Friday, April 18, 2008

Bangladesh troops told to eat potatoes


DHAKA, April 17: More than half a million Bangladeshi troops have been ordered to eat potatoes in an attempt to ease the impact of surging rice and wheat prices.

Potatoes are not traditionally on the menu for Bangladesh’s 140 million people but army chief Gen Moeen U. Ahmed and the country’s army-backed interim government has ordered a change in diet because potatoes are now cheaper and more abundant.

World prices of rice, wheat, edible oil and pulses have almost doubled over the last year, increases that poorer Asian countries can ill afford. Bangladesh was hit last year by two severe floods and a cyclone that destroyed around 3 million tonnes of food grains, raising fears of a possible famine.

“The daily food menu now includes 125g of potato for each soldier irrespective of rank,” government agriculture adviser Choudhury Sajjad Karim quoted the army chief as saying on Thursday.

Potatoes will also be eaten daily by air force and navy personnel along with other regimental services including police, which together have more than 500,000 members.

Officials say the 8 million tonnes of potatoes produced this year — 3 million more than last year — could cushion any food emergency if the forthcoming rice and wheat harvests are hurt by seasonal storms.—Reuters

Democrats discuss new aid package for Pakistan


By Anwar Iqbal

WASHINGTON, April 17: The Democrats, who already control the US Congress and are likely to win the 2008 presidential election as well, have started consultations to offer a new $7 billion aid package to Pakistan.

“The United States needs to stay engaged with Pakistan,” says Congresswoman Sheila Jackson Lee, a Democrat and co-chair of the bipartisan Pakistan Caucus on Capitol Hill. “We cannot stand idly by while the new Pakistani government struggles to strengthen democracy.”

Senior congressional aides told Dawn that the Democrats have started consultations on an aid package initiated last year by Joseph Biden, a six-term senator and chairman of the Senate Committee on Foreign Relations.

While there’s little possibility of an early approval of the Biden package, diplomatic sources in Washington say that the US may soon offer $200 million to help stabilise the newly elected government in Islamabad.

Mr Biden, who was also a candidate for this year’s presidential election but later dropped out of the race, had put together this package “to encourage Pakistan to stay on the road to democracy.”

The package includes $1.5 billion a year in civilian aid for at least five years and a $1 billion “democracy dividend” as a reward for holding elections and forming a coalition government.

It proposes to tie counter-terrorism aid to Pakistan’s performance in the war against terror and to provide more assistance to civilian law enforcers.

A report in Britain’s Guardian newspaper on Thursday, however, presented this aid package as a new strategy agreed between Washington and the civilian rulers in Islamabad.

But sources at the US State Department and the Pakistan Embassy in Washington told Dawn that they have not heard of a new strategy or aid package for Pakistan.

They explained that the current $3.2 billion aid package expires in October 2009 and by then Washington will have a new administration, which will want to negotiate a new deal with Pakistan on its own terms.

“So, it makes little sense for the current administration to finalise a five-year package so close to the US presidential election,” scheduled on Nov 4, said a source.

Sources in the US Congress also said that they do not expect the legislature to approve Senator Biden’s proposal before the US presidential election.

The package, however, is seen in Congress as a major strategic move for encouraging democracy in Pakistan. It would triple the amount of non-military aid to Pakistan, and is aimed at redefining the bilateral relationship.

Senator Biden’s proposal also shifts US focus from dependence on the military to a greater engagement with political forces in Pakistan.

Rs2 increase in ‘roti’ price


Friday, April 18, 2008
Khalid Iqbal


After a sharp increase in ‘atta’ price by the government, ‘naanbais’ of Rawalpindi and Islamabad have raised ‘roti’ price to Rs5 from Rs3.

The decision to this effect was taken in a meeting of office-bearers of Rawalpindi-Islamabad ‘Naanbais’ Association here on Wednesday night. Muhammad Riaz Qureshi, chairman of the association, presided over the meeting.

‘Naanbais’ in People’s Colony, Dhamial Camp, Chaklala Scheme III, New Mohanpura, Satellite Town, Banni, Jamia Masjid Road, Golra, Pirwadhai, Gharibabad, Misrial Road, R A Bazaar and some other localities are selling ‘roti’ at Rs5 against its previous price of Rs3 and ‘naan’ at Rs6 against Rs4. Those selling ‘roti’ at Rs3 have reduced the weight of dough from 110 grams to 80 grams.

Muhammad Riaz Qureshi, chairman of the Rawalpindi-Islamabad ‘Naanbais’ Association, told ‘The News’ on Thursday that they would sell ‘roti’ for Rs5 and ‘naan’ at Rs6, ‘roghni naan’ at Rs10 against its previous price of Rs7 and ‘paratha’ at Rs10 against Rs7.

The Rawalpindi district administration has not issued a new price list even after a sharp increase in ‘atta’ price.

“We don’t want to violate rules and regulations. But nobody could afford to run a business in a loss so ‘naanbais’ increased prices of ‘roti’ and ‘naan’ on their own,” he added.

“We are getting a sack of 85 kilograms of fine quality ‘atta’ at Rs2,500 against its previous price of Rs1,670. The 80-kilogram sack of low quality ‘atta’ is now being sold for Rs1,600 against Rs1,130. The district government had promised us that we would get ‘atta’ at controlled rate. But now the situation has changed altogether and ‘naanbais’ have no option but to increase prices of ‘roti’ and ‘naan’,” he said.

“If the district administration tried to create any problem for ‘naanbais’ of Rawalpindi and Islamabad, they would close down their ‘tandoors’ for an indefinite period,” he warned.

District Price Control Committee Chairman Haji Jamal told ‘The News’ that it was logical for ‘naanbais’ to raise prices of ‘roti’ and ‘naan’ after increase in ‘atta’ price. The concerned authorities should have revised the rate of ‘roti’ and ‘naan’ after the alarming increase in ‘atta’ price. ‘Naanbais’ should contact the district administration for issuance of new price list, he said.

He said that concerned officers of the district administration are not in a position to take a decision or action against violations and waiting for directives. The new government is in the process of formation and its position would be cleared soon, he said.

Mushtaq Shah, a resident of Rawalpindi, told ‘The News’ that how would they survive when a ‘roti’ is being sold at Rs5. He said that ‘roti’ is the basic need of all and how one would survive without it. He said that he is a salesman in a private company and getting Rs10,000 per month.

Asma Khan, a social worker, said that the government is responsible for inflation in the country. She said that after February 18 general elections in the country, prices have been increased manifold. Petrol is being sold at Rs62.88 against Rs53.77 per litre, milk at Rs40 against Rs35, ‘atta’ at Rs375 to Rs400 against Rs310 for a twenty-kilogram bag and public transport fares have been raised to Rs8 against Rs6 stop-by-stop. The present government has shattered the dreams of masses who wanted some relief, she said.

Monday, April 14, 2008

Food crisis may lead to wars, riots: experts


By Anwar Iqbal

WASHINGTON, April 13: The world is moving towards a food crisis that may lead to wars and riots, warn financial experts meeting at the World Bank headquarters in Washington.

“People are dying because of their reaction to the situation,” said Jacques Diouf, director-general of the United Nations’ Food and Agriculture Organisation.

The UN agency also warned that this food crisis was not going to end quickly. The World Bank agreed and predicted that prices would remain above 2004 levels through to 2015.

World Bank President Robert Zoellick noted that people living in the developed world struggled with the high cost of fuel to run their cars, while poor people in developing nations struggled to feed themselves.

“In many developing countries, the poor spend up to 75 per cent of their income on food. When prices of basic foods rise, it hits hard,” he said.

The price of wheat had risen 120 per cent over the past year, Mr Zoellick added. Over the past three years, food prices overall have risen 83 per cent, the World Bank estimates.

The crisis of surging food prices could mean “seven lost years” in the fight against worldwide poverty, he said.

IMF managing director Dominique Strauss-Kahn also issued a dire warning about the food crisis and its economic and political impact.

“Food prices, if they go on like they are doing today ... the consequences will be terrible,” he said, adding that if they continued, “hundreds of thousands of people will be starving”.

“As we know, learning from the past, those kind of questions sometimes end in war,” he said.

Leading financial experts from around the world warned that food riots and shortages were breaking out in many regions as food shortages threatened millions of people, sparking protests around the globe.

They pointed out that so far there had been deadly riots in a number of countries.

Last week one person was killed in two days of rioting in Egypt, while violence wracked Haiti, where demonstrations over rising food prices led to looting and clashes with police.

In Haiti, the poorest country in the Western hemisphere, the prime minister was ousted on Saturday night after more than a week of violent protests over rocketing food and fuel prices.

The mounting food crisis has moved to the top of the agenda of this weekend’s spring meetings in Washington of the 185-nation World Bank and its twin institution, the International Monetary Fund.

To meet this crisis, Mr Zoellick called for a “new deal on global Food policy.”

For the “immediate crisis,” he urged governments to fill the $500 million food gap identified by the UN’s World Food Programme.

Under the new deal, the World Bank will nearly double agricultural lending to Sub-Saharan Africa over the next year to $800 million to substantially increase crop productivity.

In addition, the International Finance Corporation – the World Bank Group’s arm for private sector development – will boost its agribusiness investments.

Mr Zoellick also proposed that sovereign wealth funds around the world allocate $30 billion –one per cent of their $3 trillion assets – to investments for African “growth, development, and opportunity”.

He noted that rising food prices are also contributing to malnutrition, one of the “forgotten” Millennium Development Goals.

“This is not just about meals foregone today or about increasing social unrest. This is about lost learning potential for children and adults in the future, stunted intellectual and physical growth. Even more, we estimate that the effect of this food crisis on poverty reduction worldwide is in the order of seven lost years. So we need to address this not just as an immediate emergency but also in the medium term for development.

ADB’s Power Proposal


ADB’s proposal to further
increase power tariff would spell disaster
Pakistan’s power tariff is already the highest in the world, and the
government must vigorously resist all proposals to increase it further

By Kaleem Omar

The Asian Development Bank last week proposed to the government a further increase in Pakistan’s electricity tariff, claiming that the measure could be used as an ‘energy conservation tool” and a source of earning “additional revenue”. The question is: additional revenue for whom? (a) For the Independent Power Producers, who are already earning huge profits based on their front-loaded capacity-payment-cum-power purchase agreements and their very high internal rate of return of 18 per cent guaranteed by the government under the 1994 Energy Policy? (b) For the privatised Karachi Electric Supply Corporation, which has notably failed to live up to its commitment to invest in additional generation capacity, or in upgrading the distribution system – throwing the city’s electricity supply regime into chaos and resulting in massive power cuts in the summer months, with disastrous economic consequences for the industrial and commercial sectors? Or (c) additional revenue for the national exchequer?

Even if it is supposed to be additional revenue for the national exchequer, there will, in fact, be no additional revenue going into the public kitty when the consequent effect of loss of industrial production and the slowdown in commercial activities and in the services sector are taken into account. To paraphrase an old American saying, what we would gain on the swings, we would lose on the roundabout. Moreover, any further increase in Pakistan’s electricity tariff, which is already the highest in the world, would further fuel inflation across the board, increasing manufacturing costs and making the country’s products even more uncompetitive in international markets. This, in turn, would further widen Pakistan’s rapidly growing trade gap, which has doubled in the last three years and is currently running at an annualised rate of $ 19 billion.

The growing trade gap, in which soaring international oil prices are the biggest factor, has started to eat into our foreign exchange reserves, which have fallen to $ 13.5 billion from $ 16 billion only a year ago. Exports have been stagnating at about $ 17 billion a year for the last several years, while imports continue to shoot up. This state of affairs cannot continue indefinitely, and the new government needs to take urgent steps to arrest the trend. A further increase in the power tariff, as proposed by the Asian Development Bank (ADB), in hardly the way to go about it.

It is high time that our planners stopped thinking of electricity as an end in itself aimed only at increasing the revenues and profits of the public and private sector utilities and started thinking of it as an input in the development process to be made available to consumers at cheap rates.

High electricity tariffs, besides encouraging power theft, have forced many factories to go off the national grid and resort to setting up their own generation facilities. The additional investment involved in buying, installing and operating gas-fired or oil-fired generators has further added to manufacturing costs, making Pakistani products more expensive domestically and less competitive in export markets, with very adverse consequences for the economy as a whole.

Given this sorry state of affairs, government planners simply cannot afford to procrastinate any longer and must quickly find realistic solutions to the problem. The ADB’s proposal to further increase the electricity tariff as a means of “energy conservation” is a no-brainer that should be dismissed out of hand. If factories are forced to use less electricity because of higher tariffs, what will happen to their level of production? It will go down – that’s what!

For boosting economic growth and exports, token cuts in electricity tariffs will not do the trick. To have a meaningful impact on reducing manufacturing and farming costs and making Pakistani goods and commodities more competitive in export markets, electricity tariffs need to be slashed by at least 50 per cent.

The time for tokenism is over. What is needed now is a new approach to the whole question of the price at which electricity should be sold to industrial consumers and farmers, the two sectors that produce exportable goods and commodities.

The government needs to look at electricity not as a product on which to levy higher and higher taxes but as one of the key inputs in manufacturing and agriculture. In this context, the government should even consider selling electricity to consumers at below cost if that is what it is going to take to boost GDP growth and exports. The deficit resulting from selling electricity at below cost would, in the long run, be made up for many times over by the boost that low-priced electricity would give to industrial and agricultural output, and, consequently, to exports.

A plan to reduce electricity tariffs need not involve re-inventing the wheel. A model for it already exists in the form of the very successful, people-friendly approach adopted by planners in the United States in the 1930s for reviving the economy of the impoverished Tennessee Valley region in the depression-era dustbowl states.

The Tennessee Valley Authority (TVA), created in 1933, was the first agency of its kind in the world and one of the most successful even today. Back in the 1930s, vested private interests in America, led by private power companies, accused the TVA of selling electricity at an uneconomical price. But when the capital costs of a project are allocated among the many subtle and diverse activities fostered by the TVA, who can determine the exact price of the consequent electric power?

The TVA was aimed at the re-birth of the entire watershed of the Tennessee River, and all its tributaries, including parts of seven US states and more than 40,000 square miles. This was regional planning on a proper scale. Private enterprise could not afford the vast outlay. And seven states could not integrate seven plans for seven sections of the Tennessee Valley. An unprecedented form of authority was needed and an unprecedented use of money. Yet nothing short of such a grand design could restore hope to an impoverished people.

Of all the new and startling programmes announced by the TVA in 1933, the one that caused the loudest uproar was the plan for generating electric power and the method of distributing it to the people living in the Tennessee Valley.

Could the federal government, using taxpayers’ money, set up an arbitrary yardstick for measuring electric power rates? Was this a fair method of determining what a consumer should pay for a kilowatt-hour of energy? So went the argument, back and forth. Yet the widespread use of low-price electric power generated by the TVA eventually came to play a vital part – indeed, perhaps, the most vital part – in the reconstruction of the land in the Tennessee Valley.

By 1933, the valley’s people seemed lost, seemed abandoned, in twentieth century America – while successive US presidents (Calvin Coolidge and Herbert Hoover) droned their banal tales of prosperity vetoed bills sponsored by Senator George Norris of Nebraska aimed at blocking the sale of hydroelectric rights on the Tennessee River to the car magnate Henry Ford for private exploitation.

Coolidge and Hoover thought that the government could only do evil by intervening in the economic process. Would the soon-to-be new president, Franklin D. Roosevelt, under the wise old Senator’s guidance, reconsider this time-honoured American doctrine? Hence the trip to Muscle Shoals on the Tennessee River on which Norris took Roosevelt early in 1933, when half the depression-hit American banks were closing and Roosevelt still had a month to wait for his inauguration.

Daring was the order of the day, for it needed absolute daring to imagine that the long woes of the Tennessee Valley might be repaired by human foresight, human planning. But Norris had faith that it could be done. Thus he unfolded his plan to Franklin Roosevelt on that fateful day at Muscle Shoals. And two months after Roosevelt’s inauguration, the Congress of the United States created the Tennessee Valley Authority.

The plight of the inhabitants of the Tennessee Valley could not have been redressed without this investment of the whole nation’s energy, money and imagination. Therefore the power plants at the great TVA dams are all labeled: “Built for the People of the United States”.

It is high time that Pakistan, too, adopted a similar people-friendly approach to the whole question of electricity tariffs.

Imperfect govts AND imperfect markets: Choice before developing countries


By Aftab Ahmad Khan

Governments throughout the world are confronting the challenge of costly public programmes, bureaucratic inefficiencies and inadequacies in economic performance by turning to the private sector and free markets for assistance.

Three key reasons explain this phenomenon. First, during most of the 20th century governments increased the scope of their involvement in economic life of their countries. Whether through regulation, taxation or expropriation, the growth of government was sustained and relentless, and it took place in North and South, rich and poor nations making no distinction between democracies and dictatorships. By attempting to do so many things and produce so many goods and services, government management became thinly spread across a wide range of product lines, and quality and efficiency suffered as a result.

Secondly, from the perspective of government budgets, the mismanagement and inefficiencies manifested themselves in higher cost to produce government goods and services. This led to more government spending and higher deficits, which in turn led to more borrowing and higher taxes. Confronted with burgeoning deficits and collapsing services, many governments have no choice but to get rid of losing enterprises.

The fiscal deficits became specially acute in developing countries. As debt levels mounted, governments were forced to consider policy alternatives that would reduce the financial burden on the public sector.

Thirdly, while all governments grew during the 20th century, some governments grew more rapidly than others. Many market economies were better able to limit government growth than their socialist counterparts. By the 1980s, the results were unambiguous; countries that were successful in limiting growth in the government and maintaining a viable and competitive private sector experienced much higher rates of economic growth and prosperity than those who followed the opposite course of action. In a large number of countries state intervention in economic development instead of promoting growth spawned inefficiency, instead of re-distributing resources to the poor and the powerless the interventionist state too often coincided with elitism, corruption and dictatorship.

These trends created on environment conducive to limiting the role of the government. Developments in the private sector also provided a powerful impetus to the anti-statist trends. The private sector gradually became more efficient in developing countries of Asia and Latin America.

Private entrepreneurs emerged more successful, financial markets began to develop, policy and regulatory frameworks conducive to private initiative evolved, and transfer of technology through private channels became easier and more efficient. As private sector capabilities improved, there was less need to rely heavily on the state as entrepreneur and leader.

An important lesson that has emerged from the development experience of recent decades is about the role of the state. This role is crucial, but it must be kept within the limits of the scarcest resource in developing countries, that is the supply of competent and honest administrative talent. A large public sector exhausts this resource with strongly negative consequences.

Free market policies in recent years have received powerful support from the International Monetary Fund (IMF) and the World Bank. A large number of countries which are receiving loans from these international financial institutions have to abide by the conditionality of implementing a structural adjustment programme with emphasis on pulling back the interventionist state.

The objective of structural adjustment programme, observes a World Bank report “is to restore rapid economic growth while simultaneously supporting internal and external financial stability. As such these programmes have macro-economic and micro-economic aspects. The major macro-economic objectives are to improve the external balance and domestic fiscal balance. An adjustment programme thus commonly includes a combination of (a) fiscal and monetary policies to bring about aver-all demand reduction, and (b) trade policies (mainly the exchange rate and import / export taxes and subsidies) to alter the relative incentives between tradable and non-tradable goods. On the import side, the major objective is to improve efficiency in the use of resources by removing price distortions, opening up more competition and dismantling administrative controls (de-regulation).

Such programmes include those for government expenditure and the management of public enterprises including reduction in government presence in areas where private enterprise can operate more efficiently.” Simply put, structural adjustment means less government, free trade and more private enterprise.

Notwithstanding the current fascination with the charms of the market and disillusion with government in the Third World, it is an indisputable fact that a liberal market oriented economy can only yield positive results in a milieu characterised by good governance.

According to the IMF, good governance has been found to have a direct impact on economic efficiency and growth which it tries to promote as part of its mandate. The IMF has contributed to good governance through its policy advice, technical assistance and dissemination of codes and best practices aimed at strengthening institutions and systems and functioning of markets. Through its technical assistance, the IMF “(i) helps improve the management of public resources through reforms of public sector institutions (the treasury, the central bank, public enterprises and the official statistics function including such administrative procedures as expenditure control, budget management and revenue collection; and (ii) supports the development and maintenance of an open and stable economic and regulatory environment, for example price systems and related regulations - conducive to efficient private sector activities.”

The main ingredients of the British concept of civil service that we inherited in Pakistan were public confidence in the freedom of civil service from all political bias; minister’s confidence in obtaining loyal service from civil servants irrespective of what political party was in power, high staff morale based on confidence that promotions and other rewards do not depend on political origins or partisan activity but on merit. A really substantial commitment to political action would undercut staff morale and raise a multitude of suspicions, legitimate or otherwise. Unfortunately the role of the civil servant in Pakistan has been changing from being a functionary whose sole interest is the welfare of the public and impartial administration of laws to that of a mere agent of the government in power.

Experience of a large number of countries across the globe clearly demonstrates that for free market reforms to work, government institutions must work. Even with cutbacks in the role of the government the state remains a major actor in macro-economic policy making, infra-structure and social programmes. But because government effectiveness in many developing countries is undercut by low pay and pervasive corruption, governments themselves need institutional reforms that will raise productivity and wages and reduce corruption.

In the debate over the relative powers of state and market in economic life, one notices a significant shift in the position of many economists and aid agencies. During the 1950s and 1960s, they advocated an interventionist state that would plan, mobilise and manage the nation’s resources. This they argued was necessary in developing countries because markets had failed. Most aid agencies and economists now argue that the private sector should take the lead in mobilising and managing resources because governments in a large number of developing countries are crippled by inefficiency, corruption and over-centralisation.

In actual fact in most developing countries neither markets nor governments work efficiently. The problem would be easier if the choice were between perfect markets or imperfect governments, or between perfect governments and imperfect markets. In reality the actual choice is some compromise between imperfect markets and imperfect governments.

Govt has no quick remedy for power crisis


Monday, April 14, 2008
ISLAMABAD: Minister for Water and Power Raja Pervaiz Ashraf Monday told the National Assembly that the government has set target of 9700 Mega Watt of electricity generation by 2030 from alternative/ renewable energy sources.

"For achieving, Alternate Energy Development Board (AEDB) has initiated the Wind Power Generation Project through private sector."

Replying to a question during question hours, he said the government will encourage and facilitate the private entrepreneur for power generation through Wind Mill project and other alternate resources.

Pervaiz said that unfortunately the AEDB which was constituted for power generation through alternate resources, did not initiate even a single project during last five, six years.

He said there are various proposals under consideration and implementation for generation of electricity by alternative/renewable energy sources.

He said AEDB has electrified 1,762 remote off-grid homes in 31 villages in all provinces of the country through renewable energy technologies.

There are 51 proposals with a cumulative capacity of 13,335 MW are under consideration and process for setting up of powerhouses throughout the country in the private sector, he added.

These proposals are being processed by Private Power and Infrastructure Board, under the Ministry of Water and Power, he said.

He said the prevailing power crisis was erupted during the regime of previous government due to non execution of even a single power project.

He said there is gap between the system of demand and power available due to certain reasons including poor hydrological conditions, less availability of power IPPs, monumental increase in power consumption growth rate, non installation of new generating units by private sector and failure of private sector to deliver their promises.

He said due to these reasons PEPCO is carrying out load management to the tune of 3000 MW.

"It would take about six to seven months for improvement and three years completely end the prevailing power crisis facing by the country," he added.

To a supplementary question, Pervaiz said that as per National Power Plan 127 Power Generation Units were planned during1994 to 2018, but only two Uch and Ghazi Barotha Power Houses have been added during 1999-2007.