Pakistans anxiety

Moeed Yusuf Published about an hour ago

The writer is a foreign policy expert based in Washington, D.C.

IN a recent op-ed published by the New York Times, former US national security adviser Stephen J.
Hadley and I argued for a US approach to Pakistan that centred on understanding Pakistans strategic
anxieties. We argued that encouraging an India-Pakistan dialogue, including on how to coexist in
Afghanistan, and efforts for a political settlement in Afghanistan offer the best hope for the US to get
greater Pakistani support in Afghanistan.

Expectedly, a fair share of American policy readers didnt bite. These voices much rather see the US
punish Pakistan to coerce a change in its attitude. Of course, on the Pakistani side, you can always trust
some to read too much into everything: for many here, the op-ed was a camouflaged attempt to blame
Pakistan for sheltering the Afghan Taliban and legitimise Indias primacy in South Asia.

But neither of these reactions worried me as much as some of the more complimentary feedback from
Pakistani readers especially those who matter in the policy arena.

I say complimentary only because they vindicated the thrust of our argument by confirming that those
entrusted to make decisions for this country remain fixated on India. The views represented genuine
concern, some truth, and quite a bit of conspiracy theory, all of it echoing a simple fact: Pakistan wont
budge until it feels its worries about Indias clout in Afghanistan are being addressed.

An approach that is India-centric is holding back progress.

These responses also exposed just how blinded the Pakistani strategic mind is to its own follies. The
angst towards the US is deep. Ultimately, Washington, Kabul, and Delhi are seen as the root of the
problem. Many feel their anti-Pakistan agenda is so set theres no point in trying to engage
constructively. They want Pakistan to look to China instead. When I expressed my disappointment, I
bewildered them. They were complimenting me for my argument, but I was taking issue. Here is why.

The op-ed was an argument intended for the US policy enclave. It echoed my view that the more
commonly touted US policy options like sanctioning Pakistan are not likely to deliver the desired
results for the US. I also believe some of what is being talked about in US policy circles could rupture
the bilateral relationship altogether and destabilise Pakistan, creating an even bigger problem for the
US in the long run.

But this view should have offered no solace to Pakistani decision-makers.

As important as it is for US policymakers to recognise that no policy that ignores Pakistans fixation on
India will succeed, this in no way justifies Pakistans outlook.

So now, to the Pakistani policymaker.

Pakistans India-centred strategic paradigm is one of the biggest drags on the countrys progress. Data
to prove this is indisputable. I have contended Pakistan must invert its traditional refrain of politics
before economics with India by transforming itself into a transit and investment hub for the region.
This is just about the only way Pakistan can retain a solid negotiating hand with India in the long term
while furthering its (and the regions) human welfare goals. The status quo is untenable because it isnt
working differential with India is growing by the day. Also, no one in the international community,
including China, accepts the logic of Pakistans approach anymore.

Second, while I accept the unfairness of looking at Pakistan from a purely Afghan lens, as many in the
US do, far more important for Pakistani policymakers is to recognise what their policies may have done
to reinforce this. In a post-9/11 world where proxies that espouse Islamist ideologies are out of fashion,
extremist elements have continued to use Pakistani soil to attack targets elsewhere.

This is not the place to unpack the finer debates and disagreements on the realities surrounding this
issue. The bottom line is that the presence of externally focused extremist groups in Pakistan has done
more to harm to its international standing than anything else. And it promises to continue bringing
grief if things dont change.

Finally, lets stop pretending that China offers a substitute to the US. No good can come out of goading
a US policy machinery already frustrated with Pakistan. Even the Chinese have been saying this.

Yes, the US needs Pakistan. But the opposite is also true. The US is the largest export market; it, and
not China, wields influence over the international financial institutions Pakistan depends heavily on.
The military benefits greatly from its relationship with the Pentagon and wants it to continue.

Unfortunately, none of this is will be heeded. But neither is my view on US policy going to wrest the
anti-Pakistan momentum in Washington. The US and Pakistan are on a collision course that will hurt
both, and the region. Pakistan should not wait for the US to prevent it.

The writer is a foreign policy expert based in Washington, D.C.

Published in Dawn, July 4th, 2017

Just like cricket?

Dr Niaz Murtaza Published 44 minutes ago

The writer heads INSPIRING Pakistan, a liberal policy unit and is a Senior Fellow with UC Berkeley.
OUR mercurial cricketers achieved a quick and miraculous turnaround in the UK, evidently by having
a few sessions of honest talk. This raises the intriguing issue whether this equally mercurial nation can
achieve a similar turnaround.

A narrow focus on surface issues makes this falsely look easy. If they want, politicians can clearly pass
every long overdue reform, eg, judicial, police and tax, within weeks.

A narrow, moralistic view of free will sends the national adrenalin pumping faster. In this view, people
are free agents who can rapidly change their actions at will. What stops politicians from doing the right
thing, many ask moralistically. For them, politicians too should be given a few sessions of honest talk
to move them from their petty to the public interest. And heck, if politicians dither, we can just invite
the Pindi boys for a short stint, some say. Surely, they, with their no-nonsense, can-do and patriotic
outlooks and stern looks, will quickly fix things!
But this view of free will is bookish. Politicians are members of powerful elite groups, eg, industrialists
and landed elites. Their free-will choices are influenced by group norms and interests due to heavy
indoctrination. Group norms may not dictate member actions down to the last act but strongly steer
their major actions in line with group and not public interests. The same is true for the Pindi boys.
They are creatures of their institutional interests which usually conflict with the public interest. Reform
may clip their wings and expose their vast budget and economic empire to scrutiny. So they too
support the status quo.

It is not a matter of removing a few corrupt politicians.

The chances of most politicians and generals suddenly breaking their free will free from the shackles of
group interests are not zero but close to it. Making national strategies on the basis of such minuscule
chances is insensible. Thus, what looks like the easy task of changing certain policies by rulers
exercising their individual free wills, viewed through narrow moralistic lenses, suddenly becomes the
difficult task of confronting the vested interests of powerful national groups, viewed from broader
political economy lenses.

At some level, all this is well known, but is ignored when national adrenalin starts pumping due to the
false allure of supposedly easy short cuts to entrenched problems. But if we look at things deeply, the
true scale of the problems becomes evident. It is not a matter of removing a few corrupt politicians or
even changing politics radically. The root cause is the low-end nature of our economy which produces
corrupt politics. So, a change agenda should cover not just politics but also economics.

Who will lead the change agenda? After landed elites, industrialists and generals, the next powerful
group is the middle class. But it is not as organised as them. An even more immediate problem is that
large sections of it have woolly ideas about change and usually look for spurious short cuts.

Ask middle-class people, especially techno-managerial types, about change ideas and they will likely
suggest military coups, technocracies, or even Islamist or other revolutions. Very few will suggest civil
society struggle the most sensible course. Political parties have made things worse by shunning
ideology which could teach people about such issues. So, even the PTI, the party which emphasises
reform the most, is an apt reflection of many in its middle-class constituency: shrill, impatient and
superficial.

Thus, change will be slow. This may demotivate some, but hopefully it may also encourage some to
adopt a broader, longer-term vision. It may help motivation to look at the case of India, whom we
defeated at the Oval. It clearly is now on a stronger growth path than ours, perhaps permanently. Even
so, after 70 years of democracy and 25 years of fast growth, its per capita income, corruption levels and
quality of lower bureaucracy, police and courts are similar to ours.

Its case also shows the perils of expecting too much from a few policy changes. So, for many, ending
feudalism will end all our problems. I support land reforms fully, but not the view that they will make
dramatic changes at the national level. India made land reforms around 1950, which helped millions
locally. But nationally, feudal Pakistan kept doing better economically for 40 years. Even today,
Indias rural poverty rate is higher than ours.
If we are all honest, we can grow fast like the Asian Tigers, many say. This is like elephants thinking
they can run fast like tigers by being honest. Complex societies like India and Pakistan have their own
pace of progress. Those who like cricket-type quick turnarounds are advised to keep watching cricket!

The writer heads INSPIRING Pakistan, a liberal policy unit and is a Senior Fellow with UC Berkeley.

www.inspiring.pk

murtazaniaz@yahoo.com

Published in Dawn, July 4th, 2017

Amplified policy distortions

Shahid Kardar Published 35 minutes ago

The writer is a former governor of the State Bank of Pakistan.

TWO inextricably linked policy distortions, and poor governance, have impacted the economys
competitiveness. They have created and reinforced potentially grim challenges in the not-too-distant-
future for the financing of our external bills.

These relate to:

a) An increasingly slanted tax structure conjoined with the unpredictable interpretation of the laws
that incentivise the movement of investable funds to either unproductive sectors of the economy (eg
real estate, speculative activities) or to sub-sectors of a rentier nature that involve heavy protection
against global competitors. This tax structure simultaneously raises, for all businesses, the cost of
compliance with tax laws;

b) An exchange rate (and other supporting policies pertaining to taxation in general, and tax refunds,
in particular, on exported products) that is overvalued, considering the downward adjustments in the
exchange rates of our trading partners and competitors, as well as the higher rate of our domestic
inflation compared to theirs; and

A deformed tax structure has spawned many beneficiaries who will resist any attempt to recalibrate
it.

c) Governance issues. The obvious example of this is the energy sector where losses on account of theft
(manifest in the steadily growing circular debt despite a substantial decline in international oil prices)
are being addressed by increasing energy tariffs, inflating the cost of production, hence the
competitiveness of our exports.

This article attempts to examine the first two policy warps by explaining the links between them. The
rupee is overvalued (the State Bank suggests by as much as 27 per cent overall and 22pc since June
2013). Whereas the currencies of Malaysia, Indonesia, India and Korea have devalued by 47pc, 38pc,
30pc and 7pc respectively since 2013 the rupee has depreciated by only 3pc!
This has made imports of even daily consumables cheap, while remittances through official channels
have been discouraged (the open market rate being Rs150 per dollar, higher than the inter-bank rate).
Resultantly, the current account deficit has deteriorated alarmingly. Export receipts and remittances
combined now fall short of our import bill by an unsustainable $1 billion a month. (The official
argument that much of it is of a transitory nature owing to machinery imports under CPEC and higher
private-sector investment suggests that officialdom is either too complacent or in a state of denial.)

Our response to these developments was to treat the symptoms. The patient needed surgery but we
chose treatment for rising blood pressure. Instead of adjusting the exchange rate, the State Bank
imposed 100pc cash margins to dampen imports while the government raised import duties and
slapped regulatory duties on non-essential imports. (The latter is a bizarre category that can only be
defined by the all-knowing mandarins living in Pakistans own version of Disneyland better known as
Islamabad.) In the process, an already dense and inequitable tax structure was made more irrational
and cumbersome.

This complex tax regime was further perverted by an Infrastructure Cess on goods traded externally
and flawed non-adjustable GST on services levied by provincial governments (especially on the most
productivity-enhancing sectors like telecom and IT), and by Sindh even on exports of services.

Policies, transactional processes and import tariff structures are critical in enabling firms to participate
effectively in global value chains based on core competencies manufacturing of different
components and services like design, logistics, marketing and distribution. Our tariff levels are high,
serving as a major impediment to integration in global supply chains, hampering the diversification of
exports.

These high rates of duties have induced complicated regulations and procedures to manage trade, as
demonstrated by the case of the Afghan transit trade. A convoluted administrative system involving
high processing charges, costs and penalties and excessive documentation got erected to check the
abuse of concessions and prevent goods with high import duties from flowing back into the country.
Such a regulatory burden has raised the cost of steering trade, besides incentivising smuggling.

These aberrations, complemented by Islamabads refusal to refund taxes to exporters and the rising
cost of energy for reasons mentioned here, resulted in literally all segments of the exporting industries
experiencing sharp increases in the cost of doing business, continuously losing market share.

Some simple examples help reveal the extent of loss in competitiveness, largely owing to our tax
structure. For similar type and quality of textile products, South Korea is 3pc cheaper. Cost of gas as
industrial input is 37pc cheaper in Central Europe. Yet another example a one-hour 55-minute
international return flight from London to mainland Europe costs Rs23,600 whereas the domestic fare
for a one-hour 30-minute return flight from Lahore to Karachi is more than Rs25,200.

Islamabad didnt stop at this. It also raised protection levels further for powerful lobbies that were
finding it more difficult to compete notwithstanding years of protection. The infant protected from
competition, in the hope that he would grow up, remained lazy, never putting in the effort to become
strong enough to compete globally without these artificial props. And the growth of one domestic
industry has created a market for another.
Resultantly, all kinds of industries, operating with varying degrees of inefficiencies have flourished,
unable to compete internationally; a glaring example of a policy distortion.

A disturbing consequence is a polarised, dichotomous economic edifice. It is characterised by heavily

protected sub-segments of industry, that essentially serve the domestic market enjoying relatively high
profit levels while those operating in global markets find survival difficult. Because of this, the pattern
of industrialisation is fast changing for the worst; it is one which is not viable without high walls
sheltering it from competitors.

The upshot of the discussion is that a deformed tax structure has spawned many beneficiaries who will
resist any attempt to reconstruct and recalibrate it. The necessary work to address these contortions
and the costs of tax revenues likely to be lost during such a transition will now need three to four
budget cycles to carry out.

And finally, by not gradually adjusting the value of the rupee there is enough cause to worry about the
possibility of an abrupt and agonising disruptive trimming of its price not far down the road, rather
like a sudden jump off the cliff.

The writer is a former governor of the State Bank of Pakistan.

Published in Dawn, July 4th, 2017

Of Boko Haram and Hindutva

Jawed Naqvi Published 40 minutes ago

The writer is Dawns correspondent in Delhi.

PRIME MINISTER Theresa May could have easily ignored, without anyone noticing, the vengeful
white Briton who drove his truck into a crowd of Muslim worshippers, mowing down a few and killing
one. After all, England had not yet fully recovered from the terror carnage in Manchester and London
inflicted by home-grown Muslims.

She could have also said something stupid like Rajiv Gandhi. He had viewed the killing spree against
Sikhs in Delhi as an unsurprising reaction to the murder of his mother. He had said when a big tree
falls, the ground beneath does shake. That was how he had accepted the carnage.

Ms May could have also feigned pain like Prime Minister Modi who equated the pogrom of Muslims in
Gujarat to a puppy coming under the wheel of his car. But she preferred to call the white man a
terrorist. A comment expected from Jeremy Corbyn came from May. Thats how democracies humble
their leaders. Why does Indian democracy falter here?

In Donald Trumps America too, regardless of the viciousness his followers pursue against the non-
whites, there is still a robust system that works for more than a mere pretence of justice. The white
man who killed a Sikh in the wake of 9/11 is rotting in prison.

Now that the so-called mainstream media in India has bared its Hindutva fangs, it is not difficult to
perceive the cover-up that was imposed over the years.
On the other hand, at least two white Americans were wounded and at least one other was killed when
they tried to save Hindus and Muslims from white hate-mongers in different episodes. Despite Europe
being under siege from Muslim terrorists there is vocal and robust protection for the ordinary Muslims
against racist vendetta.

People come out on the streets in the US and Europe at the hint of any perceived bias. Even in strife-
battered and terror-stricken Pakistan (where terror groups are, ironically, allowed to walk openly with
a swagger) human rights workers have laid down their lives. And after a church was bombed in
Peshawar some years ago, Muslims (and others) ringed churches in major cities in a show of solidarity
for the Christian community.

Last weeks Not In My Name protests across India against the widespread phenomenon of public
lynching came as a whiff of fresh air. Such relief is rare and far between in the worlds largest
democracy. The lynching of Muslims, Dalits and Christians, we all know, could not happen without the
encouragement of the Hindutva establishment. And this was the theme of the spontaneous protests.
They came like a cloudburst to a parched land.

There are individuals who have died for the cause in India. Who can forget the murder by Hindutva
assassins of the Kalburgi-Pansare-Dhabolkar trio as they fought blind faith and superstition planted
and nurtured by the rulers? Let us also put on record the mealy-mouthed disapproval Prime Minister
Modi expressed against his cow vigilantes. How else could another man be brutally beaten to death
within hours of his disapproval?

One of Modis chief ministers says cow killers should be hanged. Another says they should be packed
off to Pakistan. His cabinet has men who celebrated killers as nationalist icons. The reason is not far to
seek. The world is crawling with the us versus them rogue groups. The difference is that groups like
Boko Haram are dismantling what is otherwise the best in their civilisation, from outside the system.
They are the non-state players, whereas Hindutva in India is well entrenched within the system. It is
hollowing out Indias democracy with a surgeons ease. Similarity is inescapable here with the zealots
who were infiltrated by Ziaul Haq into state institutions in Pakistan. And this has been happening for
years, decades even.

Now that the so-called mainstream media in India has bared its Hindutva fangs (Trump complimented
Modi on the friendly coverage he got at their Washington meeting) it is not difficult to perceive the
cover-up that was imposed over the years. The fact is, though seldom discussed in the newspapers or
on TV channels, that the destruction of Babri Masjid took place years before the Afghan Taliban
destroyed the Bamiyan Buddhas. Somehow, the Ayodhya outrage is accepted as a nationalist exigency
while the Bamiyan criminals were handed the terror tag.

The fact is that churches were burnt, nuns raped and an Australian missionary roasted alive with his
two sons by a Hindutva mob in Orissa way before Boko Haram could spell Christian. Boko Haram,
loosely meaning foreign is sinful, could learn from Hindutvas institutionalised hatred of Christians,
Muslims and communists, all three bereft of a common strategy to fight their tormentors.

Two Hindutva leaders have invited comparison with Boko Haram. Uttar Pradesh Chief Minister Yogi
Adityanath claims the minarets of the fabled Taj Mahal represent not Indian ethos but an alien culture.
Hitherto, he implied, politicians with an inferior sense of patriotism were giving replicas of the Taj
Mahal to foreign dignitaries. Now the truer Indian spirit has spurred a new crop of leaders to gift
copies of Hindu scriptures.

The ruling partys nominee for Indias next president claimed something similar seven years ago.
Islam and Christianity are alien to India, Ram Nath Kovind had said when he was just appointed a
BJP spokesperson. Thats what Boko Haram says about Nigerian Christians. Thats what the Nazis said
of German Jews.

Mr Kovind had slammed the proposed inclusion of Muslim and Christian Dalits entitled for job
reservation offered to the other Scheduled Castes.

Boko Haram has been carrying out what Hindutva calls ghar wapsi, forcing Christians to convert back
to Islam their version of Islam back being Boko Harams interpretation of what came first, Islam
or Christianity in the Nigerian timeline. Anyone with an iota of integrity and faithful memory will see
the methods as strikingly similar. Not In My Name partisans could learn from a Pakistani humorist,
who told his countrymen: accepting something without reason cannot be weeded out with reason.

The writer is Dawns correspondent in Delhi.

jawednaqvi@gmail.com

Published in Dawn, July 4th, 2017

Exam malpractices
Editorial Published 40 minutes ago

IT is a measure of how bankrupt a society is when those tasked with educating its younger generation
are willing to barter the countrys future for profit. An inquiry report by the Counter-Terrorism
Department has exposed a massive racket in Karachis secondary education system The investigation
implicates 23 officials of the Board of Intermediate Education Karachi and five education department
officials. These individuals, in collusion with a private agent mafia, were engaged in leaking question
papers; making fake admit cards to enable fraud; changing examination centres as per students
choice; enhancing marks post-tabulation; organising large-scale cheating; and other malpractices to
game the examination system. The Hyderabad Board has also been found to be culpable to some
extent. According to the report, there were nine private agents who were the intermediaries between
the board officials/staff and the students. It was a racket that minted money for all those playing a role
in it.

While we have sadly become almost blas about corruption, there are some scandals that still have the
capacity to shock and dishearten. This is one of them. It is difficult to comprehend the mindset of
education officials who would participate, for the right price, in further decimating this countrys
public education system. It is not the first time that BIEK has been found involved in such illegal
activities, and it is high time those involved in such practices were prosecuted to the full extent of the
law. And what to say of those students who would take short cuts to success and accept plaudits they
do not deserve rather than work for well-earned accolades? Moreover, those who manage to
manipulate the system cannot find success in their chosen careers, for they will not have acquired
knowledge, only the know-how of using deceit to achieve their ends. Unfortunately perhaps, the use of
unethical means by some students also discourages the many who apply themselves diligently to their
studies, those young people who are our hope for tomorrow.

Published in Dawn, July 4th, 2017

State Bank report

Editorial Published 41 minutes ago
IT appears that the State Bank has been told to tone down its warnings on the economys increasing
vulnerabilities. After clearly pointing towards the growing current account deficit as a source of serious
concern in the fiscal year, its third quarterly report released just after the Eid holidays omits all
expressions of alarm. This is surprising because the jump in the current account deficit is most
pronounced in the quarter. In fact, it is the highest quarterly deficit posted by the economy since the
second quarter of 2009. One is left wondering why so little is said about this rather impressive jump
this time when far smaller spikes triggered expressions of concern in previous quarters. The only
explanation seems to be that the State Bank has been told to paper over the concerns it has been
flagging all year, because they were taking the air out of the governments claims it had turned the
economy around.

But even the blandest presentation of the facts cannot obscure the troubling aspects. While the report
tries to paper over the impact that the current account deficit has had on the reserves, the reality is that
the State Banks foreign exchange reserves had dropped by $3bn by March, after hitting a peak of
$19.5bn in October 2016. These are still ample to cover imports of up to four months, but that ratio is
also coming down with the passage of time. After trying to point out that official inflows to plug the gap
continued, there is no option but to add that these were not sufficient to fully offset the widening in
the current account gap. On the financial account, the report tries to highlight a spike in FDI, but
cannot escape the fact that 86pc of the major inflows of $4.82bn that came in during the year were
debt creating. Pakistans external account has come under pressure due to an unfavourable trade
balance, the report notes correctly, before throwing the ball into the court of the private sector,
arguing for greater entrepreneurial spirit and putting long-term growth before short-term profits. A
brief mention of the importance of continuing reforms merely touches on the governments
responsibility in the whole affair, as it only points out that a brief window of opportunity was
provided by low oil prices and an IMF programme needs to be supplemented with continuing reforms.

Published in Dawn, July 4th, 2017

PML-Ns attack on JIT

Editorial Published 41 minutes ago
AS the JIT approaches a court-issued deadline for the submission of its report, the attacks against it by
the PML-N government have sharpened. The strategy that has emerged is two-pronged: cooperate with
the JIT to the extent of appearing before it when required while routinely lambasting in the media the
investigation teams composition and working. The JIT itself has courted controversy with wide-
ranging allegations against the government, but with the firm encouragement of the Supreme Court
implementation bench, it appears to have more recently focused on completing the task assigned to it.
Unhappily, the government has only escalated its attacks in recent days. The most troubling aspect of
the PML-Ns campaign is the suggestion that anti-democratic forces in the country are conspiring to
oust an elected government. If that is indeed a possibility, the PML-N owes it to the country to come
forward and provide proof of what it is alleging. Democracy does not belong to the PML-N or
whichever government happens to be in power; it belongs to the people of Pakistan.

The dark allegations of the PML-N have also had the unfortunate effect of suggesting that
accountability of the Sharif family is akin to putting democracy on trial. If anything, democracy will be
strengthened by a fair and transparent accountability of Prime Minister Nawaz Sharif and his family.
Were Mr Sharif to be disqualified or his family members found to have engaged in corrupt practices,
the PML-N would lose its parliamentary leader and the country would be without a prime minister. But
even if it came to that, the PML-N would still have several democratic options before it. The party
could, for example, elect a new prime minister from its ranks in the National Assembly or it could opt
for an early election. Disruptive and damaging as Mr Sharifs possible exit may be for the PML-N, the
democratic process would hardly be on the verge of automatic collapse.

Unhappily, the JITs early controversial conduct and the questionable circumstances in which its
membership was selected have helped sustain the PML-Ns narrative of victimhood. Instead of the JIT
recognising that the way it conducts itself could be used by the PML-N to taint the entire probe, the
team has itself at times plunged headlong into damaging political terrain. The shocking dossier that it
submitted to the Supreme Court on alleged media criticism suggested an investigation team that is
more concerned about how it is perceived in the media than interested in the terms of reference given
to it. The PML-Ns allegations aside, the JIT has independently mired itself in unnecessary and
undesirable controversy. Once the latest round of interviews are over, the JIT must work to compile a
fair report that adheres to the norms and rules that ought to apply to investigations with potentially
far-reaching consequences.

Published in Dawn, July 4th, 2017