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The new set-up.

* Old wine in new bottle

* Feudal autocrats at the helms of affairs.

* Elections on July 14, 1993

The National Assembly has been dissolved on April 18 by President Ghulam Ishaq Khan, accusing Nawaz Sharif of subversion of constitution, corruption, nepotism and bungling. This was the third time in eight years that the National Assembly was dissolved by a president using the discretionary powers that he wields under the 8th Amendment to the Constitution. It is the second time for Ghulam Ishaq Khan. The first time he dissolved the Assembly was in August 1990. It was a PPP government which was sent packing then. The party has now been welcomed back as a key component of the interim government formed under the premiership of Mr. Balakh Sher Mazari. Benazir Bhutto opted to support the president with over 40 resignations of PPP MNAs and Mr. Farooq Leghari, along with Mr. Hamid Nasir Chattha, was inducted into the interim set-up as a senior minister.

The matter of the present dissolution is entirely different in its political nature. After all, the IJl was the creation of the power that be, and Nawaz Sharif was the most trusted prime minister the establishment had wished for. While the PNAI could never have imagined of winning a two-thirds majority, it was made possible for the IJl under the tutelage of Ghulam Ishaq Khan. The over-kill in the last general elections had only helped consolidate the force dependent upon the 8th Amendment, but also provided Nawaz Sharif with an ample space to survive the pressures of two successive chiefs of the army staff, and defy all those limits he was supposed to observe.

A new caretaker cabinet of 60 ministers and advisers has been constituted with the induction of new faces. Thirteen of the new cabinet members handpicked for the job, came from the two cabinets dismissed in the last three years for being corrupt. Moreover its members like Balakh Sher Mazari, Farooq Khan Laghari and Hamid Nasir Chatta belonging to top feudal class of the Southern and the Central Punjab. Another important dimension is the joining of the interim arrangement by the PPP. This marks the reversal of this party's politics not to come into power through the backdoor. The caretaker prime minister is just a dummy, who has no experience in running even a small government organisation. Almost all parties of the country except Nawaz Sharif faction of the Muslim League, the ANP, the Jamaat-e-Islami and the MQM were given representation in the interim set up. Among the new entrants are representatives of all component parties of the PDA, the PPP, Tehrik-i-Istiqlal, the Pukhtoonkhwa Qaumi Party, Tehrik-i-Nifaze Fiqqah jafaria, Malik Qasim, Junejo and Pagara factions of the Muslim League, nominees of the JUP (Noorani) and the JUl (Fazalur Rehman) affiliated with the Islami Jamhoori Mahaz (IJM), ex-MNAs of FATA and representative of minorities.

Supreme Court of Pakistan is hearing former Prime Minister Nawaz Sharifs' petition against the dissolution of his 29th month old government and the National Assembly. The court is expected to give its verdict on the case in a week's time. Islamabad is nervously watching the proceeding of the Supreme Court and bracing itself up with the possible eventuality. Some quarters are hinting at the possibility of imposition of emergency. The constitutional experts say that in case of adverse verdict, GlK would have to resign. According to retired Chief Justice Mr. Javaid lqbal restoration of National Assembly will trigger a constitutional civil war between the Prime Minister and the President. He believed that if the Assembly is restored ":A working relationship between Nawaz Sharif and the President would be imperative to save the country from a long constitutional civil war."

Election's date is fixed as July 14. The new elected PML President Hamid Nasir Chatta said that our first priority is to ensure free and impartial elections so that political uncertainty should end forever. Ms. Bhutto wants the election to be conducted by the army rather than the Government officials and the appointment of independent election commission to ensure free and fair polls. Ms. Bhutto has been criticised that the cooperation with the President on the dissolution of the assembly was an unprincipled stand. However. it may be recalled that Ms. Bhuttos' PDA had been demanding the dissolution of rigged assemblies, the formation of a government of national consensus, an independent election commission and the holding of free and fair election under it since 1990. To achieve these goals, she also talked about enbloc resignations of her partymen on a number of occasions in the past. With this backdrop, it would be difficult to find anything un-principled about her deal with the President.

The big caretaker cabinet includes both foes and friends. President Ghulam Ishaq came face to face Asif Ali Zardari at a ministerial swearing in ceremony which only a few month ago was impossible to imagine. It is surprising that the President has not yet withdrawn his allegations against Zardari and few criminal cases are still pending in the court of law. It is pertinent to note that the President is not answerable before any court of law for his actions under Article 248 of the Constitution.

ECONOMY

The overall Gross Domestic Product (GDP) growth is expected to be around five per cent as compared to the growth rate of 6.4 per cent achieved during the last fiscal year. The decline in the GDP growth rate is attributed to huge damages caused by floods and torrential rains. The official sources claimed that the growth rate during the current fiscal year would be satisfactory. Cash foreign exchange reserves held by the State Bank of Pakistan amounted $ 830.4 million on December 30, 1992, compared with $ 672.9 million on November 30, 1992 and $ 434.4 million on December 31, 1991. It is not known how much amount of the foreign exchange deposit account is included in the foreign exchange reserves.

NEW PROJECTS IN JEPOARDY

The implication of the political change will have far reaching effects. The Rs. 26 billion Motorway project may be in jeopardy. The caretaker Prime Minister Balakh Sher Mazari has already commented that this project is not in the interest of the country. The form of industrialisation may be reversed. The yellow cab scheme may be shelved. There is likely to be long outstanding debts on this account. The import bill has shot up haphazardly due to indiscriminate imports of vehicles.

The total figure of imports of vehicles amounted to $ 551.404 million (July-March) as compared to last year 329.192 million a substantial rise of 67.5 per cent. If the present trend continues the amount being spent on the import of these vehicles would be $ 720 million by the end of the current year. Already about 500 yellow cabs are standing in the open and may turn out to be a net loss.

By the time the President had decided to strike, the IJl Government of Mr. Nawaz Sharif had managed to achieve the distinction of being the first government ever in Pakistan to cross the 10 per cent barrier of budgetary deficit. In the process it has also earned the distinction of pushing the country's current account deficit back to about $ 3 billion. External debt, largely commercial (as concessional assistance had dwindled to peanuts by the time it came to power), has increased by nearly $10 billion in the 29 months a record for any government in any Third World country. The foreign currency liberalisation policy may not reversed as it would jeopardized the inflow of foreign funds. The caretaker Finance Minister has already given his assurance to this effect. However, the privatisation policy may get a set back. The President has already made a mention of the PNSC and some other organisation in his speech dissolving the National Assembly. Already in the last two years the government lost almost seventy income generating industrial units to privatisation. The privatisation of Pakistan Telecommunication Corporation may be stopped.

On dismissal of Nawaz Sharif's government which decided to privatise 26 per cent shares of PTC, foreign investors keen on investing in Pakistan's telecommunication sector have become a bit confused as their confidence has been shattered.

"We don't know whether the caretaker government or the successive government which will come into power after elections will continue the privatisation programme as such let alone the PTC privatisation," said a source close to one of the nine international telephone agencies who had shown interest in purchasing PTC in response to the then government's offer to privatise PTC.

The international consortium of consultant appointed for PTC privatisation had finalised their recommendations and forwarded it to the Committee a few months back. They said the consultants had inter alia determined the value of PTC assets which was in the vicinity of Rs. 4.5 to Rs. 5.0 billion. PTC Staff Union (CBA) sees no justification for the PTC privatisation. CBA General Secretary Sabir Hussain said: "PTC is a profit earning organisation staffed with the best telecommunication workers in the world," adding: "We don't see any reason for privatising PTC". Sabir said PTC workers had always opposed the privatisation process and will still oppose it.

When the new owners of the privatised units came they started cutting production and raising prices. These new owners were trying to recover the bad money which they had deposited with the government. The truth was that cement prices had gone up by 30 per cent, Ghee prices by 50 per cent, Steel prices by 30 per cent and vehicles prices by 100 per cent. A large number of units amongst those nationalised now had valuable property attached to it, hence the charge that the government was only interested in disposing off real estate is true.

There is a general view that Nawaz Sharif started new projects to get kickbacks. The cost of the motorway was revised from 23 to 29 billion rupees only because Nawaz Sharif received a commission on the project. Benazir Bhutto also supported privatisation, but she had not given any banks to her friends at throwaway prices.

In the last 29 months, despite all the fanfare, the Nawaz Sharif Government had been able to add only about 450 MW to the generating capacity of power while there is the possibility that in the coming months country may suffer a shortage of another 750 MW because of cracks that have developed in some of the turbines at Tarbela. All through its tenure, the Nawaz Sharif Government talked of the 1,200 MW thermal station at Hub to be constructed in the private sector. From all indications so far, this project which was actually mooted in 1985 still looks like a non-starter.

Shortly before the privatisation process had hardly begun the debate on the utilisation of the resourses so generated was initiated by the Press and the Opposition. Without having any substantive basis it was being claimed that the resourses generated through privatisation would be used by the government to reduce its budget deficit. Factually the previous government had shown in the budget documents in June, 1990 the expected receipts from the Muslim Commercial Bank. The policy of the Nawaz Sharif government was unequivocally stated that the resources generated through privatisation were not to be merged in the budget. However, the accounting system had been devised to ensure that these do form receipts in the Consolidated Fund but were reimbursed to the Privatisation Commission after depositing in the Consolidated Fund for utilisation after a Special Committee decided how to incur the expenditure from this particular source.

The fact is that all the resources that usually would have gone into new investments were diverted towards buying the already established and profit-making public sector units. Even here, it is important to note that the buyer had paid only 40 per cent of the prices while providing bank guarantees for the remaining 60 per cent, which if one went by the Pakistan experience is never fulfilled. In some cases, even the 40 per cent has been funded through undervaluation of the assets and inventories of the sold units.

In some cases the accumulated duty drawbacks were allowed to go with the units which, in almost all cases, were more than the total price. So, all in all, privatisation has been a process through which more white money was converted into black with the added assurance of accelerated flow from white to black through tax evasion.

Now 72 of the over 100 units advertised for sale have been privatised, including six which have been bought by their employees. Some of the 16 units advertised recently were there in earlier auction lists but had no takers or received low offers from prospective buyers. Many of them like Beta Engineering have suffered large losses and have small prospects of recovering soon unless large investments are made.

Bela Engineering with a subscribed capital of Rs. 34 million had a cumulative of Rs. 207 million by the end of 1991. Who would want to buy the shares of such a company or the once prestigious Pakistan Engineering Company which is buried under a mountain of debt and has asked for Rs. 400 million more from the government to revitalize the industry. The same goes for PNSC which has disappointed the persons, who had bought its shares a long time ago.

TRADE DEFICIT TO WIDEN

Pakistan is very likely to miss the $ 8 billion target of export earnings in the fiscal year 1992-93 ending in June. Though no figures were given by officials, the exporter forecast that Pakistan will fall short of the target by at least $1 billion. They blamed lower cotton production because of devastating floods last September, recession in the cotton yarn industry and falling prices of rice on the international market.

"The exports are likely to fetch $ 7 billion in the current year, about $1 billion less than the export target of $ 8 billion," said a cotton yarn exporter. "It will be difficult to achieve the $ 8 billion export target because of the cotton crisis," said an official of the government's Export Promotion Bureau (EPB). Although the trade deficit in the first eight months of the fiscal year that ends in June narrowed to $ 1.70 billion from $1.99 billion in the year ago exports lagged behind target, officials said.

Exports rose 10 per cent to $ 4.49 billion in the July-February period from $ 4.08 billion in the year-ago period and imports jumped to $ 6.29 billion from $ 6.08 billion, Federal Bureau of Statistics figures show. Exports usually rise in the fourth quarter. Exports have slumped, mainly because of a shortfall of three million bales of cotton this crop year compared with 1991-92. Cotton-based products account for more than 60 per cent of total exports.

The All Pakistan Textile Mills Association (APTMA) demanded that Pakistan should devalue its rupee to 30 to the dollar from the current 26.65 to make Pakistan mere competitive after neighbouring India made its rupee fully convertible. Cotton ginners say production fell to 8.76 million bales to March 1, compared with 11.78 million a year ago.

The fall sent domestic cotton prices soaring and resulted in higher production costs for yarn textiles and garments, leaving them less competitive in recession-hit world markets. Exports of some items have risen in terms of quantity but were earning less hard currency because of the recession. Yarn exports rose to 351,101 tonnes, worth $ 711.42 million, up to February, from 280.944 tonnes worth $ 669 million the year before.

The foreign exchange earned through higher exports of yarn is not comparable with the previous year's earnings. Rice exports fell to 735,152 tonnes worth $ 219.35 million, compared with 905,474 tonnes worth $ 41.78 million and carpets exports fell to 2.11 million square metres worth 110.27 million, from 2.58 million square metres worth $ 146.31 million.
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Title Annotation:includes table of cabinet ministers; Pakistan
Publication:Economic Review
Date:Apr 1, 1993
Words:2655
Previous Article:ICI Pakistan Limited.
Next Article:Proposals of Lahore stock exchange for Budget 1993-94.

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