The President in his speech to the joint session of parliament highlighted the need for a 'national consensus' on five major issues namely (i) energy shortage, (ii) circular debt, (iii) taxation reforms, (iv) restructuring of public sector entities, and (v) documentation of the economy. That these five issues have remained unresolved for the past three years and have continued to have major negative implications for the people of this country is by now well acknowledged.
Policies that would resolve these issues have, as is quite natural within a democratic set up, varied between political parties premised on their distinct manifestoes. Thus the President's call to take 'tough decisions together' and his invitation to 'all political parties for a national dialogue' notwithstanding the fact that his address was heard and applauded only by the PPP and ANP MNAs, (the MQM remained stoically unmoved during his speech and subsequently noted that it would wait to see action with respect to his promise on ushering peace in Karachi) is sound. However the onus of ensuring this rests with the PPP that may not have an overall majority in parliament but certainly has the largest number of MNAs.
The Opposition, inclusive of PML (N), PML (Q) and JUI (F), as well as the PPP's coalition partner, MQM, has periodically and irately noted that the PPP does not take them on board while taking critical economic decisions. Threats of withdrawal from the coalition in the Centre, that would convert the Gilani government into a minority one leaving it open for a vote of no confidence, has periodically led to some policy revisions.
These revisions are unfortunately not sustained in the political arena, as MQM's accusations with respect to targeted killings reveal, but remain focused on the economic arena. An example of course is the withdrawal of the oil price hike on the say so of the MQM as well as the PML (N) as contained in their 10-point agenda - a decision that allows for reduced revenue collections from the petroleum levy as well as sales tax on oil and products thereby fuelling the country's budget deficit.
This is one of the decisions that in all probability led the International Monetary Fund not to reactivate the stalled Stand-By Arrangement. This decision also belies the President's claim that "making tough decisions is the responsibility of the leadership, no doubt. We are not afraid to lead; and we know the way." The way he identified as a reduction in the cabinet size, rationalisation of the subsidy regime, and introducing tax reforms by expanding the tax net through introduction of the Reformed General Sales Tax. And the President implied this is not enough because of the five economic issues that remain.
The Opposition would well argue that their input on the five issues has been provided to the government and it has opted not to follow their prescriptions. Energy shortage continues to be tackled through the highly controversial rental power projects, rendered controversial not only by accusations of corruption by members of the opposition which can be easily dismissed as opposition for opposition's sake, but by an independent third party auditor selected by the Cabinet as well as by recent Supreme Court verdicts on some of the RPPs. The President was silent on the RPPs but noted the work on Neelum Jhelum and Bhasha dam that were conceived before 2008.
The circular debt issue persists even three years after the government stated it would eliminate it, a commitment it made to the IMF under the SBA. The reason: failure of the government to ensure payment within the energy sector, a failure that accounts for the inability of the generating units to operate at maximum capacity. Given that government departments are the major defaulters the onus falls on the government rather than on members of the opposition.
The taxation reforms are the ones most resisted by members of the opposition as well as MQM. There is opposition to the RGST, a tax designed to increase documentation, a must for an economy like ours that has a parallel black economy operating outside the tax net. The reason is the resistance by the powerful traders towards enhanced documentation of the economy as a prelude to being taxed. Be that as it may the opposition has suggested cutting down corruption/incompetence in the FBR as well as in state-owned entities as a means to increase revenue and reduce expenditure. This is not tenable in the short-term and perhaps the PML (N) can revisit its suggestions. More importantly the MQM with significant trader support base but with no rich landlord representation have urged the government to impose a tax on the income of the rich agricultural landlords - a suggestion that all other political parties are resisting for the benefit of their own parliamentarians. There is therefore a need to chalk out numbers with all parties and one would hope that this exercise is carried out 'sooner rather than later' as advised by the President.
And finally restructuring of SOEs is essentially a government exercise. The former Finance Minister identified a blueprint for restructuring and one year down the line the government has still not made the required changes. The major issue with the SOEs is two-fold. First, appointments continue to be made on the basis of nepotism and not on merit inclusive of relevant education and experience. And secondly the government has used SOEs as recruitment grounds for its supporters thereby adding to their financial woes and necessitating large annual bailout packages. Unfortunately this was viewed by the President as an achievement during his speech as he noted that 7000 sacked employees were restored, contractual employees were regularised and an allowance equal to 50 percent of basic pay was given to every federal government employee, untenable given our cash-strapped economy as well as given the fact that all other countries are not raising salaries with the objective of reducing expenditure enabling them to deal with burgeoning budget deficits. The President however reiterated his earlier mantra on the issue: public-private partnership with shares offered on the stock exchanges. This is sound logic and the President first highlighted this approach three years ago. Non-implementation reflects the ongoing domestic liquidity crunch that is partly attributable to high cost of borrowing as well as law and order issues, the private sector's concerns over this government's labour policy that disallows it from taking decisions on hiring and firing and last but not least due to the global recession.
The President took credit for the seventh NFC award as well as the fact that collection of direct and indirect taxes increased by 8 and 12.5 percent respectively. Additionally he also mentioned that foreign exchange reserves have risen as have remittances and exports. Pakistan's rural economy has greatly benefited and we have become a wheat exporting country and cotton output would rise this year due to the floods of last year. These are on the PPP watch and are legitimate achievements. His critics would of course argue that his mention of the accountability bill, stalled in the Senate by what many argue is the Law Minister's lack of interest, as well as his claim that the Benazir Bhutto's family and PPP do not believe in revenge with respect to the killers of the assassinated leader do not reflect ground realities.
What was noticeable were two major issues that the President did not mention in his speech. First and foremost he was silent on Pak-US relations even though he dedicated a full four to five minutes on his government's achievements in the foreign policy arena that included countries like China, Afghanistan and India. And, second, corruption - the reason for the dismissal of many a government in the past by the country's President.
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