Local bodies: The way forward for economic development

History proves that whenever the local administration was put in place in the past, even in partially true spirit, it always led to some rural and urban development. PHOTO: EXPRESS/ FILE

KARACHI: Finally, the federal and provincial governments are going ahead with local bodies elections, a rare phenomenon in the country’s political history that came on the prodding of the Supreme Court, which will be held in the next few weeks.

It is indeed a good move in a country where the autocratic form of government seems an integral part of the history. Unfortunately, local administration has a low share in economic development even during the rule of elected federal and provincial governments.

The devolution of power is vital for removing a sense of deprivation and achieving economic development and prosperity at the local level. Formation of an effective local administrative structure aimed at decentralising administrative and financial authority, good governance, effective delivery of services and transparent decision-making through institutionalised participation of people at the grass roots level is the only way forward for a poverty-stricken country like Pakistan.

Indeed, the seventh National Finance Commission Award in 2009 was a landmark achievement when all provinces reached consensus after a long time over distribution of the country’s financial resources among themselves as well as with the federation.

Although the Centre has devolved powers to provinces after the 18th Constitutional Amendment, it will not produce desired results until the formation of local bodies with financial autonomy in its entirety. The NFC Award is just an arrangement for resource-sharing between the Centre and the provinces, but the third tier of the government – local bodies – does not come within its purview, which is actually concerned with devolution along with financial autonomy.

This is considered to be a core area for the local administrative setup all over the world, particularly in developed states. In contrast, we have a system where elected legislators for federal and provincial assemblies are responsible for infrastructure development at the local level, which is the prime cause of corruption and disparity in development across the country.

The allocation of resources from the Public Sector Development Programme (PSDP) to the legislators is a “manufacturing fault” of the democratic system in the country, which could be tackled through the establishment of an effective and accountable local bodies system.

Absence of effective local governments also contributes to many structural weaknesses in revenue collection. According to a study of local governments in the Asia-Pacific region, revenues at the local level constitute a mere 5% of the total revenues generated by different tiers of the government in a country. The central government bags close to 89% and the remaining is collected by the provinces or states.

Effective local governments will be able to show a better fiscal effort in terms of tax and non-tax revenue generation for the national exchequer. Apart from this, a small share of expenditure is needed at the local level, which is around 4% of the expenditures made by all forms of government.

History proves that whenever the local administration was put in place in the past, even in partially true spirit, it always led to some rural and urban development. Pakistan has just passed through its first phase of democratic transition. Now there is a pressing need to cultivate democratic seeds at the grassroots level through setting up an effective local government system with full financial and political autonomy aimed at achieving economic development and prosperity in the country.

The writer hosts business talk shows on FM 101 and Radio Pakistan and is pursuing an M Phil in Economics

Industrial waste: A threat to people’s lives

Keenjhar Lake had become poisonous due to hazardous chemical waste found in heavy quantity in the reservoirs which supply water to other cities, including Karachi. PHOTO: SARAH MUNIR

KARACHI: Some time back, it was investigated that hazardous sewage and industrial waste were risking lives. This was initially done in Punjab where the government had invested $20 million for pollution-free water treatment plants in southern parts through a UN development programme.

It was identified that the water in the reservoir was killing plants and animals in the area and severely affecting humans, through infectious diseases, causing blindness and severe burns on the body.

The provincial assembly was informed that Keenjhar Lake had become poisonous due to hazardous chemical waste found in heavy quantity in the reservoirs which supply water to other cities, including Karachi. In the short term, it will impact around three million people living beside the riverbank and in the long term it will affect over 20 million people in Karachi.

A water sanitation plant has been installed at a cost of Rs750 million at Keenjhar Jhimpir area. Apparently, it seems that raw water was seeping through the plant filters and mixing with the drinking water supply. An inquiry report was prepared but no action taken.

Anywhere else, this kind of high-profile matter related to threat to human lives through corporate negligence would emerge as a slap on the government’s face, leading to a swift remedy. Here, we are looking the other way round.

What the policymakers do not understand is that installing water treatment plants alone without ensuring electricity to run them will provide no solution, as people will end up drinking polluted lake water, with the killer poison of chemical waste already flowing in heavy quantities.

The bigger challenge is how to ensure that the reservoir is secured and that leaks in filters of those plants are plugged and the cost of corporate criminal negligence is recovered from the profiteers who have violated health and safety standards.

According to the World Health Organisation report for 2012, the water samples that were collected put the hazard risk at 2.3% as compared to WHO’s standard at 0.75%, indicating high risk. Today, the situation is posing a severe threat of death and disease among the people of Sindh. The only reason this matter came up for discussion in the assembly was because of its significant impact on the Karachi water supply and its reservoirs.

The Ministry of Environment, Environment Protection Agency, civil rights organisations and provincial government officials are silent on the issue.

In Karachi alone, over 275 million gallons of consumable water is illegally sold fetching an approximate Rs100 million a day, for which we pay Rs3,000-5,000 on average to the tanker mafia, that itself further generates Rs10.4 million for the black economy. This further complicates the issue of providing safe and drinkable water to the citizens, both in urban and rural localities.

Had it not been the Karachi impact, the poor people of Sindh would have continued to suffer from dangerous skin and stomach diseases, some of them could not be cured.

Water pollution is a crime across most of the developed world and a notice must be taken to ensure we are safe and secure and to avoid the possible critical risk to the nation.

The writer comments on international relations and public policy

Shrinking spreads: When interest income comes under strain

SBP is keen to ensure that banks will have to lend more to the private sector to earn higher spreads CREATIVE COMMONS

KARACHI: 

These are interesting times in the Pakistani banking sector. After several years of abnormal profits that belied the depressed (and depressing) economic conditions, banks are experiencing a drop in earnings because of shrinking spreads. I believe these shrinking profits will benefit the sector in the long run: the morphine drip is running dry, forcing the banks to evolve their strategies and think more carefully about sustainable business models. Successfully building a sustainable model involves developing diversified revenue streams such as trade finance, consumer lending, alternative banking channels, branchless banking and the SME sector.

Pakistan has a relatively strong and competitive banking sector. In the past two decades the privatisation of the major banks – HBL, UBL, MCB and ABL – and the entry of international players have contributed towards rapid progress in terms of regulation, technology, systems, organisational culture and human resources. There are currently 5 public sector, 17 private, 5 Islamic and 7 foreign banks in Pakistan. The SBP has gradually raised capital requirements and has expressly stated its intention to create conditions conducive to further consolidation in the field.

The four major privatised banks and National Bank of Pakistan (NBP) have a significant share of the market (53% of industry assets in FY2012) and are commonly referred to as the Big 5. NBP experiences all the advantages and disadvantages that come with being a government owned bank and is an altogether different animal. The remaining four comprise 40% of the assets: their size and outreach grant them significant economies of scale and scope as is evidenced by their average ROE of 22% compared to the industry average of 15%.

In the last five years, large scale government borrowing to finance an ever increasing budget deficit and risk aversion in lending has led to commercial banks investing heavily in treasury bills. The excessive government borrowing from commercial banks has crowded out the private sector resulting in financial disintermediation. In the three year period 2010-2012, industry deposits grew annually at 15.6% while industry advances (loans) only grew 5.6% showing that banks have been increasing investments, specifically in government borrowing. Advances to Deposit Ratios for most developed markets range between 80% and 120%, but are around 55% for Pakistani banks. The model has been simple: use depositors’ funds to buy treasuries and run a skeleton crew on the credits side.

The squeeze

Low cost of deposits and a high discount rate because of rising inflation has resulted in large banking spreads with minimal effort on the part of banks. This situation is now changing; government borrowing from scheduled banks is close to Rs2.5 trillion – unsustainable for banks as the government cannot afford to repay this amount any time soon

SBP is keen to ensure that banks will have to lend more to the private sector to earn higher spreads

The commercial banks have reaped large profits at the cost of depositors and borrowers and the SBP is now focusing on reducing it by increasing minimum required saving rate offered on savings accounts from 5% to 6.5% linked to the repo rate. At 6.5%, real returns on savings are still negative and in the longer run the SBP might move it even higher. The discount rate has also been brought down to 9% from 12% last year because of lower inflation and industry pressure.

The game plan

With core revenue stream (interest income) under stress, banks have to focus on two things:

Shore up interest income by mobilising additional deposits and increasing lending. Interest income will always be the bread and butter for a bank. Traditionally banks have tried to attract Casa (current and savings) deposit because it is low cost and stable. High Casa ratios are seen as an indicator of strong fundamentals. Given that Savings Deposits have a cost of 6.5% (even higher in tier-based accounts), Current Deposit is now the focus area and we are already seeing aggressive marketing and product offerings as banks compete for current deposits. These are harder to come by as customers are becoming increasingly rate sensitive and ubiquitous daily return tier-based deposit products mean even transactional accounts can earn high rates on a daily basis.

Banks will also look to increase advances, but it will take a bit longer for them to realign their structures to scale up lending.

Increase revenue from non-interest income side. This is consistent with most developed markets where fee & commission income constitutes a much larger percentage of total income from customers. At present Fee, Commission and Brokerage Income on an average contributes 10% – 20% to the total revenues for the banks. They will want to increase this up to around 30% in the medium term.

Musharraf, one step closer to freedom

Musharraf was arrested on Oct 10 over the alleged murder of the deputy cleric of Lal Masjid. PHOTO: AFP

ISLAMABAD: A trial court on Monday granted former president Pervez Musharraf his request for bail in connection with the murder of a cleric from the Lal Masjid, Express News reported.

The court set Musharraf’s bail at two surety bonds of 0.1 million rupees each, after considering new video evidence presented before the court today.

“The court has granted him bail,” Afshan Adil, a member of Musharraf’s legal team, told reporters. “Musharraf will not leave the country and will face all the cases.”

She also said that the money would be paid on November 5.

Musharraf is still on the Exit Control List but he can freely move within the country.

Musharraf was arrested on October 10 on the order of Islamabad High Court (IHC) over the alleged murder of the deputy cleric of Lal Masjid, Abdul Rasheed Ghazi and his mother during a military operation in 2007. The ex-president had filed an application before the Additional District and Sessions Court and sought bail in this case.

During the course of hearing on October 30, attorneys from both the sides completed their arguments and judgment had been reserved till November 1. The hearing had further been delayed to November 4 to allow the prosecution more time to collect evidence.

General Musharraf’s counsel, Ilyas Siddiqui, had maintained that his client was wrongly implicated in the case as the First Information Report (FIR) was based on mala fide intentions.

Advocate Tariq Asad, representing the prosecution, termed the court’s decision unlawful, adding that they fully intend to challenge this decision.

Peace talks with TTP over, Chaudhry Nisar laments

Interior Minister Chaudhry Nisar addressing a press conference in Islamabad on Saturday. PHOTO: AFP/FILE

ISLAMABAD: Lamenting the end of peace talks, Interior Minister Chaudhry Nisar Ali Khan alluded to a larger conspiracy aimed at disrupting talks with the Taliban, culminating in the drone strike on Tehreek-e-Taliban Pakistan (TTP) Chief Hakimullah Mehsud.

Briefing members of parliament on the status of talks with the TTP, the interior minister said the prospect of dialogue with the militants was “unfortunately” no longer possible.

He said the team formed to initiate the dialogue was meant to set off to meet the TTP today, but all hopes of dialogue had come to an end with the killing of Mehsud.

Nisar commended all the political parties for uniting to pursue peace talks, and showing patience despite ongoing attacks. He said evidence had been gathered for the Qissa Khawani attack, the Peshawar church attack and the killing of Major General Sanaullah Niazi, adding that the timing of these acts of terrorism was suspect.

He also thanked the Army which, “went the extra mile” to protect the peace dialogue, despite the grave security situation that was developing.

The interior minister did however blast the local media for its irresponsible reporting on the issue of peace talks, adding that he remained silent during “dangerous” misreporting and leaks at the time due to the sensitive nature of the issue.

Yousaf Baig Mirza joins as CEO Express Media Group

Yousaf Baig Mirza has joined as CEO Express Media Group. He will head the Group’s electronic and print media entities. Express Group has three TV Channels, which include the flagship channel Express News along with Express Entertainment andTimes. On the print side, they have Daily Express, the very popular English daily The Express Tribune and Sindh Express.

Having served as the head of various private and state owned media groups in the past 15 years, Mr Mirza has extensive experience of media management in Pakistan and abroad. He was thrice called over by the serving regimes to fix the State TV, which invariably takes a sharp dip after his exit, both in terms of revenue and viewership. Under his dynamic leadership the state run network made remarkable improvements and expanded significantly.

He is credited with launching some of the most successful channels in the public as well as private sectors. The Advertising Association of Pakistan awarded him with the prestigious ‘Media Man of the Decade Award’ for his professional contribution. He is a pioneer of the Private-Public Media Partnership which has benefitted most of the private sector channels up and running today.

Known for his outstanding expertise and professionalism, Mr Yousaf Baig Mirza has led top media groups in the private sector to incredible success. His strength in management is well consolidated with his remarkable knack for Media Marketing.

The management is extremely pleased to welcome Mr Mirza as the CEO Express Media Group and have tremendous faith that his unparalleled expertise in media will take the organisation to a whole new level.

Drone attacks counterproductive to peace efforts: Nawaz

Screengrab of Prime Minister Nawaz Sharif speaking at Azm-e-Nau 4.

ISLAMABAD: Prime Minister Nawaz Sharif said “drone attacks are counterproductive” to Pakistan’s efforts for peace, Express News reported Monday.

He said this in his first public speech since a US drone strike killed Taliban leader Hakimullah Mehsud, while speaking at Azm-e-Nau 4, one of the many military training exercises that are meant to introduce new war strategies.

The series aims at improving the mobilisation speed of troops and increasing cooperation for joint Army, Navy and Air Force response to any conventional threat. Security officials have deemed it a ‘new concept of war fighting’ aimed at preempting India’s ‘Cold Start Doctrine’.

Nawaz said that on his recent trip to Washington, he “made it clear that Pakistan does not intend to accept foreign aid.”

“Gone are the days when our national security policies were determined by phone calls from abroad,” the prime minister added.

Nawaz warned peace could not be achieved “by unleashing senseless force”. Though he did not mention the drone strike directly, he stressed his desire to “give peace a chance”.

He also remarked that the Pakistani population is united “when it comes to the protection of our motherland.”

Praising the Pakistan army, he said that it has come to the aid of the civil government by “imparting training to our law enforcement agencies”.

He further stated that economic development is linked to the law and order situation of the country and that it is not something that will change overnight.

New technologies

The army allegedly shot down a drone during the exercise to demonstrate the development of anti-drone technology.