Grand Trunk Road

The News reported on Sunday that former chief of the Steel Mills Lt Gen (retd) Abdul Qayyum, in an interview with Geo News, disclosed that differences between Musharraf and deposed Chief Justice Iftikhar Muhammad Chaudhry cropped up over the privatisation of the Steel Mills:

The ex-Steel Mills chief said when the case was being heard by a full court of the Supreme Court, President Musharraf called him (Justice Iftikhar) and asked as to what kind of remarks he (Musharraf) was hearing from him, adding the case should be decided in a manner that it does not cause any loss to the country. To this, Justice Iftikhar said, “You shouldn’t worry. I will decide the case in the best interest of the country.”

The next day when the Supreme Court judgment in the case came, it was totally against the expectations of the president. It was then that a row between the president and the then chief justice ensued.¹

Khaleej Times has a similar report:

[Qayyum] said that former premier Shaukat Aziz was afraid he would be tried on criminal charges after Supreme Court annulled the privatisation of the Steel Mills citing gross irregularities.²

Today, The News has an article about a statement made by the People’s Workers Union (PWU) Pakistan Steel (CBA) President Shamshad Qureshi who said that Gen Qayyum’s allegations were false and that he was fully involved in the privatization of the organization and was the front man of Pervez Musharraf and Shaukat Aziz during that period.³
Parvaiz Elahi took things a step further and blamed it all on Shaukat Aziz:

Commenting on the action of November 3, he said it was Shaukat Aziz responsibility. He said that he came to know about the issue of deposed Chief Justice through television and afterwards Shaukat Aziz also called him about the issue.⁴

¹ Ex-chief of Steel Mills spills the beans. The News. May 25, 2008.
² Aziz was afraid he could be tried in Steel Mills case. Khaleej Times. May 26, 2008.
³ Union challenges Pakistan Steel Mills ex-chairman’s claim. The News. May 26, 2008.
⁴ Aziz responsible for judges’ issue, says Elahi. The Post. May 26, 2008.

Recently, the State Bank of India announced that it was halting loans to farmers for farm equipment such as tractors and combines. Now, Arun Kumar of the Hindustan Times reports¹:

Stung by protests from farmers, politicians and even a section of its own employees, State Bank of India on Wednesday hurriedly withdrew its controversial decision to suspend financing of farm equipment, primarily tractor loans.

“We regret that our circular dated May 16, 2008, concerning tractor loans has been misunderstood and has given rise to concern. The circular is withdrawn with immediate effect,” SBI Chairman OP Bhatt said in a statement.

What misunderstanding was there? According to Anup Banerjee, an official from the SBI, the halt was intended not for small farmers but for large-scale farmers with huge loans who have fallen behind in payments.

Another angle to this situation is the impact of the farmer debt relief plan being pushed by the government. According to Moneycontrol India², the guidelines for the Farmer Debt Waiver Scheme have been passed and will allocate Rs 71,680 crore ($16.8 billion at current exchange rates) to loan forgiveness. Small farmers are expecting to get 100% forgiveness, whereas large farmers (those with more than Rs 50,000 borrowed) will have up to 25% forgiven.

This loan forgiveness program may be at least partly responsible for SBI’s problems to begin with, though. In The Hindu, C. R. L. Narasimhan comments³ on the harm SBI’s backstepping has done to their image as an independent bank. But also, he notes that:

Already there are indications that even farmers who would have repaid their loans are holding back hoping to get a waiver.

This reminds me somewhat of the subprime mortgage crisis in the USA. Even people who could pay their mortgage have chosen to walk away, hoping for some kind of government bailout. What portion of SBI’s 17.8% default rate on farm equipment is due to this sort of behavior is an open question.

¹ Kumar, Arun. SBI backtracks on farm gear loans. Hindustan Times. May 21, 2008.
² Cabinet okays Farmer Debt Waiver Scheme guidelines. Moneycontrol India. May 24, 2008.
³ Narasimhan, C. R. L. Tales behind SBI’s withdrawn circular. The Hindu. May 26, 2008.

I have a feeling that the members of the press have given up trying to glean any meaning from Zardari’s contradictory statements and are simply amusing themselves finding appropriate facial expressions to match the tone of his interview of the day. Here’s the picture that was on the top of the “Musharraf is a relic of the past” story in The News– angry, crazy Zardari:

The News, May 23, 2008

“So like my little daughter Bakhtawar would say, if you move, I move”¹

Today, a Daily Times column reporting more conciliatory statements by him features a happier (but still kind of crazy-looking) Zardari:

The Daily Times, May 25, 2008

“Making the impossible possible is the job of a politician”²

¹ “People want govt to throw out Musharraf: Zardari.” The News. May 23, 2008.
² “PPP Has Working Relationship with Musharraf: Zardari.” The Daily Times. May 25, 2008.

From an editorial today in The News¹:

The KSE crash is of course only a reflection of the overall situation of the economy and, dare one say, the polity. The grim reality is that Pakistan finds itself in the grip of both economic and political turmoil. The two are indeed closely tied together. The economic crisis – high inflation along with a mounting budget and trade deficit along with declining investment, a weakening currency and capital flight – is contributing to political uncertainty, with expectations that it may be used against the government with the grim inflation figures and lowered debt rating offered up as evidence of the inability of government to deliver. At the same time, in the immediate future, there can be little hope of the political stability that would be needed to boost investor confidence and create an environment conducive to economic growth. The vicious cycle seems unbreakable for the present. The mood at the stock market has indeed remained downbeat for weeks. This is unlikely to change soon given the turbulence in the political atmosphere, and a long, rocky road towards recovery from both political and economic crisis still lies ahead.

¹ “Black Friday”. The News. May 25, 2008.

Business Recorder reports¹:

Punjab Finance, Planning and Development Minister Tanvir Ashraf Kaira has said poor, salaried class and farmers will get relief in the coming budget for the fiscal year 2008-09, saying, “Our main focus would be to give target subsidy to the poor in the budget.”

The relief would come primarily in the form of price controls. Abid Hasan, a former operations adviser for the World Bank, agrees with the goal, if not the means, in his take on the situation published in The News today². His plan revolves around the introduction of a “poverty reduction surcharge” (his fancy name for “tax”) on what he considers superfluous luxuries like cars, cell phones, stock trading, and high utility bills.

Actually, at first I was encouraged because he takes the view that government subsidies and price controls have contributed to Pakistan’s economic woes. He argues, for instance, that by letting farmers sell at market prices, smuggling and black market loss would be reduced and farmers would have the resources to increase food production for next year. However, look at what Hasan proposes when it comes to cars:

More generally, tax policy should be used to switch consumption patterns appropriate to the country’s poverty status. As an example, in Pakistan for every one car sold, four motorbikes and four cycles are sold. The ratio for India is six motorbikes and 10 cycles, and in Vietnam it is 25 motorbikes and 10 cycles, for every one car sold. These two countries are almost the same or higher per capita income, and similar poverty profile, as Pakistan. And yet their population uses, relatively, more motorbikes and bicycles. Progressive tax policy – for example, zero rating bicycles, motor bikes and public transportation and high taxes on cars – and correct pricing of fuel would encourage this “pro-poor” switch.

He offers no justification for the implication that India and Vietnam have a healthier ratio of cars to motorbikes and bicycles. Why not tax cars so much that the ratio falls to 1:100? How is the proper ratio determined? Why isn’t it good that more Pakistanis can afford cars? Without the hard numbers, it’s hard to even say that Pakistanis can afford more cars, since it could just as easily be that fewer Pakistanis can afford motorbikes and bicycles, or that bicycles and motorbikes aren’t as useful to Pakistanis.

In the end, I’m just annoyed that Hasan takes the time to rail against socialist economic policies like price controls only to suggest that we solve the problem by introducing new socialist economic policies like high taxes on certain items to get various ratios into what the government determines is most healthy.

¹ Budget will be poor-friendly: minister. Business Recorder. May 24, 2008.
² Hasan, Abid. Spend on the poor to save Pakistan. The News. May 24, 2008.

The Karachi stock market closed down over 4.5% on Friday in the largest single-day loss of 2008. According to Dawn¹, investors had expected a drop after the State Bank of Pakistan raised the discount rate to 12% from 10.5% on Thursday in a bid to curtail inflation. However, the size of the drop suggests that the rate increase was a pretext for exiting the market as Pakistan faces tough political and economic challenges. Since mid-April, the Karachi stock market has lost about 20% of its value. Inflation has increased dramatically, the government budget deficit has reached record heights, and foreign exchange rates have fallen.

This NPR report ¹ by Soraya Sarhaddi Nelson describes the difficulty the Afghan government faces in getting international funding for its $50 billion strategy to rebuild the nation. Western officials are wary of simply handing over funds to the Afghan government due to allegations of corruption and mismanagement. An illustration:

Yet how some Afghan contractors hired by the ministry spend international aid money raises serious questions. For example, one contractor in Kandahar province recently agreed to pay $100,000 to a local Taliban commander to ensure his men would leave the project alone.

The builder claims he and other contractors have no choice but to cut such deals to protect their projects in high-risk areas such as Kandahar.

He allowed NPR to listen to, but not tape, his negotiations by speakerphone with the Taliban leader. He also sent the Taliban commander a copy of the contract to prove he wasn’t making more on the project than claimed.

¹ Nelson, Soraya Sarhaddi. “Afghanistan Unveils Ambitious Development Plan”. NPR. May 21, 2008.

Baitullah Mehsud talked to reporters on Saturday¹ and denied his involvement in the Benazir Bhutto assassination and the kidnapping of Tariq Azizuddin, Pakistan’s ambassador to Afghanistan.
Zardari talked about a “difference of opinion” between Pakistan and the US on how to deal with active militants in the area²:

“There is a position in America which (Democratic presidential front-runner Barack) Obama holds that if they have actionable intelligence, they should have a right to strike,” Zardari said.

“We disagree with that position and we just want to make sure that if there is actionable intelligence available, then we will strike. That’s where there is a difference of opinion. That’s something I’d like to work upon,” he told PTI in an interview.

This column³ in The Post by Musa Khan Jalalzai discusses the impact of the increase in violence in Pakistan on the security of Afghanistan. According to him, the fighting in Waziristan and Kurram agency have compelled thousands of people to flee from those regions to either Afghanistan or Punjab.

This column⁴ in The News by Khalid Aziz is from May 19, but it has a lot of interesting insights into the situation. He argues that the Pakistan government needs to develop a more holistic counter insurgency strategy like the US or India and that by 2006, the Pakistan military was certain that there was no purely military solution to the problem in the tribal areas. He contrasts the negotiations in Swat, which are taking place step by step, with the military’s unilateral actions in Waziristan which have resulted in the release of many prisoners without a written agreement being signed. About Swat, he has this to say:

The former Wali of Swat had built an elaborate system of governance based on cooptation of religious scholars in the judicial system. He was a wise statesman; he employed the religious scholars for dispute resolution and as consultants to the normal Swat courts. It was ensured that cases were disposed quickly through summary proceedings. Redressal of wrong was quick and the process was comparatively cheap.

The people of Swat lost all this, when the state was merged. During the negotiations, the militants requested to be helped in getting a quick and a cheap dispute resolution system more in tune with their past experience and were thus willing to adopt the 1999 Adal Regulation, which is already on the statute books.
[...]
Unfortunately, there is a large gap in the civil-military relationship in Pakistan. Once this is recognized and steps taken to reduce it, Pakistani society would be able to develop a COIN strategy. Existence of such a framework would not only better manage the insurgency but will also permit Pakistan’s allies to recognize the local issues and act collaboratively.

Today, unfortunately the policies of Pakistan and her allies play into the hands of the militants. The future does not lie in acrimony and accusations but in developing a robust strategy which looks at insurgency regionally. There is still time for them to withdraw from the precipice and the deal with the problems holistically. Islamabad must not commit the folly of ignoring the equally important life and death struggle arising from the raging insurgency because it is dealing with other matters.

¹ “No link with BB murder, Ambassador’s kidnapping: Baitullah”. Online International News Network. May 24, 2008.
² “Pak, US differ on tackling militants in tribal belt: Zardari”. The Hindu. May 24, 2008.
³ Jalalzai, Musa Khan. “Pak-Afghan security situation — I”. The Post. May 24, 2008.
⁴ Aziz, Khalid. “The march of folly”. The News. May 19, 2008.

India Today has a piece by Sandeep Unnithan¹ about the debate over the creation of a central agency to investigate all terror-related crimes. Prime Minister Manmohan Singh argued for the need for the Federal Investigation Agency days after the Jaipur blasts and complained that plans for its creation had been stalled because states were reluctant to surrender power to the central government. Critics argue that agencies created after crises have not had a good record in India:

Yet, the fate of agencies created after crises-the National Technical Research Organisation set up after the Kargil War and the Joint Intelligence Task Force after the 2006 Mumbai blasts-has led experts to question the creation of a new agency.

“It will be sensible and economical to augment and empower an existing organisation like the IB than create a new one,” says Ajai Sahni, Centre for Conflict Management.

¹ Unnithan, Sandeep. “Elusive Agency”. India Today. May 22, 2008.

This is from three years ago, but I thought it was relevant to the difficulties in negotiating peace with tribal elders in Waziristan. From Zahid Hussain’s book Frontine Pakistan¹:

[Nek Mohammad's] supporters led by Abdullah Mehsud, had continued to engage Pakistani security forces in a drawn-out guerrilla war. Their targets included those tribal chiefs who had collaborated with the Pakistani military. One by one, all those who had backed military operations against the militants in South and North Waziristan were killed. Faridullah Khan, a Waziri tribal elder and former senator, virtually signed his own death warrant when, in March 2004, he facilitated the entry of army troops to his home village, Shakai in South Waziristan. His men helped soldiers to demolish the houses of the tribesmen linked with the al-Qaeda. He even permitted soldiers to use his fort-like house.

I saw Faridullah at an army sponsored tribal jirga in Shakai in April 2005. Escorted by armed guards, Faridullah, who sported a huge turban and a bushy moustache, declared, ‘Al-Qaeda were all over the valley. But this year they are on the run. Peace has been restored.’ Twenty-four hours later, Faridullah was dead. The killers had waited at a diversion of the main road, when his jeep passed on the way from a meeting with the army commander. The militants had blasted the vehicle with rocket-propelled grenades. Ironically, Faridullah was killed a day after General Khattak had declared that South Waziristan had been cleared of foreign terrorists.

¹Hussain, Zahid. “Tribal Warriors.” Frontline Pakistan. New York, NY: Columbia University Press, 2007. 152-3