Sunday, 30 August 2009

Farrukh Saleem's Analysis of Pak Sugar

Farrukh I one of Pakistan;s best economic and invetigative journalists.

He sent me the borad summaary of hsi sugar analysis. Here it is.

3.5 million production
average price last year Rs30
price this year 55
difference times production roughly equals Rs80 billion
a total of 80 mills
average profit per mill Rs1 billion
ruling party mills owned around 2 dozen
pml n mills onwed around 1.5 dozen
pml q mills owned around 1 dozen

Now do you see the political economy in the coutnry!

Friday, 28 August 2009

Bravo Shaukat—rethink aid build capacity!

We all know that the army is good only at usurping power but little else. They went looking for an economist and got a smooth suave private banker—Shaukat Aziz. So much for their intelligence (no pun intended).

Our new Shaukat--Shaukat Tarin the Finance Minister of Pakistan-- has finally got it that even to obtain aid you must know your mind and negotiate. He has raised the all important issue of how donor funds never reach Pakistan or are intermediated away. Sadly no one in the media has picked it up. I feel particularly sad since I have been raising this subject for years.

Let us look at the USAID figures (See table below) which I have got from their website. Of the 1.2 billion that they report their only about 20 are given to local institutions like the Khushali Bank and HEC. The rest are all awarded to American firms that none of know anything about. Even though some of these firms have been here for years, we still do not know of them or hear of their consultants or even see them.

What are these firms doing? How are they affecting our policy? What is the quality of their consultants? Who makes up projects with fancy titles like “empower Pakistan”? Where are these projects reviewed? What Pakistani intellect is brought to bear on these projects?

Sadly we do not ask these questions. The media is focused on rumor and sensation. They do not question USAID officials. The only time USAID official s appear on TV is to teach Yoga! Expensive yoga lessons!

Unfortunately our talent finds no place at home since all policy thinking is done by the consultants who have large research funds and the government ear at their disposal. It is not surprising that I find Pakistani PhDs and engineers running franchises in the US instead of contributing to policy.

We should reflect on this aid.

Project

Implementing Firm

Amount (USD million)

Duration

Pakistan Legislative Strengthening Project (PSLP)

Development Alternatives, Inc.

17

September 2005 - May 2010

Pakistan Districts That Work (DTW)

The Urban Institute

26

August 2006 - November 2009

Pakistan Election Support Program

IFES, UNDP, The Asia Foundation, & Democracy International

32

September 2006 - September 2010

Earthquake construction

CDM construction

120

Sep 06-Sep 2011

Community Rehabilitation Infratructure support program

Winrock International

150

Feb 09 -Feb14

Community Rehabilitation Integration and decentralization in Earthquake affected areas

International Rescue Committee

28

Sep 06-Sep 10

Revitalizing, Innovating and strengthening Education

American Institutes of Research

17

Improving Livelihoods and Enterprise Development

CNFA Inc

28

Sep 06 sep 09

Developing Financial Services for Communiteis witout credit

Khushhali Bank (KB)

11

September 2003 to September 2010

Competitive Support Fund (CSF)

Foreign consultatn

11

Sep 06 sep 09

Improve Agricultural Practices in Balochistan

fao

15

November 2004 to December 2011

Empower Pakistan: Energy Policy

Advanced Engineering Associates Inc.

6

October 2008 to October 2010

Empower Pakistan: Energy Efficiency and Capacity

International Resource Group (IRG)

26

March 2009 to March 2012

Empower Pakistan: Jobs

Care International

80

May 2009 to May 2014

Empower Pakistan: Firms

Chemonics

90

May 2009 to May 2013

Empower Pakistan: Performance

QED Group

25

February 2009 to March 2014

USAID - Fulbright Scholarship Program

U.S. Educational Foundation in Pakistan (USEFP)

93

September 2004 - September 2009

Collaborative Capacity Building of Human Rights and Gender

American University Washington College of Law

2.4

January, 2009 - January, 2013

College Improvement Program at FC College

Forman Christian College, Lahore

5

September 2004 - September 2009

Higher Education Commission - Financial Aid Development (HEC-FAD) Program

Academy for Educational Development (AED)

4

September 2008 - September 2010

Links to Learning: Education Support to Pakistan (ED-LINKS)

American Institutes for Research (AIR

90

October 2007 - September 2012

Merit and Needs-based Scholarship Program,

Higher Education Commission

6.8

July 2004 - onwards

Pre-Service Teachers Education Program (Pre-STEP)

Academy for Educational Development (AED)

75

September 2008 - September 2013

Strenghtening Teacher Education in Pakistan

UNESCO

3.4

October 2005 - June 2009

US-Pakistan Science and Technology coop program

National Academy of Sciences (NAS)

7.5

June 2005 - December 2011

Food Security Relief Program in Pakistan

World Food Program

22.3

January 2009 - March 2010

Pakistan Initiative for Mothers and Newborns (PAIMAN)

John Snow Research and Training Institute Inc. (Prime)

92.8

October 2004 - September 2010

Family Advancement for Life and Health (FALAH)

Population Council

60

June 2007 - May 2012

Technical Assistance for Capacity-building in Midwifery, Information and Logistics (TACMIL)

Abt Associates Inc.

10.9

December 2007 - December 2009

Field Epidemiology and Laboratory Training Program (FELTP)

Center for Disease Control (CDC)

5.7

September 2005 (Annual Buy-in)

Pakistan Polio Eradication Initiative: Surveillance

World Health Organization (WHO)

4.8

October 2004 - September 2009

Pakistan HIV/AIDS Prevention and Care Project (PHAPCP)

Research Triangle Institute (RTI)

3.3

February 2006 - June 2009

Pakistan Safe Drinking Water and Hygiene Promotion Project (PSDW-HPP)

Abt Associates Inc.

17.9

October 2006 - September 2009

Strengthening of Tuberculosis to Enhance the Quality of DOTS Program in Pakistan

World Health Organization (WHO)

6

September 2004 - March 2009

$1,192

Tuesday, 4 August 2009

Political Economy of Pakistan

We readily blame feudalism for most of our problems. In my view, such knee-jerk analysis is flawed. Let me explain.

Feudalism is a particular historical term that captures the obligatory relationships between a monarch (state), and the feudal lord on the one hand, the feudal lord, and the peasant on the other. The feudal lord supplied tax collector, administrator and supplier of soldiers to the monarch. In return, he got land and power over the peasant.

This has never prevailed in Pakistan. The colonial government did leave some princely states behind but both India and Pakistan got rid of them fast! Much has been made of irrigation land grants given out by the British. These also included land for military supplies program! The result was that some prominent families accumulated large landholdings!

Does this mean that they have had dominant political and economic power? To answer this question, recall that the colonial masters for their own administrative reasons had made their state infrastructure dominant over everyone including the landed aristocracy! The landed aristocracy was only marginally involved in the policy formulation and legislative process and that too mostly as a handmaiden of that state.

Immediately after independence, the post-colonial state adopted the mantle of economic development and, for a while, even of modernization. In this context, the agrarian economy was considered backward and in need of transformation. The term feudalism was vilified and we continue to vilify it even today.

But note that from the very beginning there were signs that the feudals were on the decline. Early on a system of controlled agricultural prices was put in place to the detriment of the landowner but to the advantage of the urban dweller was put in place. Until recently, agricultural prices have been kept low taxing the landowner. Further government interventions such as restrictions on marketing and on input supply continue to choke the profitability and productivity of land.

Through our history, we have also debated some quite vigorously the issue of land reform. At least one attempt has been made at it. Their still remains a 100 acre ceiling on the books. Even though it is not enforced, it remains a threat and affects the scale and productivity of agriculture.

Since independence, the trend of government gifts of land to the army and bureaucracy has created a whole new class of landowners. In many districts, these new ‘landlords’ may now not be less powerful than the feudal lord.

In thinking about the power of the feudal, we also need to ask why landlords always seek to cultivate the local DC and administrators? Now all of us are beholden to army officers?

Recall that in our post-colonial era, the developmental state has been increasing the power of the administration. The state through its public servants controls the distribution of wealth, the dispensation of all rights, access to services, credit, even the ability to engage in market transactions. Despite the fact that some liberalization has taken place thanks to international pressure in areas such as some utilities (telephones) and imports, administration still controls a large part of people’s lives. All the influentials include the landlords do play the intermediary between the state and the people. This is not reserved to the landlord! A number of other innovative individuals have made their political careers in this way.

But then we have to be clear that we are living in a country where the military-bureaucratic alliance has all the power (the Hamza Alvi thesis). They control most of the rule-making, administration and state resources. During the independence period, state resources have increased enormously because of greater international borrowing and aid.

Working the bureaucracy for wealth gains is what economists call “rent seeking.” Remember till the nineties, a bureaucratic dispensation like a license for imports or a textile mill used to convert people to overnight riches. Despite liberalization, many mechanisms remain in place for dispensing wealth through administration rather than the market. These include, land scams, insider trading, rigged privatization, state licenses on various monopolies.

Rentseeking mechanisms are therefore still intact and this activity still remains strong for gaining wealth and power. In a recent study, I could not find entrepreneurs in Pakistan. People get rich only through rentseeking.

How different is our industrialist from our landlord? Industrialists were built on licenses and continue to profit from subsidies. Even today, the car, sugar, textile and flour industries are subsidized. There have been very few years in our history that these people have not been subsidized. They are given protection dispensations at will. They are given subsidized land in industrial estates. They are given insider deals in privatization.

The landlords are nowhere near these rentseeking industrialists in terms of financial wealth and bureaucratic influence. No landlords make it into the lists of the richest people.

Why do the rich industrial elite not enter politics? Learning from the famous memon and the bora sects, our industrialists have learnt that bureaucratic favors flow if they work the system silently. Standing for issues means nothing to them.

Somehow, all this debate about feudalism has kept us form making a serious analysis of our state. Prominent names may become ministers but what power do they have? The power lies in the military-bureaucratic complex. Even today, the Rules of Business of the secretariat give the minister less power over the bureaucracy than the secretary. The secretary in many ways is the crucial decision-maker.

And why do we ignore the silent city wealth. The silent industrialists and now the financial musclemen are a power (the latter have removed 2 SECP chairmen). In any case, most policy decisions are made for the benefit of these rentseekers to the detriment of the ordinary people. We have all seen sugar, flour and cement price manipulations. Car imports have been manipulated for the benefit of the silent mafia. The result is that the people keep getting substandard cars. And so on.

We are also very confused about what the middle class is (which is very small)! Not to mention poverty (which is always overestimated)!