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Pipe
dreams Transit
to future Notions
of inequality Wasted
experiment Regional
rhapsody Peace-mongers Bridging
the knowledge gap cannot be achieved without a huge increase in education
spending Arthur
Bayhan Building
bridges
Plans to
build a gas pipeline connecting Iran, Pakistan and India are under tremendous
strain, mostly because of American opposition. Still the project is far from
falling apart By Ammara
Durrani
But the
pressures are no less daunting. In
October 2004, we had noted in these pages that the heavy geo-political
baggage of conflict that countries of Central, West and South Asia have
carried for decades has kept them outside the 'core' of regional cooperation.
The case of IPI pipeline politics showed that while the rhetoric for joining
hands had matured, the will and apparatus for even functional cooperation —
the minimal requirement for trans-border enterprise — was not firmly in
place among countries that stood most to gain from this cooperation. A
year-and-a-half of negotiations and parallel international developments
later, it is clear that the region cannot wish away political conflicts for
several foreseeable decades. For every stakeholder of the 2,600 km long IPI
pipeline worth nearly $7 billion, these have only multiplied in number and
character. In 2004,
analysts predicted that the Kashmir conflict between India and Pakistan would
spoil, sooner or later, the prospects for the trilateral project because the
fledgling peace process between the two countries remained sketchy and
uncertain. But political leaderships on both sides of the border showed
remarkable pragmatism by terming the pipeline a stand-alone enterprise, to be
made possible irrespective of the snail-paced and often inconclusive
Composite Dialogue between the two countries. Still,
that did not reduce the old mistrust. Despite guarantees from Iran and
Pakistan, India balked because of fear of depending on Pakistani cooperation
for energy supply and thus putting India's economic security at the disposal
of an arch-rival. It even prompted some Indian policy analysts to suggest
that the construction of the controversial Baglihar Dam could be used as a
'counterbalance' by India allowing it "to retaliate, should Pakistan
interfere with the gas flow". That
India could not trust Pakistani government's security guarantees is
understandable, given the tribal conflict brewing in Balochistan actively
targeting gas lines passing through the province. In the last one year,
apprehensions about the conflict in Balochistan and its impact on the IPI
project have only increased. The mounting violence in Pakistan's largest
province poses an urgent challenge for the Pakistani government despite
President General Pervez Musharraf's vow to crush the tribal resistance with
unprecedented force. Notwithstanding
these obstacles and availability of options like
Tajikistan-Afghanistan-Pakistan (TAP) pipeline costing $5 billion and
Qatar-Pakistan-India (QPI) pipeline costing $8 billion, everyone knew that
IPI offered the cheapest, guaranteed and relatively securer means for
bringing the much-needed gas to energy-hungry Pakistan and India. This
cost-benefit analysis encouraged the three countries to set up a formal
mechanism of negotiations for clinching the deal. Through regular meetings of
their bilateral working groups, the three governments have managed to thrust
the IPI project at the center of their diplomatic parleys, gaining for it a
global focus. The
international attention that the project has received in the last few months
has given energy politics an economic clarity and excitement for untapped
potential that, after a brief spell, had gone missing from the region in the
1990s. It has caught the imagination of Russia, China, Japan, the Gulf states
and other countries in Southeast Asia who all want a share in the energy pie,
and who are negotiating numerous deals with each other worth millions of
dollars. Until
recently, the regional environment for what former Indian Petroleum Minister
Mani Shankar Aiyar envisioned as an Asian energy grid comprising of a matrix
of pipelines stretching from the Caspian to China, seemed promising. But this
year has begun on an ominous note because of the rise of the biggest hurdle
that the project now faces — the US-Iran nuclear stand-off. On the surface,
the political leaderships of Iran, Pakistan and India continue to give media
sound bites that would have us believe that the IPI project is only a matter
of some more negotiations and time. But several realities present a grim
picture. Since
the start of active negotiations on the project, the US has voiced its
reservations against it, first mutely and later vociferously. Against the
nuclear drama that is unfolding vis-a-vis Iran, it has upped the ante by
striking a civil nuclear energy cooperation deal with India last summer. The
US says the deal will meet all of India's energy needs. It has also dangled
F-16s and F-18s in front of Pakistan and India, respectively, as incentives
to back out from the IPI project. The jury
is still out on the question as to what extent the US-India civil nuclear
energy deal is aimed at containing Iran more than China. But the subsequent
developments involving Iran's referral to the UN on charges of nuclear
enrichment and the American threat of slapping economic sanctions on that
country have put a huge question mark on the future of IPI pipeline. At the
micro level, Aiyar's personal dynamism behind the region's energy drive is no
longer there. The able politician's transfer to another ministry in February
this year may have been the first casualty of the growing Indo-US security
partnership. Then the parties can't seem to agree on a pricing formula to
mutual satisfaction. Iran wants $6 per million British thermal units (MBTUs)
of gas, which Pakistan and India find at least $2 per MBTUs higher than their
expectations. Resultantly, the first tripartite ministerial talks in March
failed to settle issues of inter-government guarantees and obligations,
pipeline security, building, operation and maintenance, and pricing
structure. Without
naming the US, India and Pakistan both deny facing any external pressure to
back out of IPI, saying they will not allow it to come in the way of their
national interests. This sounds as a direct rebuff to Washington's wishes.
Behind their apparent media-driven confidence, however, it appears that the
two South Asian neighbours are finding it difficult to carry on business as
originally intended, because the US is stepping up its efforts to back the
Central Asian energy route as a more acceptable option for India. The
press reported last month that India is expected to formally join the TAP
pipeline project by mid-May and stay away from IPI plans. The Indian cabinet
is in the process of actively considering the project that enjoys the
blessings of the Asian Development Bank (ADB). Even
though some of important issues still need to be resolved like certification
of the Daulatabad gas field reserves, gas volumes to be transported by the
pipeline, gas pricing, pipeline security and the over all structure, TAP
pipeline partners have formally asked India to decide about joining the
project by May 15. Compared
to the advances that have already been made in pursuit of IPI pipeline, TAP
project may take quite a long while before any good comes out of it. This is
why the players are keeping all their options open even if they appear
contradictory. Last
week, Iranian Deputy Oil Minister, Hadi Nejad Hosseinian, held talks first in
Islamabad and then in New Delhi. In Islamabad, Pakistan and Iran agreed to go
ahead with a bilateral gas pipeline with a 33 per cent higher supply to
Pakistan than the proposed tri-nation project, if India does not join it.
Hosseinian and Pakistan's Petroleum Secretary Ahmad Waqar said at a press
conference that India could be accommodated through a second pipeline if it
was interested in going ahead with IPI pipeline. Later in
New Delhi, Hosseinian clarified that India had not been 'ousted' from IPI
pipeline, and also set an August deadline for India to sign an agreement on
the project, failing which Tehran would proceed with bilateral exports to
Pakistan. The
three governments seem set for a meeting in Islamabad on May 22-23 to sort
out pricing and other issues before a tripartite ministerial meeting in
Tehran scheduled for June. Meanwhile, Tehran is also planning to go ahead
with gas exports to China slated for 2009. It is
difficult to predict the outcome of IPI project even if the odds against it
look daunting. American pressure notwithstanding, the three actors are
putting up an independent front, ostensibly safeguarding their economic
interests. Russian and Chinese stakes in the energy game also offer them an
opportunity to push through with their plans, albeit slowly. In a recent
article, energy expert F William Engdahl chronicled the latest developments
around the Shanghai Corporation Organization (SCO) which is defining the
energy politics in the region and the US position therein. Engdhal says that
Iran's entry this June in SCO will shift the regional balance of power
against the US, and that US opposition to their economic cooperation is
"driving these countries into each others' arms". That could result
in a "geopolitical nightmare" for Washington. However
it may move in future, it is clear that Washington wants to use local
conflicts to establish its influence in the region. Through pressure and
offering diverging incentives to each player, it is perpetuating these
conflicts which would ultimately prevent efforts at regional economic
cooperation in the form of projects like IPI gas pipeline. In doing so, the
US may only end up weakening countries which have helped it in its war on
terror, and which can play an important role in ending its Iraq imbroglio. Whether
common economic interest will trump heavy-weight politics remains to be seen.
Both India and Pakistan know, however, that they will play a key role in
deciding the fate of this project to which is attached the economic
prosperity of their billion plus poor people.
Pakistan
has a lot to gain if it can realise the benefits of being at the centre of
commercial and economic integration within ECO By
Mohammad Ali Khan
The
prime minister, in his speech, focused on the economic, and particularly the
energy potential, of ECO member countries. He stressed the optimum
utilisation of this potentials for a greater economic integration among ECO
member countries. Shaukat
Aziz's suggestion for making ECO region a free trade area, in fact, is a
carry-over of an understanding reached among the ECO members when five of
them — Pakistan, Afghanistan, Iran, Tajikistan and Turkey — signed ECO
Trade Agreement (ECOTA) in Islamabad in July 2003. The agreement is an
important stepping stone towards removing trade barriers in the region and
setting up of free trade area by 2015. Pakistan, being the founding member of
the ECO, is the coordinator of ECOTA and it has, along with Tajikistan,
already ratified ECOTA. While other signatories are at different stages of
ratifying the agreement, all ECO members are reviewing a draft action plan
for its implementation. Experts
believe the implementation of ECOTA can lead to opening up of trade in the
ECO countries and pave way for greater inflows of Foreign Direct Investment (FDI)
in the region, allowing multinational companies to tap it as an integrated
single market. This
agreement, the experts say, can also foster higher level economic growth in
the region through lowering of barriers to trade, reduction of transaction
costs and removal of inefficiencies in trading systems. It will help in
alleviating poverty, reducing unemployment and forging closer cooperation
among the member countries. ECO
covers an area spreading over 7 million square kilometer with huge minerals
reserves and enormous human resources. According to the statistics provided
by a recent ECO bulletin, ten member countries of ECO have a total population
of 379.7 million with a combined economic output of $616.9 billion in 2004
— a mere 1.5 per cent of the world's economic output that year. The
economic recovery achieved by ECO countries as a group in 2002 accelerated
significantly in 2003 and 2004 with average real GDP growth recorded at 6.9
per cent and 8.0 percent respectively, compared to 1.1 percent in 2001. The
recent growth performance shows that ECO countries outperformed any other
regional grouping of all developing countries. During the past five years,
real GDP growth averaged 6.2 per cent for ECO region, compared to an average
growth rate of 4.1 per cent for all developing countries. "Transport,
communication and energy sectors have great potential. ECO member states can
cooperate in these sectors to boost their growth prospects. This objective
can be achieved through initiating special steps like ECOTA as engine of
growth in regional trade," says Muhammad Tariq who heads Small and
Medium Enterprises Development Authority (Smeda) in Peshawar. Geo-strategic
importance of Pakistan in the broader context of ECO has placed it into a
very distinctive position. Its proximity with Afghanistan and six land-locked
former soviet states places it at the centre of ECO's economic development. For
instance, Pakistan has a critical role to play in 'pipeline politics'
currently going on with active presence of Iran and Turkey, the two other
founding members of ECO. Pakistan's geo-strategic position on the one hand
can provide an effective transport infrastructure to the land-locked Central
Asian Republics (CARs) and war-ravaged Afghanistan and on the other it can
also help in fostering the higher growth within its own economy. Statistics
show that proven oil and natural gas resources of the region have been
estimated at three per cent and four per cent of the world's total
respectively. The estimated proven oil reserves of the region range between
17 billion barrels to 33 billion barrels. By 2010, the countries of the
region are forecasted to produce from 3 million to 4.7 million barrels per
day of oil. The confirmed regional natural gas reserves are estimated at 232
trillion cubic feet. "These
vast energy reserves attract the attention of even the non-ECO players, like
the United States, India and China who one way or the other influence the
Central Asia's economic and political integration into global political
economy," says Tariq. He
believes that economies of Central Asian states can benefit immensely if they
are allowed to use Pakistan as a transit route for their trade with the rest
of the world because this route will greatly reduce their transportation
costs. This will also help Pakistan to take up a strategic role in shaping
the economic future of the region. Apart
from facilitating trade in the region, Pakistan can also transform itself
into an energy corridor. Negotiation for Turkmenistan-Afghanistan-Pakistan
pipeline and Turkmenistan-Iran-Pakistan pipeline projects are evidence of
Pakistan's central role in the movement of energy in the region. "Geo-strategic
importance of Pakistan affords it to play a central role in political and
economic integration of the region. It has the ability to become an economic
and transport hub of the region because it provides the shortest and
economically the most feasible transit route for Central Asian states to
reach the Arabian Sea. But to play that role, Pakistan must have to integrate
itself effectively with regional transport infrastructure," says Tariq. Pakistan,
he suggests, must effectively take part in ongoing reconstruction in
Afghanistan for channelising transit corridors passing through Afghanistan
into Central Asia. Businesspeople
too think that Pakistan in general and NWFP in particular will be the main
beneficiaries of the trade liberalisation through ECOTA or any other
multilateral agreement between ECO member states. "The
natural resources and raw material of former communist states in Central Asia
can feed local industries to manufacture low cost industrial products.
Similarly, Central Asia's energy reserves and their export to other ECO and
non-ECO member states is also placing Pakistan at an important
position," says Numan Wazir, a Peshawar-based businessman. In terms
of trade with ECO member states, Pakistan does not have a lot going. But,
Numan says, Central Asian states and Afghanistan offer Pakistan an
opportunity to increase export of non-traditional items to these so far
unexplored markets. He says
all these are emerging economies and have the capacity to absorb a lot of
exports because they do not have a firm industrial base of their own which
means countries like Pakistan have a golden opportunity to tap some of this
potential. "Certainly,
Iran and Turkey, two key players of ECO, have technical edge over Pakistan
when it comes to large scale manufacturing," he concedes but adds that
this does not necessarily mean Pakistan's loss. "Industrial imports from
the two countries can contribute in accelerating Pakistan's economic growth.
Machinery being produced by these two countries is comparatively
semi-automated that suites Pakistani environment well because it is still
labour-intensive. Its import and installation will certainly generate
employment and thereby reduce poverty which is one of the basic principals of
ECO charter," he adds.
taxation Taxing
riba-free loans is unjustified, confiscatory and unconstitutional By Huzaima
Bukhari and Dr Ikramul
Haq Any law
enacted by the Majlis-e-Shoora (Parliament) has to conform to the principles
contained in the Constitution of Pakistan, and tax codes are no exception.
Article 77 of the Constitution says, "No tax shall be levied for the
purposes of the Federation except by or under the authority of
Majlis-e-Shoora (Parliament)". Any tax levied by the Parliament is to be
tested on the touchstone of the fundamental rights enshrined in the
Constitution and if it is violative of any provision it would be void ab
initio. The
state has power to tax its citizens but taxation should not be confiscatory,
discriminatory or offensive to any fundamental right guaranteed in Chapter 1
of the Constitution (Article 8 to 28). It is the duty of the State "to
ensure the elimination of all forms of exploitation and the gradual
fulfilment of the fundamental principle: from each according to his ability
to each according to his work" (Article 3). In the Income Tax Ordinance,
2001 (called 'the new Ordinance' in this article), this principle has been
flagrantly violated through section 13(7) of the new Ordinance by taxing
notional income in the hands of a salaried person if his employer extends him
a riba-free (interest-free) or concessionary loan. Article
8 of the Constitution says, "Any law, or any custom or usage having the
force of law, in so far as it is inconsistent with the rights conferred under
this Chapter (Chapter 1 relating to Fundamental Rights) shall, to the extent
of such inconsistency, be void". The provision of taxing notional income
arising from riba-free or concessionary loans is against the following
provisions of the Constitution: 1. Article 25 of the Constitution
which says, " all citizens are equal before law and are entitled to
equal protection of law". This article does not speak about abstract
equality, but in fact, proclaims equality before the law. Equal protection of
law means that all people equally placed should be treated alike both in
privileges conferred and liabilities imposed. A reasonable classification of
equally placed people should be based on an intelligible differentia which
distinguishes persons or things that are grouped together from those
who/which are left out and the differentia must have a rational nexus to the
object sought to be achieved by such classification. 2. Article 38(f) requiring the State
to eliminate riba as early as possible. In
Pakistan, loan defaulters (both genuine bankrupts as well as professional
loan-sharks) enjoy immunity from tax. Through clause (3A) of the Finance Act
2004, Part IV of the Second Schedule to the new Ordinance, confers the
unprecedented benefit of non-taxation on a remitted loan and its mark-up. It
is painful that businesspeople are getting these extraordinary benefits while
the already overtaxed salaried people are being burdened with unjustified
notional taxation on riba-free or concessionary loans where no element of
real income is involved. It is shocking to note that benefit extended to many
persons through Finance Act 2005 by inserting clause (53A) in Part I of the
Second Schedule to the new Ordinance is not extended to bank employees
despite the fact they are at par with all the people mentioned therein. Section
13(7) of the new Ordinance taxing the notional benefit arising out of riba-free
or concessionary loans given to employees is violative of Article 25 and
38(f) of the Constitution. The section reads: "Where a loan is made, on
or after the 1st day of July, 2002, by an employer to an employee and either
no profit on loan is payable by the employee or the rate of profit on loan is
less than the benchmark rate, the amount chargeable to tax to the employee
under the head 'Salary' for a tax year shall include an amount equal to (a)
the profit on loan computed at the benchmark rate, where no profit on loan is
payable by the employee, or (b) the difference between the amount of profit
on loan paid by the employee in that tax year and the amount of profit on
loan computed at the benchmark rate, as the case may be. The
expression 'benchmark' is defined in sub-section (14) of section of the New
Ordinance 13 as under: "'benchmark rate' means (i) for the tax year
commencing on the first day of July, 2002, a rate of five percent per annum;
and (ii) for the tax years next following the tax year referred to in
sub-clause (i), the rate for each successive year taken at one percent above
the rate applicable for the immediately preceding tax year but not exceeding
such rate, if any, as the Federal Government may, by notification, specify in
respect of any tax year". This
provision of law is liable to be struck down as it is against the declared
policies of the government of providing relief to the salaried people,
promoting housing industry and extending affordable loans and advances to
low-income groups of society. Section
13(7) read with section 13(14) of the new Ordinance is against all norms of
law, justice and equity. How can a law fix benchmark rate arbitrarily at 5
per cent for the base year and thereafter provide for an annual increase of 1
per cent? Secondly, if an employee has obtained loan at a rate less than 5
per cent from his bank, how can the law fix it at a higher rate when many
other clients are getting the loans at the same or reduced rate? It is
pertinent to mention that the Central Board of Revenue (CBR) under a repealed
Ordinance of 1979 issued a Circular Letter 4(8)IT-J/91 dated June 30, 1991
opining that "...it is not desirable to tax such notional
income...". Why this policy has changes in Income Tax Ordinance, 2001 is
best known to CBR stalwarts. The
facility of interest-free or concessionary loans can be abused by the
director/shareholders of private companies or certain persons running
family-controlled trusts, but in their case the law provides that such a loan
would be treated as dividend as per section 2(19)(e) of the new Ordinance.
The whole amount of loan in their case is treated as dividend and a separate
block of income that is taxed at a rate of 10 per cent. In the
case of employees/persons having no ownership interest in the business
concern, the employer/concern cannot divert income by giving them loans in
lieu of dividends and therefore there is no justification to tax these loans
as dividends. The idea of taxing these loans at an incremental rate of 1 per
cent every year starting from the base year rate of 5 per cent is
confiscatory as in many cases the actual rate on which these loan are
obtained are much lower than this. The banks are giving loans to
credit-worthy parties at rates as low as 2 per cent to 3.5 per cent. The
following illustration (based on a real life case) shows financial
ramifications of this provision of law in the case of a bank employee,
earning a monthly basic salary of Rs 10,000, who has availed the facility of
house loan worth Rs 4 million from his employer: Had
section 13(7) not been applicable, total tax payable would have been just Rs
700. Taxable
salary is merely Rs 120,000 whereas notional value of taxable house loan
facility is Rs 240,000. Loan of Rs 4 million is barely sufficient to
purchase/construct a house on a 125 square yards to 250 square yards plot in
any average locality. The
banks' employees are at par with PIA and Railways who enjoy free/concessional
tickets. In their case no income on this account is taxed as the employer is
engaged in the business of carriage of passengers. On the same analogy, the
banks are engaged in the business of lending and borrowing and therefore
their employees should not be taxed for this facility. The
above example clearly exposes the adverse effects of section 13(7) read with
section 13(14). There are cases where only due to inclusion of loans as
notional income, a salaried person falls in the category of tax bracket of Rs.
600,000 and consequently all the allowances and perquisites in his case
become taxable. It is
therefore imperative that this notional income should not be taxed. In case
the government (in fact CBR) is bent upon promoting riba despite tall claims
of eliminating exploitation from the economy, then the following amendments
should be made making the law equitable: 1. Benchmark rate
as defined in section 13(14) should not be more than the rate on which a loan
is obtained by an employee. 2. In case rate is lower than the
average borrowing rate for such kind of loans in the market, the federal
government or the State Bank should be asked to notify an average rate for
the relevant tax year. 3. Addition in
income under section 13(7) should not be part of 'taxable income'. 4. Such a notional income should be
taxed as a separate block at a concessional rate not exceeding 5 per cent. It is
hoped that the policymakers will take due notice of this unjust and
confiscatory provision of law while making budget for financial year 2006-07.
This law has disastrous financial ramifications for the salaried persons. The
tall claims of the government to promote riba-free economy, housing industry
and to provide housing facilities to all the citizens are in direct conflict
with this erratic and confiscatory fiscal provision. The
authors are members of visiting faculty of Lahore University of Management
Sciences (LUMS). Mr.
'A', employ of bank, recieved the following for the tax year 2006: Basic
Salary:
120,000 House
Rent Allow: 54,000 Utilities:
12,000 Medical
Allowance:
12,000 Computation
of taxable income and tax payable Item Amount
Exempt
Taxable Basic
salary
120,000 Nil
120,000 HRA
54,000
54,000
Nil Utilities
12,000
12,000
Nil Medical
12,000
12,000
Nil Income
u/s 13(7)
320,000 80,000
240,000 Total
taxable income
360,000 Calculation
of tax liability Taxable
income:
360,000 Tax on
Rs.200,000:
3,500 Tax on
Rs.160,000 @ 12%: 19,200 Gross
tax:
22,700 Less
rebate u/s 64
5,044 Net tax
payable
17,656
Karachi
has again privatised its solid waste management. Can the exercise be fruitful
without learning and implementing lessons from similar exercises in the past?
By Dr
Noman Ahmed Three
months ago, the City District Government Karachi (CDGK) privatised its solid
waste management (SWM) service. Private contractors are now handling waste
management in the city. An empirical survey of the city streets and
neighbourhoods, however, shows no improvement from what they always were. This is
not the first time that SWM has been privatised in Karachi. But the manner in
which the current exercise is initiated shows that no lesson has been learnt
from the experiences of the past. As per the current conventions wisdom, it
is assumed that any service or enterprise would acquire new heights of
efficiency whenever handed over to the private sector. The reality, however,
shows a different picture, which needs to be understood in order to develop
sustainable solutions. Changes
in lifestyle and rise in consumerism have been catalytical in increasing the
quantity of urban waste. According to conservative estimates, total amount of
waste generated in Karachi is over 7,800 tonnes per day. This does not
include the waste generate by hospitals and industrial and commercial
activities like construction, electronics, manufacturing for which authentic
statistics are not available. About 12
per cent of the waste generated in the city is segregated and disposed off at
the household level; another 10 per cent is separated and disposed off by
scavengers; five per cent of it is used for land reclamation, predominantly
along the coastline of the city; town Municipal Administrations pick up 33
per cent of the waste while an almost equal quantity is dumped in natural
drains, nullahs and creeks. In terms
of composition, a sizeable part of this waste comprises urban organic waste
with low calorific value. Recyclable items are largely separated at source or
are sold to junk dealers. Over 400 recycling units exist in Karachi, all in
the informal sector. Fact finding studies by Urban Resource Centre — an NGO
— have revealed that over 5,500 households draw their livelihood from this
informal recycling industry. Karachi
lacks properly designed transfer stations for interim storage, sorting and
onward transfer of waste. As a result, informally designated garbage dumps
can be found almost everywhere. There is no scientifically designed sanitary
landfill site for the safe and final disposal of waste. Most of the garbage
is presently dumped in Jam Chakro dumping site near Surjani Town, Govind Pass
(near Hub) and Mehran Town near Korangi. As no public health procedures are
applied while selecting these sites, open dumping causes enormous problems.
For instance, three children died in Surjani Town two years ago when the
authorities dumped oil-contaminated soil there. As a
municipal norm, SWM has been a prime responsibility of the municipalities.
Historically, Karachi Metropolitan Corporation (KMC) (now defunct) used to
handle it. After the KMC was restructured and District Municipal Corporations
(DMCs) came into being, the responsibility of managing solid waste were
divided between the two bodies. DMCs would looked after collection and
disposal, while KMC restricted itself to the management of dumping sites.
After the promulgation of Sindh Local Government Ordinance 2001, managing
solid waste became a three-tier operation. Union council was made responsible
for street sweeping and collection of waste from households, TMA was made
responsible for lifting of waste and transferring it to dumping sites and
CDGK was given the task of managing dumping sites as well as overall
coordinating the whole affair. The performance of the previous system for SWM
was not satisfactory. Low priority to SWM sector, limited resources at the
disposal of towns, lack of coordination among government departments and
limited availability of trained staff were few of the shortcomings faced by
the sector. Given
donors' preference for privatisation of public services, it was natural that
managing solid waste also went the same route to rid it of inefficiency.
Privatisation of SWM in Karachi was attempted under the local governments
that existed in 1990s. In 1994, KMC contracted waste collection to a private
entrepreneur. He installed an imported plant to convert urban organic waste
into compost (which is a form of plant food used for soil enrichment). Due to
various administrative and procedural reasons largely unknown, the plant
closed down and the contract was prematurely terminated. In 1998, DMC-Central
(now defunct) awarded a contract of waste collection and disposal for North
Karachi and Federal B Area. A private contracting firm was hired for the
purpose. The contract ran into controversies soon after its take off. There
were allegations and counter allegations by the contracting parties. The
contract was soon terminated. According to the contractor, he had to undergo
heavy financial losses in the capital investments made for the purchase of
vehicles and manpower. DMC-Central accused the contractor of poor
performance, below the desired level of efficiency. In DMC-East
(now defunct), an NGO, Society for Environmental Awareness (SEA), was invited
to lift organic waste from the site of Old Sabzi Mandi at the University Road
to notified points at Korangi for preparation of compost/fertilizer. Due to
administrative delays and improper location, the project could not
materialise. In Defence Housing Authority, a private organisation has been
active in lifting and disposing the waste to prescribed points. At a local
scale, an NGO, Association for Protection of Environment (APE) is running a
project in Shah Rasool Colony and Lower Gizri to devise a waste collection
system with local community's participation. It is linked with the municipal
network of Clifton Cantonment Board. At the collection level, the service is
functioning satisfactorily due to community participation. This
shows that results of SWM privatisation has remained below the desirable
level. Most of the past experiments could not even take off due to different
types of problems. While each of these cases has shown that professional and
managerial competence is a pre-requisite for success, understanding similar
experiments is also extremely relevant. It is vital to know that donor
agencies, principally the World Bank, have been promoting the concept of
private sector participation for improving the efficiency and level of
service in a cost effective manner. A number of formats and arrangements have
been tried and tested in this respect which have met with a varying degree of
success. Several of them are relevant to Karachi also. In most
of the developing countries private sector operators are small in scale and
capacity and are not able to handle all aspects of the services themselves.
They also have to bear the burden of taxes and duties on the import of
equipment. In order to remain profitable, they establish links with the
members of the government to get better conditions in contracts. This is a
case found prevalent in most of the Latin American cities. Several lessons
can be derived from these experiences. Livelihoods
of certain low income households are linked to SWM. While devising a system
of formal privatisation, existing informal practices of picking, sorting and
recycling should be kept into view. It is interesting to know that while we
talk of privatisation today, informal private sector has been doing its job
for several decades. It not only manages its own survival but also provides
useful service by reducing waste volumes, generating some useful products and
bye-products through recycling and creating avenues of employment for a vast
variety of skilled and unskilled labour force. According to some studies,
there are more than 100,000 labourers/people in Karachi who are directly or
indirectly involved with income generation activities related to waste
management. The key
element in devising a management structure for private sector should be
efficiency. Any thing less than that should not be acceptable. Municipalities
tends to privatise SWM to lower the cost and improve on service. Private
sector enters the system in order to earn profit by keeping an appropriate
management. A proper blend of the two can only result when a realistic
contract is reached. The contract should include terms and conditions that
are realistically worked out and are manageable by the contractor. Capacity
building of the contractors is a crucial factor. At present, there are
extremely few private enterprises that can attempt to manage waste in
Karachi. Skill development, management training and site management are few
essentials for building the capacity of potential contractors. A
crucial aspect in SWM is an appropriate system of monitoring and evaluation
of the performance of private sector contractors. It has several aspects. The
first aspect is the creation of a set of performance indicators. Frequency of
sweeping, lifting of garbage and safe disposal to the dumping/transfer site,
general cleanliness and an impact assessment on the health of the citizens
are some common indicators. Impact assessment by the users and beneficiaries
of the project is also vital. Formats
of monitoring should be carefully determined. They must also include and
involve the users and beneficiaries. Another aspect is the system of lodging
complaints and follow-up response from the service provider. In many
developed countries, this structure is fairly simple. Complaints are
registered through phone calls and are attended within 24 hours. Such
practices help in building users' confidence. But the
foremost aspect is to make SWM a self-sustaining enterprise. In the
contemporary environment of market economy where subsidies and relaxations
cannot be guaranteed at all, the question of sustenance becomes crucial.
Several aspects need to be considered to make the exercise realistic. The
existing set of actors and enterprises should be incorporated into any new
system that is devised. Their livelihoods and modes of employment should be
safeguarded. Recyclers, middle agents, contractors of different scales and
orientation and shopkeepers involved in commercial activities related to SWM
all fall in these categories. Appropriate ways and means must be worked out
to rationalise their operations without disrupting the useful working chains
that they have developed. Waste
should be used to generate outputs that are essentially required in the
society. Organic waste can be utilised to prepare compost which remains in
great demand in urban agriculture. Similarly, waste of suitable calorific
value can be used to generate energy. For organised disposal, sanitary landfill sites need to be developed where waste can be disposed in a safe and environment-friendly manner. Simple and contextually viable technology should be employed by the service providers. Ultra high-tech and sophisticated machinery or orthodox manual modes are both incompatible with our local conditions.
By Amitabh
Pal Cities
of no joy A new
American book reveals yet again that India, Pakistan and Bangladesh are world
leaders — in a field, however, that will make South Asians extremely
uncomfortable. Acclaimed
US sociologist Mike Davis has just published a global survey, titled Planet
of Slums, of a sad phenomenon of our times. In this much-praised work, he
includes everything that you probably want to know about slums, including the
history (he even traces the word origin), typology, geology, and the economic
forces at play. Sadly, the three biggest South Asian countries get
prominently highlighted throughout, with Sri Lanka making a few cameo
appearances. "Bombay,
with 10 to 12 million squatters and tenement-dwellers, is the global capital
of slum-dwelling, followed by Mexico City and Dhaka (9 to 10 million each),
and then Lagos, Cairo, Karachi, Kinshasa-Brazzaville, Sao Paulo, Shanghai and
Delhi (6 to 8 million each)," notes Davis in a book that is full of
eye-popping detail right from the start. I know
that at some level this is not news to many of us. The moment you step
outside your house in any major South Asian city, the actuality of urban
destitution becomes readily apparent. But, still, considering how much of a
presence slums are throughout the region, there is a surprising deficiency of
scholarly research or media coverage within South Asia of this issue,
although there are honourable exceptions such as Kalpana Sharma's Imagining
Dharavi, a masterful book on Bombay's megaslum. The
reasons for this are not difficult to understand. The topic makes all of us,
including me, uncomfortable. The reaction of many middle-class residents of
these cities is either to throw their hands up in despair at the reality
around them, or turn on the poor themselves, demanding their eviction. The
media often just reflect the sentiments of their audience. Slums
and their inhabitants thus continue to get short shrift in much of the South
Asian press, including the English-language media (and Hindi media outlets,
which I am quite familiar with, are generally quite bad, too). Publications
like India Today and Times of India are so busy breathlessly chronicling the
escapades of the tiny elite that they seldom disdain to cover the lives of
less exalted folks. But we
cannot begin to tackle the problem of urban misery until we begin to
understand it. Davis provides us enlightenment on this very vital subject. Lest you
think that Davis is one of those arrogant Westerners who love to rub the
noses of Indians and Pakistanis in their poverty while being oblivious to
their own social ills, be assured that Davis has never spared his countrymen.
He started his book-writing career exposing the ecological unsustainability
and massive inequality characterising Los Angeles in works like City of
Quartz and Ecology of Fear, but has turned his attention to global issues in
recent years. In Late
Victorian Holocausts, Davis achieved the mind-boggling feat of linking late
19th century weather patterns and misadministration to large-scale famines in
British India, China and Brazil. By doing this, he implicated imperial rule
in creating the poverty that plagues much of South Asia today. And he does
that to some extent again in Planet of Slums. "The
British were arguably the greatest slum-builders of all time," he
writes. "In India, Burma, and Ceylon, their refusal to improve
sanitation or provide even the most minimal infrastructure to native
neighborhoods ensured huge death tolls from early-twentieth-century epidemics
(plague, cholera, influenza) and created immense problems of urban squalor
that were inherited by national elites after independence." But
Davis doesn't let South Asian post-colonial governments off the hook as well.
"In
the rest of the Third World [apart from China, Hong Kong and Singapore], the
idea of an interventionist state strongly committed to social housing and job
development seems either a hallucination or a bad joke, because governments
long ago abdicated any serious effort to combat slums and redress urban
marginality," Davis points out. He also
shows that the privileged classes throughout the developing world have often
seized much of the housing set aside for the poor, with India and Pakistan
being prime examples. "In
the 1970s, for example, municipal and state authorities launched a hugely
ambitious scheme to create a modern twin city on the mainland, opposite the
Bombay peninsula," writes Davis. "The urban poor were promised new
homes and jobs in glittering New Bombay (now Navi Mumbai), but instead local
people on the mainland were displaced with loss of land and livelihood, while
the bulk of the new housing went to civil servants and the middle
class." Karachi
also doesn't escape Davis's harsh eye. "The
periphery of Karachi is public land supposedly controlled by the Karachi
Development Authority," Davis writes. "Yet, as the Authority,
according to Peter Nientied and Jan van der Linden has "totally failed
to provide land for housing low income groups," the fringe has been
illegally subdivided, by syndicates of public officials, corrupt police, and
middlemen known as dalals." There
aren't only negative stories to tell about slums. Davis's book mentions
Akhtar Hameed Khan and his much-admired Orangi Pilot Project in Karachi.
Another recent book on the same subject, Robert Neuwirth's Shadow Cities: A
Billion Squatters, A New Urban World, gives an account of several self-help
and community groups that ceaselessly work to make life more bearable in the
slums of Bombay. But Neuwirth writes that when local reporters came to know
of a white Westerner living in a slum in their city, they were only
interested in him validating their opinions about how horrible, diseased and
crime-ridden slum-dwellers were. The
phenomenon of microfinance lending, represented most famously by Bangladesh's
Grameen Bank, is also helping the urban needy, particularly women, in a small
way. But to ensure that slums and their proliferation are tackled in a
far-reaching manner will require a drastic change in governmental priorities
throughout South Asia, including support for village-based employment,
small-scale agriculture and a decent infrastructure in the rural areas, plus
making available jobs and affordable housing in the urban centers. I know:
You are scoffing at me as a daydreamer. But how about this. All of us — the
rich, the middle class and the poor — need to get together to demand that
the governments of South Asia do the one thing it is known that they are
capable of: waging war, but this time on poverty. Because if they don't
tackle the underlying issues creating the problem of slums on a war footing,
South Asian cities will be confronting urban blight and deprivation on a
bigger and bigger scale in the years to come. 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.
Commodity
trade between India and Pakistan ensures profits for exporters, low prices
for importers and a lot of goodwill towards each other between the two
countries and their people By Sushant
Sareen
At a
political level there remain plenty of problems, issues and disputes between
India and Pakistan, and one dare say, none of them are likely to be resolved
any time soon. But increasingly the political disputes between the two
countries are not standing in the way of trade and commerce. Equally
important is that fact that narrow 'nationalism' is no longer dictating the
choice of trading partners. Not only is there no longer any national shame
attached to importing goods (including food-stuff) from the 'enemy', there is
also no national 'pride' or even nationalistic gloating on the issue of
exporting goods to the 'enemy'. This is really a sign of growing maturity
among the people of the two countries and a victory of 'enlightened
moderation' (or self-interest) over the earlier tendency to 'eat grass' in a
show of nationalism. In a
sense, this developing economic paradigm is not unique to India and Pakistan.
Around the world, economics is fast becoming the defining and driving factor
in relations between countries. Within countries, the fate of ruling
dispensations is increasingly being decided by their performance in the
economic field. Exhorting people to 'eat grass' no longer sells well at the
hustings, or even at 'fauji darbars', especially when those asking the people
to make sacrifices continue to live by the maxim 'greed is good'. The
political compulsions of controlling runaway inflation in prices of
commodities of daily use like sugar, meat, onions etc, coupled with economic
realism of procuring these goods from the nearest and cheapest source, have
therefore combined to give a fillip to trade between India and Pakistan. Interestingly,
the very reason for which skeptics have doubted the potential of trade
between India and Pakistan — the commodities and products that both
countries produce are similar — is exactly what is pushing forward trading
relations between them. Just as despite producing similar products with
similar technology, the developed countries trade more with each other than
rest of the world, India and Pakistan too can have a similar trading pattern
which enhances the competitiveness of both countries by synergising their
productive capacities. In the case of commodities like wheat, sugar, onions,
potatoes, garlic etc the sub-continental palate also becomes an important
factor. Since the climatic and soil conditions are quite similar, onions or
garlic grown in the region are far preferable than the anti-septic taste of
similar products from any other part of the world. More importantly, the
trade in commodities between the two countries is not uni-directional; rather
the same commodities are both exported and imported depending on the supply
situation. Today,
Pakistan is facing severe shortages of sugar, so it makes sense for it to
import sugar from India, which has surplus stocks. But in 1999, India was
importing sugar from Pakistan to stabilise prices at home. Also, when the
onion crisis hit India in late 1998, they were imported from Pakistan. Today,
there is a glut in the onion market in India, and export of onions is a very
attractive proposition to bale out the onion farmers. But while India is
overflowing with onions, the wheat stocks have reached a critical low. India
is therefore considering importing wheat from Pakistan, which in turn has
allowed duty-free livestock import from India in order to moderate prices of
meat. And with cement prices going through the roof, Pakistan's decision to
allow cement import from India has offered the Indian industry a new market. Of
course, trade in agricultural commodities and basic infrastructural goods
will always face a restriction in terms of supply availability, which in turn
is a function of climatic factors, pricing and procurement policies of
governments, institutional structures (in terms of credit availability,
storage facilities, transport links etc) and cyclical or temporary market
conditions. Since most of these goods are not open for free imports and
exports (which generally depend on domestic supply availability), it adds an
additional barrier to open and free trade in these goods — that of
government mandated trade. This is not entirely a bad thing, provided
governments are open to the idea of regional trade. If
anything, restrictions on commodity trade ensures that such trade does not
take place at the cost of domestic consumers or producers. For instance,
after Pakistan allowed cement imports from India, the price of cement shot up
in the local market. As a result, the commerce ministry had to read the riot
act to cement manufacturers and warn them that exports would be forbidden if
domestic supplies ran short or if the price of cement continued its upward
spiral. Such intervention in the market is politically very important because
it ensures that commodity trade doesn't become a handle in the hands of
unreconstructed and unreformed mindsets within the country, who would then
use this to demonise the other country and try to scuttle trade and commerce
even in non-contentious goods. So,
until trade in agricultural commodities is fully free — something which is
unlikely to happen for a wide variety of political, social and economic
reasons — governments on both sides will also have to calibrate commodity
trade keeping in view the supply situation in their countries. For instance,
if in response to an Indian order for wheat, traders in Pakistani Punjab send
wheat across the international border and this results in shortages in Sindh
or NWFP, it will be a political disaster for both inter-provincial relations
within Pakistan as well as for Indo-Pak trade. Governments will perforce need
to guard against this kind of purely market-driven trade. This kind of a
control can be a bit of a damper for those excited about sub-national
cooperation — Punjab-Punjab, Sindh-Rajasthan, the two Kashmirs — the
regions that would prefer to trade with each other rather than go through the
trouble of looking for customers in Balochistan or Bihar for their produce.
But since commodity trade is only a small component of sub-national
cooperation, government restrictions need not be a limiting factor. Political
intervention in commodity trade also has a very important diplomatic
dimension, which if used wisely, can normalise relations between India and
Pakistan much faster than any political confidence building measure. By
bringing down prices of essential items like wheat, sugar, meat, this kind of
trade directly affects the lives of people, much more than any esoteric
agreement on informing each other of missile tests or hotline between the two
Director Generals of Military Operations ever can. This creates a goodwill
and dependence that is invaluable for normalisation of relations. Indeed,
India is increasingly opening up to the idea of using trade as a tool to
impress upon Pakistan the benefits of normal relations. This is in contrast
to a time when Indian policy makers would have preferred to not sell to
Pakistan only in order to ensure that Pakistan would have to shell out a lot
more money for something it could buy cheap from India. This new
policy not only helps India develop a constituency among the people of
Pakistan but also helps to 'buy' influence among powerful sections of the
Pakistani establishment. For instance, the sugar deal in 1998-99 was also
used by the two governments to oblige special interests like the Army Welfare
Trust and politicians running sugar mills (many of who are today important
members of the government in Pakistan). The opening up of a new market in the
neighborhood also helps domestic farmers, traders, and industry especially
during times of a bumper crop. After all, holding on to stocks is expensive
and if the choice is between a false sense of nationalism which leads to
bankruptcy and selling goods to the 'enemy', all rational economic players
would rather choose the latter over the former. The lifting of barriers to food imports is probably the wisest decision that has been made by the policy makers of India and Pakistan. More than anything else, it signals a lifting of mental barriers. Trade in commodities like cotton, petroleum products and engineering goods is the next logical step that needs to be taken. And with Indian companies waiting for the opportunity to invest in Pakistan, more and more vested interest in peace and normal relations between the two countries are likely to be created. With an ever increasing tribe of stake-holders in peace, the necessary space will be created for the two governments to try and solve their political problems. So perhaps the policy of 'feeding the enemy' (and making money at the same time) is not so bad after all.
Newswatch By Kaleem
Omar We are
now into that pre-budget time of year when tall promises tend to become the
order of the day and official spokesmen get busy painting rosy social-sector
and economic sector development scenarios that often end up being honoured
more in the breach than the observance. And even when they don't end up that
way and things do get done, they frequently tend to get done at a much slower
pace than visualised by the government. In T S Eliot's words, "Between
the reality and the response, falls the shadow." That
shadow, in our case, is made of a number of elements, including the limited
absorption capacity of government agencies to utilise budgetary allocations
for development spending within the stipulated time frame, bureaucratic
inefficiency, procedural red tape, and a lack of the kind of political will
that is needed to translate development goals into concrete results on the
ground. To make
matters worse, this annual ritual tends to be based on premises that
frequently ignore the true magnitude of particular problems in a country of
Pakistan's size, resulting in the formulation of solutions that smack of
tokenism rather than of efforts aimed at really coming to grips with the
problems. True to
form, the government decided on Thursday to raise budgetary allocations for
higher education by 50 per cent in the federal budget for fiscal 2006-07. The
proposed increase from Rs 22 billion in the current fiscal year to Rs 33
billion in the forthcoming fiscal year may sound like a lot, but what this
enhanced figure actually amounts to in per capita terms, based on the
country's present estimated population of 165 million, is Rs 200 per person
per year. This is
a pittance, and is not going to go very far in turning Pakistan into a
knowledge-based economy, especially in light of the fact that more than half
the country's adult population is still illiterate and tens of millions of
people are still excluded from sharing in the benefits of economic growth. Exclusion
is the most poignant expression of our economic and social contradictions and
problems. Exclusion breeds extreme poverty and neglect — the shop-floor of
crime and violence, the locus of human abuse and human destruction. Exclusion
is an amplified portrait of ourselves. If
people could participate in the decisions that shape the processes that, in
turn, shape their lives, economic strategies suited to their real needs could
be implemented, even under the constraints of the global economy. New
economic strategies could then be evolved that put people first, that address
the problems of environmental degradation, that aim at bettering the living
standards of the population as a whole rather than only those of upper-income
groups, and that treat the informal economy as the real economy. For such
people-first strategies to succeed, one of the first problems that needs to
be addressed is the knowledge gap. It may be a truism, but the plain fact of
the matter is that knowledge is the key to economic development, especially
in an age where the world is increasingly becoming one single area in a very
fundamental sense: a complex unit of production, a single labour market and a
specific system of power. Like
other developing countries, Pakistan is characterised by the duality between
the segments of the population that are integrated, even at a very low level,
into the global economy and the much larger numbers of people that are
excluded from the system. Bridging the knowledge gap can help to transform
this system of exclusion into one of inclusion. The
information revolution makes understanding knowledge and development more
urgent than ever before. Today, even the remotest village has the possibility
of tapping a global store of knowledge more quickly and cheaply than anyone
imagined possible only a few decades ago. And yet
more than a billion people in developing countries are living on a per capita
income of less than a dollar a day and another billion are not much better
off. What's more, the income disparity between rich and poor nations is
growing. One of the reasons for this disparity is the knowledge gap. The
United States dominates the world's knowledge economy. Forty-five of the top
50 regions with the best knowledge base in the world are in the US, led by
Minneapolis-St Paul. Stockholm, the top region outside the US, is ranked only
22nd in a report from Robert Huggins Associates, a British think-tank. The
report rates each region on its 'knowledge competitiveness' — defined as
its ability not just to create new ideas but also to exploit their economic
value. Its findings highlight the gap in competitiveness between the US and
the rest of the world, including Europe. European
Union leaders have signally failed in their much publicised original aim to
move the EU significantly closer to becoming the world's most competitive
economy by the end of the decade. Meanwhile,
Japan — which until the late 1980s was touted as the world's most
competitive economy — remains tied up in knots in attempts to tackle its
economic woes. Its legionaries, flanked by columns of the bureaucracy,
continue to hamper attempts to overhaul the economy. Junichiro Koizumi was
supposed to change all that, by going over their heads and appealing directly
to the public. Yet more than five years after becoming prime minister,
Koizumi has little to show for his efforts. US
regions' score in the Huggins report's 'World Knowledge Competitive Index' is
boosted by high research and development spending by businesses, high
spending on education and a highly developed information technology
infrastructure. Other
measures of 'knowledge competitiveness' used to compile the index include
levels of employment in knowledge-intensive industries, such as computer
manufacturing and high-tech services, and numbers of patents registered.
Developing countries hold hardly any US patents. Pakistan, for example, holds
only two US patents — both held by a Karachi-based company that
manufactures polypropylene yarn and downstream products. The San
Francisco region — home of Silicon Valley — comes second in the index.
London, in 50th place, is the top UK region, with Tokyo the highest-scoring
Asia-Pacific location in 54th place. Germany, the eurozone's largest economy,
performs poorly: its highest-ranking region, Hamburg, comes 62nd in the
index. The
Huggins report identifies Australia and New Zealand as countries on the rise
within the world's knowledge economy — boosted by growing employment in
knowledge-intensive industries. The
report emphasises the role governments can play in boosting the knowledge
economy through spending on education and R&D tax breaks. It says the
scope for intervention is wide and highlights the potentially crucial role of
business-focused universities in spreading the knowledge economy. Poor
countries — and poor people — differ from rich ones not only because they
have less capital but because they have less knowledge. Knowledge is often
costly to create, and that is why much of it is created in industrial
countries. But developing countries can acquire knowledge overseas as well as
create their own at home. Forty
years ago, Pakistan and South Korea had virtually the same income per capita.
Today, South Korea's GDP per capita, at $ 13,000 is nearly 17 times higher
than Pakistan's, at $ 800. Some reckon that half of the difference is due to
South Korea's greater success in acquiring and using knowledge. As a
World Bank report titled 'Knowledge for Development' notes, knowledge also
illuminates every economic transaction, revealing preferences, giving clarity
to exchanges, informing markets. And it is lack of knowledge that causes
markets to collapse, or never to come into being. Poor
countries differ from rich in having fewer institutions to certify quality,
enforce standards and performance, and gather and disseminate information
needed for business transactions. Often this hurts the poor. For example,
village moneylenders often charge interest rates as high as 80 per cent or
more, because of the difficulty in assessing the creditworthiness of poor
borrowers. The
'Knowledge for Development' report proposes that we look at the problems of
development in a new way — from the perspective of knowledge. There are
many types of knowledge. The report focuses on two sorts of knowledge and two
types of problems that are critical for developing countries. The
first is knowledge about technology, which is also called technical knowledge
or simply know-how. Examples are nutrition, birth control, software
engineering, and accountancy. Typically, developing countries have less of
this know-how than industrial countries, and the poor have less than the
non-poor. These unequal distributions across and within countries are
knowledge gaps. The second is knowledge about attributes, such as the quality of a product, the diligence of a worker, or the creditworthiness of a firm — all crucial to effective markets. The difficulties posed by incomplete knowledge of attributes are information problems. Mechanisms to alleviate information problems, such as product standards, |
When
enterprise meets adversity, it either caves in or responds with a bold mix of
creativity, calculated risk and determined focus on objectives. Negotiations
on pulling through Iran-Pakistan-India (IPI) gas pipeline are such an
enterprise and the fact that are being kept on track in the face of several
pressures, shows the stakeholders' ability for creating the much-needed mix
mentioned above to carry the process forward. 
Prime
Minister Shaukat Aziz, while addressing the 9th summit of Economic
Cooperation Organization (ECO) at Azerbaijan's capital Baku, called for
declaring the region which makes ECO a free trade area. 
The
growing willingness of India and Pakistan to depend on each other for
essential commodities like wheat, sugar, livestock and lately cement, always
brings to mind a conversation with a Bangladeshi ruling party law-maker
during the South Asian Parliamentarians Conference at Bhurban. When asked why
the Bangladeshis were so hostile to India, the Bangladeshi legislator
explained that the Bangladeshi attitude towards India was not uni-dimensional.
He said that while at the political level there were a lot of problems
between India and Bangladesh, at the same time the people of Bangladesh also
realise that if they are getting cheap rice, or beef, or onions or sugar or
medicines, it is because of India. Also implicit in the explanation given by
the Bangladeshi legislator was that vested interests had been created on both
sides that prevented relations between the two neighbours from reaching the
breaking point. Perhaps, a similar dynamic might operate in relations between
India and Pakistan if trade between them continues to grow.