Syed Nayyar Uddin Ahmad
Third World economic development would be aided more by foreign investment than by World Bank welfare. Yet as World Bank aid has increased, more and more countries have created barriers to foreign investment, thereby retarding their own development.
Five World Bank borrowers—Peru, Nicaragua, Syria, Guyana, and Liberia—have effectively defaulted on their bank loans. Yet the bank wants to expand its lending in order to keep a net positive flow of assets to its debtors— to continue giving them $5 so they can repay $3. This may be in the bank’s interest but it benefits no one else.
The bank was created because commercial banks were leery of lending to sovereign governments. In the past 20 years, private lending to sovereign governments has exploded. If the private credit market for sovereign borrowers has any fault, it is that it is too generous to doubtful governments. In almost every case, World Bank loans now go either to countries that squander the money or to countries that could obtain private loans.
What the bank can do that private lenders cannot or will not do is provide money on easy terms to uncreditworthy borrowers. But every bank handout increases a recipient government’s ability to act irresponsibly and sabotage its own economy and reduces its need to rely on private credit markets. As the bank’s report on exchange rates has shown, bank aid boosts a country’s real exchange rate, thus making it less likely that the country will become self-sufficient.
Who benefits now from the World Bank, aside from inept Third World rulers and the bank’s own employees?
A few years ago the bank was considering establishing a commercial affiliate that would borrow in world capital markets and lend to LDCs at a profit. This is a good idea for the bank as a whole. If the bank never gets another dollar from the U.S., West German, or Japanese treasuries, it will still be able to lend over $13 billion a year because of its huge reserves and repayments of previous loans.
The bank should be required to support itself by selling bonds and existing on its own creditworthiness. Once Western governments stopped handing out money to the bank, its obsession with its loan levels would cease, and it could begin to make sound economic judgments. It would no longer have an incentive to back unproductive projects and incorrigible kleptocracies.
Giving countries money that will be badly used is worse than not giving them any money at all. Empowering corrupt and inept politicians to rule over their people has nothing to do with real development. Perpetual structural adjustment loans for politicians who perpetually maul their economies and impoverish their subjects are an exercise in futility. If real policy reforms are made, people will have genuine incentives to invest or to lend these governments money. And if no real reforms are made, giving them money will only continue to squander capital and postpone the day of reckoning.
The less money the bank has, the more likely it is that its net effect on development will be positive. As long as the bank suffers from its current “have money, must lend” syndrome, it will continue pouring billions into floundering socialist regimes, inefficient government corporations, and harebrained mass migration schemes. A poorer bank would be a wiser bank and a better friend to the Third World.” Unquote.
Since the World Bank and IMF knew very well that their fresh loans to repay old loans will further sink Pakistan economically, but still they wanted to expand their lending in order to keep a net positive flow of assets — they continued giving us $10 so we can repay them $6. This may be in the bank’s interest, but it was deadly poison for Pakistan.
Since, these loans were given to us with deliberate ill intentions, Pakistan must stop repayment of these loans, on the very strong plea of being ODIOUS loans. Now, the time has come to separate the growth, development, education, eradication of poverty & security of Pakistan, from the politics, forever. It has been a standard political tactics in the past, to put the blame on previous rulers, by all and sundry, to divert the attention of the masses, from own failures and governance incompetencies.
However, now we must put a full stop to this non-sense, which has wasted the entire past lifetime of Pakistan. Since, its a matter of impending economic collapse of the country, for which all of us are responsible in one way or the other; we should decide to look forward and forgive and forget each others sins of the past; and take each and every segment and political force of the society in confidence, for a very transparent scheme of our future development.
In this connection, Mr. Steve Maraboli has very appropriately said that “Make a pact with yourself today to not be defined by your past. Sometimes the greatest thing to come out of all your hard work isn’t what you get for it, but what you become for it. Shake things up today! Be You… Be Free… Share.” Nothing can match the benefits of the collective wisdom. Let us build a new economically strong and politically stable Pakistan, by our collective decisions; knowing very well that no political party, group or institution is so strong, to run this country, single handedly, for a sustainable period, without the help and cooperation of each other. We must also realise that our personal safety and better future lies in accommodating and cooperating with each other, with the sole aim of building a STRONG Pakistan, under the slogan “Re-born Pakistan”.
In this regard, it is suggested that, we should AIM to bring Pakistan by the year 2035, to the level at which Singapore was in the year 2010 (where country was developed first and politics allowed subsequently, not like Pakistan, where we have put the cart before the horse; and indulging in politics first and development of the country and society is the last priority). All politics & other considerations should be made subservient to this TARGET for 2035, even if we have to abolish weekly holidays for the next 20 years & reduce our daily sleeping time to 6 hours.
All the stake holders, particularly, from the deprived sections of the society in Pakistan, must immediately come forward, for deciding about the direction of the future of the nation. Biggest factor in any victory is self-confidence. Anti-thesis of terrorism is education, coupled with economic emancipation. As such, the nation must embark upon the following agenda, to resurrect our economy without any further loss of time.
(1) Request to all foreign donors for a 10 years moratorium, on all debt repayments by Pakistan, which is a frontline state of the world’s war on terror (WOT). Here, don’t forget that the world powers have totally written off loans of many countries, for much less cooperation than Pakistan, which is practically fighting their war, for more than a decade and a half.
(2) 20% per annum reduction in all non-developmental government expenditures, plus total freeze in all perks paid from the national exchequer, involving foreign currency.
(3) All government servants starting from the President, PM, Judges, military and civil personnel using official cars must use their vehicles for 10 years, before replacing it with new model.
(4) Maximum tax rate on each and every type of income in Pakistan should be fixed at 10%. This will not only bring huge revenues to the government, but will also discourage the tax evasion tendencies. The size of our undocumented economy is almost equal to the yearly budget of Pakistan. The best way to minimise black money is not the launching of amnesty schemes, because the black money keeps flourishing after taking advantage of such facilities. If we really want to deal with the menace of undocumented economy on a permanent basis, the best way is to either eliminate taxes or reduce the rates of taxes to a minimum level i.e., not more than 10%. This low level of tax rate will not only spur an economic boom, but will also automatically encourage people towards paying the taxes; rather than giving bribes to the government officials, to save them from bigger payments of taxes.
(5) Impart training of various modern skills to the country’s huge unskilled manpower for increasing the industrial and agricultural productivity, competitiveness, value addition & exports.
(6) Special support and incentives for developing world class facilities for enhancing income from tourism sector, which should encompass religious, medical, educational, hunting, entertainment and traditional tourism, specially keeping in view how rapidly Dubai has become a world tourist destination by juxtaposing technology with innovative ideas.
(7) Set a target for 20% per annum increase in foreign remittances, by offering innovative incentives to expatriate Pakistanis, which should even attract foreigners to park their money in Pakistan.
(8) Outsource FBR functions (which will alone increase income by Rs.1000 billion) & impose flat 10% tax on all & every type of income (as already mentioned at 4. above), without any exemption (except for the security forces personnel, whose salaries may be doubled with expected receipt of un-precedented increase in revenues). This will not only reduce income tax burden on salaried class (with max. tax rate of 10%. Here don’t forget consultants are already paying 10% tax), but will also result in so much increase in revenues, to the extent that government will not require any tax fresh imposition, in the budget. Plus, the government will be able to give tax free salaries to all the armed forces, rangers, police and other security agencies personnel, who are shedding their blood, in fighting the menace of terrorism, for our and our children’s safe tomorrow.
(9) Pakistan’s Foreign policy is excellent in theory, perhaps the best in the world. However, this policy should be implemented in its true letter and spirit, with core emphasis on PEACE particularly with its neighbours; and Foreign Policy thrust and motto of all our diplomats should be that any and every action in their embassy, must result in the economic benefit of the country. Foreign missions exceeding their allocated targets of investments and remittances should be lavishly rewarded with monetary benefits.
(10) Initiate steps (by imposing economic emergency specifically for austerity at every level) to bring each and every economic activity under document.
(11) To attract huge world wide foreign exchange deposits from expatriate Pakistanis and foreigners, allow profit rate of 3% PA to be paid on half yearly basis, on Dollar and other specified foreign currency bank accounts in Pakistan. We should not forget that recently Pakistan borrowed at 3% from the IMF and sold Eurobonds at 8.25%.
Moreover, all eligible non-filers must not be penalised with any amount of taxation as they are legally not allowed to file returns as per law. I am more than confident that by the dint of sheer hard work, sincerity & honesty, which is imbibed in the bones of the Pakistani work force, we can surely bring Pakistan, into the comity of 20 developed nations of the world, in the next 15-20 years. The leaders of Pakistan holding the destiny of this great nation, with highest manpower potential and material resources in the world, must remember the following two adages:
(a) Not failure but setting low aim is a crime.
(b) In order to achieve the impossible it is precisely the unthinkable which must be thought.