Charter of Democracy by Pakistan peoples Party led by Benazir Bhutto and Pakistan Muslim League headed by Mian Nawaz Sharif. These analysts are of the view that the charter is the main factor that has forced the government to offer visible relief to people in order to win their electoral support.

The prevalence of these theories notwithstanding, Dr Salam Shah, prime minister's adviser on finance, did not buy them in his post-budget press briefing. He said the government was offering relief not to win elections but rather as its duty to protect vulnerable segments of the society, especially at a time when the government has fiscal space to do so.

Ahsan Iqbal, information secretary of Pakistan Muslim League (Nawaz), is not convinced. He tells The News on Sunday that the government has presented this budget keeping general elections in view. But he adds that the economic policies of the regime led by President Pervez Musharraf has introduced so many economic distortions in the last six years that the so-called relief offered in the budget will come to nothing. The policies, he observes, have made the rich even richer and poor even more so.

Ahsan Iqbal says the government has concealed bitter economic realities. "For example, the government has not mentioned as to how the budget deficit will be bridged." Also, the government has announced huge development budget programme of Rs 435 billion "without mentioning that it also contains Rs 50 billion earmarked for reconstruction in the earthquake hit areas". This, he claims, is unjustified.

Ahsan says the Rs 12 billion subsidy the government has announced to keep pulses' prices in check will be given to importers. "This subsidy should have been given to the farmers so as to increase pulses' production." The money allocated for Khush Haal Pakistan Programme, Rs 10 billion, will be used for election campaigns by ruling coalition's legislators to win political favours in their constituencies, he claims and adds that going by the past experience not all the money allocated for development will be spent for the purpose at the end of the day. "The government has spent only 60 per cent of the money it allocated for development in outgoing financial year which means the government does not have the capacity to utilise all big money it has allocated for development this year."

Other observers point out that rising inflation has already threatened the popularity of the government, so it is understandable if the government tries to do something about it by stemming the tide of dearness through various relief and subsidy measures.

Still, these analysts say, the relief measures do not go very far as far as winning elections is concerned. The raise in pensions, for instance will effect only a tiny portion of the population and the raise in the salaries in not as big as it is being made out to be.

This, coupled with the fact that 70 per cent people in our country reside in rural areas where economic activity is going down instead of going up, will not have a significant impact on people's lives. The rural areas will experience more incidence of poverty if agriculture continues to face decline in growth as it has done during the outgoing financial year. This is where the traditional vote bank of Pakistan Peoples Party lies. If the government wants to lure rural voters away from Benazir Bhutto, it will have to do something to provide direct relief to them.

So far, the government's efforts in this regard are not very significant. It has announced to invest Rs 7.80 billion to launch Food Security Programme. Initially, the programme will be launched in 1000 villages. How far can some seven billion rupees go in ameliorating rural poverty and how can the government ensure rise in its popularity by working in just 1000 villages will be interesting to watch.

The government has also announced to invest Rs 3.60 billion in the development of livestock and diary sectors. About 1200 model dairy farms and 2,950 cattle breeding farms will be established through this investment. The question arises once again as to how people in the rural areas will benefit from this investment because, as sources claim, two only two companies will be the ultimate beneficiaries of all this money.

A monolithic concept of capitalism no longer exists, perhaps never did. As Philip Kotler, Somkid Jatuspripitak and Suvit Maesincee note in their study 'The Marketing of Nations', today's global economy is one of "capitalistic diversity". Even beyond the three versions found in the "triad" -- American, European and Japanese -- there are further variations that are distinctly East Asian, Latin American, and reflections of other countries, the co-authors of the study note.

In East and Southeast Asia, for example, Singapore chose to develop an infrastructure conducive to high technology and service industries. Hong Kong chose to operate as a laissez-faire economy, while South Korea and Taiwan followed the Japanese model. In Latin America, Chile initiated a strategy of liberlisation before any other Latin American country. Ironically, Chile initiated this strategy of economic liberalisation under a military dictatorship that was one of the most repressive regimes in Latin America.

For that matter, both South Korea and Taiwan became industrialised economies during the period -- 1950s, 1960s and 1970s -- when they were ruled by authoritarian regimes. So did Singapore. But perhaps the greatest irony of all is the case of Hong Kong, which adopted the laissez-faire economic model in the days when it was a British colony.

Pakistan, too, saw its period of highest economic growth under military regimes: first, under Ayub in the 1960s, and then under Zia in the 1980s. In the latter period, however, American aid and large remittances of foreign currency by overseas Pakistanis were big factors in boosting growth. The Ayub era saw an average of about 40 to 50 new public share offerings a year on the Karachi Stock Exchange. During the Z A Bhutto era, when the government nationalised many key business sectors, the number of new public share offerings fell to an average of only about five a year. The number rose a little in the Zia era. Even then, however, it did not average more than about ten new share offerings a year.

India's mixed planned economy, labeled 'socialist' for more than three decades, has been basically capitalist, despite large public-sector investments in industry, banking and administrative regulations: agriculture, services, foreign trade and even industry have seen major growth of privately owned enterprises.

In the former socialist countries, decentralised decision making and market transactions are replacing centralised planning and command allocations. Yet the nature and rate of change varies. As the authors of the study note, even before the breakdown of communism, China and the Soviet Union took different pathways of development. China pursued a strategy of heavy industrial development but decentralised approaches to primary-sector development, while in the Soviet Union all sectors were under centralised planning and large-scale bureaucratic direction. In recent years, China and the former Soviet Union have again been pursuing different paths toward a market economy. China liberalised its economic system without changing its political system, while in the former Soviet Union the political system fell apart even as it started dismantling its command economy structure.

The other former socialist states in Eastern Europe are also pursuing a variety of development strategies. In recent years, the major policy debate in Eastern Europe has been between the gradualists, like those in Hungary, and the shock therapists, like those in Czechoslovakia (now the Czech Republic and Slovakia) and Poland.

As the authors of 'The Marketing of Nations' study note, East Asian countries are thought to have industrialised following the Japanese 'model' of development. Several arguments have contributed to this hypothesis. One is the 'late starter' theme. "Japan may be viewed either as the last of the major countries to undergo an industrial transition or as the first of the developing countries to industrialise," the authors note.

The East Asian countries were also late starters. They began to industrialise in the 1950s and 1960s. Some key features contributing to the notion of a Japanese-East Asian model of industrial development include an emphasis on export performance ('export-led growth'), high savings and investment rates, dynamic entrepreneurship, and high productivity of capital and labour.

But as the authors of the study argue, "one must distinguish between the Japanese model states like Taiwan, South Korea and Singapore, versus Hong Kong." In the former, the major objective for government intervention is to foster economic development.

According to the authors, in East Asian economies, the policymakers create "economic contests" that deliberately link competition with the benefits of cooperation among firms and between government and the business sector -- the so-called 'Japan, Inc' model.

"Economic contests, however, require a high-quality civil service, which has the capacity to monitor performance and which is insulated from political interference," the authors of the study note. This, coupled with a high investment in education, has perhaps been the key to the high rates of growth seen in the East Asian economies in 1970s, '80s and '90s. And although the growth rate fell sharply in the wake of the financial crisis of 1997-1998, it is now back on track in most East Asian countries.

The authors of the study point note that two elements greatly contributed to East Asia's rapid growth. The first was getting the fundamentals right. Good macroeconomic management provided the stable groundwork for private investment. Price distortions had to be minimised. Policies were needed to enhance the integrity of the banking system, to assist the financial sector's capture of non-traditional savers, and to encourage personal and corporate savings. Education policies stressing universal primary and secondary education were needed to increase labour force skills. Foreign investment policies were needed to acquire and license foreign knowledge and technologies. Public investment had to complement private investment and promote an export orientation. Agricultural policies had to encourage productivity improvements and avoid excessive taxes in the rural economy.

Secondly, policy interventions had to be carefully chosen. "All interventions incur costs, but these costs were generally curbed within certain limits," the authors of the study note. "Given the outright importance of macroeconomic stability and export growth in East Asian countries, subsidies were provided within fiscally responsible bounds and international interest rates were used as a benchmark for domestic interest rate controls."

A former student leader and a law graduate, Jehangir Badr has been affiliated to Pakistan Peoples' Party (PPP) since former Prime Minister Zulfikar Ali Bhutto launched a movement against then President Ayub Khan in 1968.

Jehangir Badr has a long personal history of arrests, detentions and torture by the government hostile to Pakistan Peoples Party. In 1978, he was nominated senior vice-president of his party's Lahore Zone and in the same year was also nominated as a member of the party's central executive committee by Bhutto himself.

In 1979, he became additional secretary general of the party's Punjab chapter and was then elevated to head the party in the province.

He was elected a member of both the National Assembly and the Punjab Assembly in 1988 elections. He has also worked on senior cabinet posts during both the governments headed by Benazir Bhutto, in 1988 and 1993, holding the ministerial portfolios of housing and works, science and technology and petroleum and natural resources.

Jehangir Badr was elected a member of the Senate in March 1994. These days he is working as Pakistan Peoples' Party's secretary general.

Excerpts of his interview conducted in Lahore follow:

The News on Sunday: President Pervez Musharraf has dubbed the Charter of Democracy, signed jointly by Pakistan Peoples' Party and Pakistan Muslim League (Nawaz), as a political gimmick. How do you think the charter gives a new life to political process in Pakistan?

Jehangir Badr: General Pervez Musharraf's comments on the charter do not come as a surprise. Any positive movement in the direction of giving the much needed breath of fresh air to politics in Pakistan bodes ill for the general. More than anything else, the charter has given hope to people. We understand that there is no time to relax. The charter makes us more answerable to people. Now it is up to us to come up to their expectations. Many people who have not even gone through the charter are pinning their hopes on it. Understandably, we have to perform in a better way. If we fail this time, it will be a big setback to the democratic process. The charter lays stress on the political and social justice for people. It also makes political leaders accountable to their vote bank.

TNS: Critics say that the charter does not say anything on the economic problems facing the country. How do you react to that?

JB: The charter does not take up issues in detail because it was not supposed to be a lengthy document, to start with. It provides only the basis on which to work. It, however, does mention that one of the priorities of a democratic government is poverty alleviation -- a term that touches on all aspects of our economy. Now to deal with the big task of poverty alleviation one has to have a policy which is supported by a government that remains in office for its full (constitutional) term. Perpetuation of economic policies is one thing that we hope we will enjoy when the sword of Damocles no more hangs on a democratic government in the shape of dictatorship.

TNS: Can it happen in the near future, given the high level of depoliticisation in Pakistan?

JB: There is no reason we should lose hope. Days of depoliticisation are over. Our efforts are directed to a destination where we can reap the fruits of democracy. Signing the charter of democracy is just the beginning. We are ready to pay whatever the price.

TNS: The charter categorically states that elections under a dictator are unacceptable. Come next elections in 2007, will you take part in them considering that no change is likely by then in how the country is being ruled?

JB: Since we are a part of the Alliance for the Restoration of Democracy (ARD), any decisions on whether to contest the elections under General Pervez Musharraf or not will be taken after consultations with (the alliance's) component parties. As things stand, the legal framework order (LFO) mentions that an interim government has to be formed to conduct elections. So, legally the present set up should give way to an interim government to hold elections. If the elections are held under the present regime, they will lose their authenticity and impartiality.

TNS: What if international observers are called in to oversee the coming elections? Will you accept the results then?

JB: We support national and international observers to monitor the elections. But it has to be monitoring in the right sense of the word. Observers should be allowed to visit any polling booth anywhere in the country. It has to be a transparent process or else the exercise will be of no use. We have seen in the past that international observers were not given full access to balloting and counting of votes. This has to change.

TNS: "No party shall solicit the support of military to come into power or to dislodge a democratic government," says the charter. Doesn't it imply that the army is right when it says that politicians themselves ask it to intervene in political crises?

JB: There is some truth in that. And that needs to be explained. Some political parties have served as agents of the military over the last few decades. But it is usually after the military pushes its way into the corridors of power that a political party offers to serve as its minions. As soon as it says yes to the military, a political party looses its appeal to common people and becomes the establishment's party or the king's party, as we say. Pakistan Muslim League (Q) is one example. Pakistan Peoples' Party (on the contrary) has a history of confronting the military governments.

TNS: But the party now seems to have lost its habit of confronting a military government...

JB: This is not so. Even the harshest critics of the the party appreciate its role in this respect. In fact, the rules of the game have changed under the present circumstances. Today we don't want to go on our own (to challenge the military government). We want to bring other political parties along and devise a common strategy to deal with the situation. This is precisely what we are doing.

TNS: But the charter is just words on paper. Do these words mean anything unless they are translated into practical activity?

JB: That's true. But it shows that the main political parties in the country are determined to block the military from usurping power again in future.

TNS: Does the signing of the charter mean that there will be an electoral alliance between PPP and PML (Nawaz)? If yes, how will it work?

JB: PML (Nawaz) and PPP have given tough time to each other in politics. That's why some people are finding it difficult to realise how we will come together to form an alliance of some sort. But that doesn't mean that we cannot work together if needs be. We will do seat to seat adjustment with PML (Nawaz) and that will obviously be done after extensive consultations between the two parties. The next step (if the elections results so demand) will be the formation of a coalition. While the concept of forming coalitions may be newer here in Pakistan elsewhere, especially in Europe, there are many governments that have been worked well as coalitions. We should not underestimate ourselves.

TNS: But is it that simple? How will it affect, for example, the local politics, say the politics of the walled city where you and Shahbaz Sharif (President of PML-Nawaz) have been contesting elections from the same constituency?

JB: Well, the matter as to who will contest on which seat has not been finalised yet. But preparations are there to contest the coming elections. I don't think there will be any problem on any seat. We cannot afford to fight it out among ourselves now. Politics has no rigid rules. PPP and PML (Nawaz), or any other party for that matter, should know that the sooner we learn to accommodate each other and accept it as a reality in politics the better it will be for our country and our future in politics.

TNS: Will PPP join hands with religious parties to contest elections or form the government in the centre and the provinces?

JB: Going by our political history, PPP and religious political parties have not been able to come to terms with each others' political and ideological leanings. Muttahida Majlis-e-Amal has earned a bad name for supporting General Pervez Musharraf in his initial years. After they have helped Pervez Musharraf get legal framework order passed through the parliament, one has every reason to doubt their intentions. But since we believe in democracy we will see if we have to talk to them in the near future. At the end of the day the fate of the religious parties is going to be decided by people. It will be a welcome sign, though, if they sign the Charter of Democracy. We hope no big hurdles arise (in their signing the charter). But we will certainly try and find a way out if there are differences over an issue.

TNS: What do you think is going to come out of the July meeting on the Charter of Democracy?

JB: In the meeting, we will present the charter to all the component parties of ARD. We will welcome suggestions and proposals from other parties. It is very likely that the charter will be signed by all the parties making up ARD. After that, it will also be presented to MMA for their approval. We hope that if there is a difference of opinion we will sort it out without much delay.

TNS: The Charter of Democracy says that local body elections will be held on party basis. In what other ways, will the local government system be different if set up under the charter's guidelines?

JB: Holding local government elections on party basis will in itself be a big achievement. The present local government system's failure to solve the problems of people is a stark reminder of loopholes in it. Under the present set-up, local government representatives are not accountable to any political party. They are not answerable to people they are supposed to serve. The federal government departments like the National Reconstruction Bureau (NRB) can bring no change when the powers do not trickle down to the grassroots level -- that is, the local councilor. It is for everybody to see that most of the present nazims have hopped onto the bandwagon of local politics on the basis of their wealth alone. Unless local government representatives are accountable to their political parties, which have a political future at stake, things will not improve.

TNS: The charter says that a national democracy commission will be set up to promote 'democratic culture' in the country. What does this mean?

JB: (Promoting a democratic culture) is going to be a long term process but a beginning has to be made. It is true that we cannot bring democratic culture in the society overnight but we should begin by at least talking about it and by backing up the process through forming institutions when we are in power. 'We' here means any democratic government that comes into power through free and fair elections.

TNS: You have braved torture in jails for not compromising your political principles. We no longer see the same spirit in political workers of today...

JB: This is a misconception. Party workers, be it the workers of PPP or any other political party, are there to work for their parties. These days political activity is mainly confined to the electronic and print media. But there will soon come a time when party workers will show their strength on the street.

TNS: PPP is generally known to be weak in organisational structure, especially in Punjab. How is it going to affect the results in the coming elections?

JB: I agree that this is an issue to be urgently looked into by us. This is also the problem with every other big political party in the world that works on the grassroots level. But that should not make us lax. Had we been more organised we could have got better results in the past elections. In the recent past we have taken several steps to make our party more organised and effective at the district and provincial level. We have to do more in this regard.

TNS: Doe