Abdullah Yusuf, the most effective tax collector in Pakistan's history, has been fired, without explanation, by the PPP government while he was traveling overseas in his official capacity.
Mr. Yusuf's key accomplishments include doubling of the revenue collection to achieve an aggressive target of over Rs 1.04 trillion in 2007-08; implementation of broad-based reforms within the tax system; universal self-assessment regimes; paperless customs clearances and e-filing systems and customer responsiveness with the business trade and bodies for creating a friendly business environment. Before Mr. Yusuf's reforms, the tax collection bureaucracy in Pakistan was notoriously corrupt and inefficient and he faced a lot of internal resistance. Mr. Yusuf is a chartered accountant and financial management consultant with extensive experience in public and private sectors.
Mr. Yusuf was appointed by Prime Minister Shaukat Aziz to the position of the Federal Board of Revenue (FBR) Chairman as part of his broad agenda for reform in governance. Mr. Yusuf is also known to be close to President Musharraf. While there has been no explanation offered for Mr. Yusuf's termination, it appears to be politically motivated. This action is particularly questionable, given the revenue growth target for the next five years set at an ambitious 25% per year.
It seems that the critics of President Musharraf have been obsessed with a YouTube video clip showing Mr. Yusuf dancing and President Musharraf and former Prime Minister Shaukat Aziz smiling. The focus has been on judging the performance of Mr. Yusuf on the dance floor and his relationship with Mr. Musharraf rather than his undeniable accomplishments as the chief tax collector of Pakistan. Indeed, this is sad day for Pakistan.
I found myself on the receiving end of lots of email traffic after Mr. Yusuf's video appeared on YouTube. I'd like to share with you one particular message that I found closest to reflecting my own feelings about it: Here it is:
We seem to be a nation of hypocrites. I say this because we seem to judge people quickly from their outward appearance. Surely a human being is much deeper than the outward appearance. There is a hadith that our Prophet prohibited people from condemning any one as kafir, as he said that this was a secret between that person and God. There is a deeper lesson in this.We as a nation are quick to pronounce judgment on the moral fiber of all and sundry in quick time; but do we judge ourselves? Jesus had said, when a prostitute was brought before him for judgment, "let he who has not sinned cast the first stone". Do we ever think along those lines? This is what makes ours a nation of hypocrites. The CBR Chairman, and I did not know him personally; was mentioned to me by many friend and acquaintances of mine who had the experience of dealing with CBR, and I got a unanimous positive appraisal that during the tenure of this chairman, CBR's performance had improved quantum fold in attitude and performance. I also felt this in the form of a major tax-payer of Pakistan; and certainly the level of harassment that one went through the tax department was greatly reduced. Should we be judging this chairman for his good performance at his job, or condemning him for what he does on his own leisure time. To the citizens of Pakistan his performance at his job is most important for the well being of this nation. Dancing, I think, is a natural out-pouring of happiness, and man has been dancing through the ages. So what is wrong here!! I think what is wrong here is using these videos to malign him and judge him unreasonably. May Allah guide us all in the right direction.
Here's the "controversial" videoclip:
Thursday, July 24, 2008
Monday, July 21, 2008
$100B Business at Stake in US-India Nuclear Deal
As the Indian parliament gets ready for a confidence vote this week, the fate of the government of Prime Minister Manmohan Singh and the US-India nuclear deal hangs in the balance.
The Indian government is pulling out all stops to win this vote to salvage the US-India nuclear deal. In addition to the Indian people, the international community and the nuclear suppliers group (NSG) are also watching the vote closely.
The NSG's interest lies in the estimated $100 billion worth of nuclear business in India over the next two decades. U.S. companies hope to capture as large of a share of that business as possible. Private studies suggest that if U.S. vendors win just two civil nuclear reactor contracts, they would create 3,000–5,000 new direct jobs and 10,000–15,000 indirect jobs in the United States, according to US International Trade Administration.
It has now been three years since the signing of the historic agreement between President Bush and Indian Prime Minister Manmohan Singh. During this period, political parties and media in India have been debating the merits and pitfalls of the agreement.
India has also asked the International Atomic Energy Agency to place the draft India-IAEA Safeguards agreement before its Board of Governors. After the board's approval, the U.S. will seek an exemption from the international Nuclear Suppliers Group that would allow the deal to proceed. The final step will be a vote in the U.S. Congress on the so-called 123 Agreement.
As the deal makes its way through the Indian parliament, the IAEA, the NSG and the US Congress, there is heavy lobbying taking place on all sides. The US nuclear suppliers lobby is actively pushing for passage in the US Congress, even if it requires a lame-duck session after the November elections. Some nonproliferation advocates in the U.S. have also stepped up their campaign against the deal. They claim the agreement will facilitate a new nuclear testing by India, and thereafter will allow India to upgrade its nuclear arsenal. Non-proliferation advocates have also argued that India could expel IAEA inspectors in the future and thwart the IAEA inspection regime.
The US legislation passed in 2006 -- the so-called Hyde Act -- that gave preliminary approval to the U.S.-India agreement, requires that Congress be in 30 days of continuous session to consider it. Congressional aides said that clock can begin to tick only once India clears two more hurdles -- completing an agreement with the International Atomic Energy Agency, and securing approval from the 45 nations that form the Nuclear Suppliers Group, which governs trade in reactors and uranium. Because of the long August recess, less than 40 days are left in the session before Congress adjourns on Sept. 26, according to the Washington Post.
India is said to be running short of uranium needed to fuel its reactors. It is anxious to win "clean" agreements with the IAEA and the NSG that would not result in fuel cutoffs if it decides to resume testing nuclear weapons.
Sen. John McCain, the Republican presidential candidate, is a strong supporter of the agreement, but Sen. Barack Obama, his Democratic rival, is more skeptical. During the congressional debate on the Hyde Act, Sen Obama added language in the bill limiting the amount of nuclear fuel supplied to India from the United States to deter nuclear testing. Though proliferation is a constant concern raised in the US, there has not been much discussion of the implications of this deal for other nations in the neighborhood: Pakistan, Iran and China.
Pakistan's nuclear fuel needs are currently very modest and they currently are met by China. China has promised to help Pakistan achieve its target of generating 8,800 MW of nuclear power by 2030 by speeding up the delivery of the six nuclear plants and supply the necessary fuel, according to various reports. At the same time, Pakistan is building a $1.2 billion facility to develop the capability to manufacture full-cycle nuclear fuel and power plants. The Iranian situation is currently very murky with the US and EU threatening sanctions if Iran continues to enrich uranium.
If India wins the IAEA and the NSG approvals that would not result in fuel cutoffs in the event it decides to resume testing nuclear weapons, it could easily bypass any US restrictions and obtain needed nuclear supplies from other nations eager to do business with India.
Here's a brief video clip with Dr. Leonard Weiss, an NPT expert, explaining the US-India nuclear deal:
The Indian government is pulling out all stops to win this vote to salvage the US-India nuclear deal. In addition to the Indian people, the international community and the nuclear suppliers group (NSG) are also watching the vote closely.
The NSG's interest lies in the estimated $100 billion worth of nuclear business in India over the next two decades. U.S. companies hope to capture as large of a share of that business as possible. Private studies suggest that if U.S. vendors win just two civil nuclear reactor contracts, they would create 3,000–5,000 new direct jobs and 10,000–15,000 indirect jobs in the United States, according to US International Trade Administration.
It has now been three years since the signing of the historic agreement between President Bush and Indian Prime Minister Manmohan Singh. During this period, political parties and media in India have been debating the merits and pitfalls of the agreement.
India has also asked the International Atomic Energy Agency to place the draft India-IAEA Safeguards agreement before its Board of Governors. After the board's approval, the U.S. will seek an exemption from the international Nuclear Suppliers Group that would allow the deal to proceed. The final step will be a vote in the U.S. Congress on the so-called 123 Agreement.
As the deal makes its way through the Indian parliament, the IAEA, the NSG and the US Congress, there is heavy lobbying taking place on all sides. The US nuclear suppliers lobby is actively pushing for passage in the US Congress, even if it requires a lame-duck session after the November elections. Some nonproliferation advocates in the U.S. have also stepped up their campaign against the deal. They claim the agreement will facilitate a new nuclear testing by India, and thereafter will allow India to upgrade its nuclear arsenal. Non-proliferation advocates have also argued that India could expel IAEA inspectors in the future and thwart the IAEA inspection regime.
The US legislation passed in 2006 -- the so-called Hyde Act -- that gave preliminary approval to the U.S.-India agreement, requires that Congress be in 30 days of continuous session to consider it. Congressional aides said that clock can begin to tick only once India clears two more hurdles -- completing an agreement with the International Atomic Energy Agency, and securing approval from the 45 nations that form the Nuclear Suppliers Group, which governs trade in reactors and uranium. Because of the long August recess, less than 40 days are left in the session before Congress adjourns on Sept. 26, according to the Washington Post.
India is said to be running short of uranium needed to fuel its reactors. It is anxious to win "clean" agreements with the IAEA and the NSG that would not result in fuel cutoffs if it decides to resume testing nuclear weapons.
Sen. John McCain, the Republican presidential candidate, is a strong supporter of the agreement, but Sen. Barack Obama, his Democratic rival, is more skeptical. During the congressional debate on the Hyde Act, Sen Obama added language in the bill limiting the amount of nuclear fuel supplied to India from the United States to deter nuclear testing. Though proliferation is a constant concern raised in the US, there has not been much discussion of the implications of this deal for other nations in the neighborhood: Pakistan, Iran and China.
Pakistan's nuclear fuel needs are currently very modest and they currently are met by China. China has promised to help Pakistan achieve its target of generating 8,800 MW of nuclear power by 2030 by speeding up the delivery of the six nuclear plants and supply the necessary fuel, according to various reports. At the same time, Pakistan is building a $1.2 billion facility to develop the capability to manufacture full-cycle nuclear fuel and power plants. The Iranian situation is currently very murky with the US and EU threatening sanctions if Iran continues to enrich uranium.
If India wins the IAEA and the NSG approvals that would not result in fuel cutoffs in the event it decides to resume testing nuclear weapons, it could easily bypass any US restrictions and obtain needed nuclear supplies from other nations eager to do business with India.
Here's a brief video clip with Dr. Leonard Weiss, an NPT expert, explaining the US-India nuclear deal:
Thursday, July 17, 2008
Retail Investors Protest Falling Stocks in Karachi
The investor confidence reached new lows when hundreds of irate investors took to the streets in Karachi today. A number of windows were broken and at least two people injured, Reuters news agency reported. They were protesting continuing slide in share prices in Karachi for the 14th consecutive day, eroding about 14% of capital since Monday, reaching a new 18-month low of 10,058.37. The KSE-100 is now down 36% from its peak of 15739.25 earlier this year. Fall of 20% or greater in major indices is considered a bear market.
Earlier in June, there was a brief respite for investors when the authorities imposed a temporary ban on short selling and tightened the circuit breaker lower limit to 1% and increased upper limit to 10%. But, as soon as the trading range was revised to plus or minus 5% last Friday, many investors took advantage of it and sold off their holdings, putting further downward pressure on share prices.
"The measures taken on Friday proved to be an exit strategy for foreign investors," Asad Iqbal, managing director at Ismail Iqbal Securities Ltd. told Business Recorder newspaper in Karachi.
Pakistan's State Bank has recently raised interest rates from 10% to 12.5% and cut 2007-8 growth from 7.2% to 5.8%. This forecast comes on the heels of dire talk of economic "meltdown" by the new leadership that is facing serious political instability amid growing differences in the PPP-PML(N) coalition government. The ongoing unease with new leadership is continuing to accelerate loss of confidence in Pakistan's economy by businesses, investors and consumers. The rupee is continuing its slide which has seen it lose 16.9% of its value against the dollar so far this year.
With the dramatic rise in international commodity prices, the food and fuel subsidies have contributed to Pakistan's rising budget deficit, which the central bank said would reach 6.5 percent to 7 percent. The deficit was just 4.3 percent in fiscal 2007. With imports rising faster than exports, the central bank said Pakistan's current account deficit will rise between 7.3 percent and 7.8 percent - a record high.
While it is true that at least part of the inflation in Pakistan is imported from global markets, it is important for the Pakistani leadership not to use it as an excuse for inaction on the economic front. Faced with international turmoil, it becomes even more important to assert leadership in economic matters to keep the national economy afloat and able to recover quickly in the future. The first step toward fixing the current mess is to put credible economic leadership in charge and stop the erosion in business, consumer and investor confidence.
Earlier in June, there was a brief respite for investors when the authorities imposed a temporary ban on short selling and tightened the circuit breaker lower limit to 1% and increased upper limit to 10%. But, as soon as the trading range was revised to plus or minus 5% last Friday, many investors took advantage of it and sold off their holdings, putting further downward pressure on share prices.
"The measures taken on Friday proved to be an exit strategy for foreign investors," Asad Iqbal, managing director at Ismail Iqbal Securities Ltd. told Business Recorder newspaper in Karachi.
Pakistan's State Bank has recently raised interest rates from 10% to 12.5% and cut 2007-8 growth from 7.2% to 5.8%. This forecast comes on the heels of dire talk of economic "meltdown" by the new leadership that is facing serious political instability amid growing differences in the PPP-PML(N) coalition government. The ongoing unease with new leadership is continuing to accelerate loss of confidence in Pakistan's economy by businesses, investors and consumers. The rupee is continuing its slide which has seen it lose 16.9% of its value against the dollar so far this year.
With the dramatic rise in international commodity prices, the food and fuel subsidies have contributed to Pakistan's rising budget deficit, which the central bank said would reach 6.5 percent to 7 percent. The deficit was just 4.3 percent in fiscal 2007. With imports rising faster than exports, the central bank said Pakistan's current account deficit will rise between 7.3 percent and 7.8 percent - a record high.
While it is true that at least part of the inflation in Pakistan is imported from global markets, it is important for the Pakistani leadership not to use it as an excuse for inaction on the economic front. Faced with international turmoil, it becomes even more important to assert leadership in economic matters to keep the national economy afloat and able to recover quickly in the future. The first step toward fixing the current mess is to put credible economic leadership in charge and stop the erosion in business, consumer and investor confidence.
Tuesday, July 15, 2008
Pakistani Economy Returning to Bad Old Days
Just like the bad old days
BRIGHTLY painted Tata lorries, laden with sacks of onions, wait in the noon heat at the Wagah border post between India and Pakistan. Once past customs, the onions will go on to Lahore and beyond. But the lorries must turn back. Their produce is laboriously loaded onto smaller vans, driven by locals.
Pakistan's costly imports of food ($3.5 billion in the first ten months of this fiscal year, which ends on June 30th), fertilizer ($823m) and fuel (over $8.6 billion) may pull the economic rug from under its newly installed government, which presented its first budget, belatedly, on June 11th. The State Bank of Pakistan (SBP), the central bank, reckons the country's current-account deficit might reach 7.8% of GDP this fiscal year, its highest ever. Growth has slowed to 5.8%, inflation has quickened to over 19% and the government's budget deficit, at about 7% of GDP, is the highest in ten years.
Such macroeconomic disarray will be familiar to the coalition government led by the Pakistan People's Party of Asif Zardari, and to Nawaz Sharif, whose party provides it “outside support”. Before Mr Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. But since then, as the IMF remarked in a report in January, there has been a transformation. Pakistan attracted over $5 billion in foreign direct investment in the 2006-07 fiscal year, ten times the figure of 2000-01. The government's debt fell from 68% of GDP in 2003-04 to less than 55% in 2006-07, and its foreign-exchange reserves reached $16.4 billion as recently as in October.
But in the months since, the turnaround economy has threatened to turn full circle. The political turmoil that followed President Pervez Musharraf's imposition of a state of emergency in November and Benazir Bhutto's assassination in December is not wholly to blame. Pricey fertiliser and April hailstorms hurt the wheat harvest. The mealy bug and other afflictions cost about 16% of the cotton crop, which in turn hurt the textile industry. And over 27% of Pakistan's higher import bill was due to the spike in oil prices alone.
But all this made it a bad moment for Pakistan to spook foreign investors with its wobbly politics. They bought just $97m-worth of shares in the first ten months of this fiscal year, compared with over $1.5 billion in the same period a year earlier. Reluctant to test the foreigners' appetite for its securities, the government has turned to the charity of multilateral lenders and friendly governments. Pakistan also received over $5.3 billion in remittances from migrant workers in the ten months to April, half of it from the Gulf.
Mr Zardari has recently returned from a pilgrimage-cum-begging mission in Saudi Arabia. The Kingdom reportedly agreed to defer charges on some of the 250,000 barrels of oil it sells Pakistan each year. This forbearance comes on top of a $300m handout to the government.
What will his government do with this money? Its new budget aims to narrow its fiscal deficit to 4.7% of GDP, based on an optimistic forecast of revenues. It will raise sales taxes across the board and impose heavy duties on luxury items such as perfume and chocolate. It has resolved to “prune” the “unbearable” subsidies, mostly of fuel and electricity, which now consume one-fifth of its budget, promising instead to give poor households 1,000 rupees ($15) a month in cash. The scheme will be named the “Benazir programme”, lest the beneficiaries forget which party to thank. The budget's allocation to the army was less in real terms than it was last year. But even as it spends less on guns, it promises to spend more on soldiers, raising their pay by 20% along with that of every other federal employee. Other expenses on the bureaucracy, however, are to be frozen: civil servants will have to forgo their new cars and air-conditioners.
As the finance minister unveiled his plans, Pakistan's lawyers began their “long march” to Islamabad, demanding Mr Musharraf's removal and the reinstatement of the senior judges he sacked last year. On June 7th Mr Musharraf told the press that he was not about to leave his post or the country. He will know when to quit, he said. He will not sit around like a useless vegetable, or like the onions waiting to cross the border at Wagah.
Source: Economist June 12, 2008
Monday, July 14, 2008
Relaxed Trading Rules Trigger Karachi Stocks Selloff
In spite of cheaper valuations of Karachi stocks from shrinking price earnings multiples relative to other markets, foreign investors in Pakistan continue to be nervous. As soon as the trading range was revised to plus or minus 5%, many investors took advantage to sell their holdings Friday and pushed the KSE-100 down more than 4%. The decline continued this week as the KSE-100 index lost 265.84 to close at 11,695.82. Earlier in the morning, it opened at 11,961.66. This is a far cry from the peak of 15739.25 earlier this year.
"The measures taken on Friday proved to be an exit strategy for foreign investors," Asad Iqbal, managing director at Ismail Iqbal Securities Ltd. told Business Recorder newspaper in Karachi.
Securities and Exchange Commission Chairman Razi-ur-Rehman believes the market has a liquidity crisis and he blamed the bearish trend in the equity market on the State Bank of Pakistan's (SBP) tight monetary policy, which has affected market liquidity.
The State Bank raised interest rates to 12 percent from 10.5 percent in May which hurt the stock market. Traders are expecting another increase in the next scheduled meeting before July 31 to curb inflation and support the rupee.
The rupee ended firmer at 69.50/60 on Monday as sentiment improved slightly after the introduction of stabilization measures last week and on rumors the government may curb imports, traders said, according to Business Recorder. State Bank of Pakistan is reportedly taking steps to arrest the rapid decline in Pakistan's dollar reserves. According to the latest SBP weekly report, the foreign currency reserves fell to $11.123 billion, down from $15.6 billion at the end of last year.
The State Bank last week moved to stabilize the rupee after it set its weakest ever closing level at 72.85/90 on July 8.
Among the most active stocks Friday, volume leader NIB Bank fell 8.7 percent to 9.69 rupees, Oil and Gas Development Co Ltd shed 5 percent to 110.45 rupees, while Arif Habib Securities was 4 percent lower at 143.49 rupees.
The Karachi stocks had rallied earlier from measures that included a 1-month ban on short selling, a special 30 billion rupee ($446 million) fund set up to stabilize volatility, and revision of the short circuits to 10% on the upside and 1% on the downside, announced June 24, 2008. Please read my post "Karachi Stocks Rally after Ban on Short Selling" to learn more about recent changes at the KSE.
"The measures taken on Friday proved to be an exit strategy for foreign investors," Asad Iqbal, managing director at Ismail Iqbal Securities Ltd. told Business Recorder newspaper in Karachi.
Securities and Exchange Commission Chairman Razi-ur-Rehman believes the market has a liquidity crisis and he blamed the bearish trend in the equity market on the State Bank of Pakistan's (SBP) tight monetary policy, which has affected market liquidity.
The State Bank raised interest rates to 12 percent from 10.5 percent in May which hurt the stock market. Traders are expecting another increase in the next scheduled meeting before July 31 to curb inflation and support the rupee.
The rupee ended firmer at 69.50/60 on Monday as sentiment improved slightly after the introduction of stabilization measures last week and on rumors the government may curb imports, traders said, according to Business Recorder. State Bank of Pakistan is reportedly taking steps to arrest the rapid decline in Pakistan's dollar reserves. According to the latest SBP weekly report, the foreign currency reserves fell to $11.123 billion, down from $15.6 billion at the end of last year.
The State Bank last week moved to stabilize the rupee after it set its weakest ever closing level at 72.85/90 on July 8.
Among the most active stocks Friday, volume leader NIB Bank fell 8.7 percent to 9.69 rupees, Oil and Gas Development Co Ltd shed 5 percent to 110.45 rupees, while Arif Habib Securities was 4 percent lower at 143.49 rupees.
The Karachi stocks had rallied earlier from measures that included a 1-month ban on short selling, a special 30 billion rupee ($446 million) fund set up to stabilize volatility, and revision of the short circuits to 10% on the upside and 1% on the downside, announced June 24, 2008. Please read my post "Karachi Stocks Rally after Ban on Short Selling" to learn more about recent changes at the KSE.
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