Imposition of flood surcharge and Reformed General Sales Tax (RGST) has become a political issue with both the opposition and coalition partners of the government opposing the proposed measures in parliament. The finance minister, Dr Abdul Hafeez Sheikh, appears impatient to get a stamp of approval from the legislators to be able to receive a good evaluation report and the next tranche from the IMF, but differences persist. Although newspaper headlines yesterday quoted acting chairman of the Senate Standing Committee for Finance that the RGST draft bill has been unanimously approved by the body, new developments and statements from various leaders suggest that this is not the case. Members of the Senate committee have denied having approved the draft while the absent chairman, MQM’s Ahmad Ali, has refused to endorse the document. It remains to be seen if the government’s efforts to mollify the MQM will bear fruit, for which both the federal finance minister and interior minister Rehman Malik were in Karachi. One thing is clear, however, the divergence of opinion both in favour and against the two proposed taxes has exposed the banality of arguments bandied about in the august house, which is the highest seat of decision making. While the opponents of these taxes to raise revenue are citing the likely subsequent rise in inflation and added burden on the common man as their reason, Dr Abdul Hafeez Sheikh’s offensive against a ‘powerful lobby’ that wants to evade taxes resorted to fancy arguments like the possibility of getting out of the debt trap with a 3-5 years economic stabilisation programme and structural reforms. A reality check is in order for both.
Management of the economy has never been Pakistan’s strong point. Successive regimes have wedded themselves to the international capitalist system and depended on doles from international financial institutions (IFI) and other donors to run the economy. The situation has gone from bad to worse with the country now finding itself having to choose between the devil and the deep blue sea. On the one side is the critical need to raise money to meet development and running expenses and on the other is an exploitative international system of lending that has entrapped the country to an extent that without loans, Pakistan, with its current economic structure and style of governance, cannot even meet its running expenses, let alone meet the needs of development. While some opposition members may have found satisfaction in dubbing the federal finance minister an ‘IMF recovery officer’ while debating the proposed RGST, the stark reality is that Pakistan has little choice but to meet IMF conditions if it hopes to receive the badly needed next tranche of its loan. The IMF board’s fifth review meeting of the country’s economic performance is due in December and imposition of RGST is one of their conditions. Also, there is intense international pressure on Pakistan to tax its rich for sustained assistance from richer nations. With the fiscal deficit expected to go well beyond the estimated figure of 4.7 percent and unabated borrowing by the government, Pakistan needs all the financial help it can get. While it is highly desirable that the government cut down its expenses to reduce the fiscal deficit, as the opposition members are arguing, this is only part of the solution. There is a need for expanding the tax net to all untaxed incomes without burdening the poor. However, this cannot lead to Pakistan extricating itself from the debt trap, as Dr Abdul Hafeez Sheikh would like to have us believe. Radical cuts in luxury expenses, and a revolutionary programme of economic reform, involving industrialisation of the country leading to diverse export surpluses, backed by strong political will, are necessary for this to happen. Only fancy talk cannot steer the country out of the perennial debt trap. *
SECOND EDITORIAL: North Korea scrutinised again
Tuesday morning’s surprise bombardment of South Korean island Yeonpyeong by North Korea has drawn worldwide attention and heavy criticism. South Korea responded in kind after which its government leaders met in an underground war room to deliberate their response in case of increased attacks. Civilians were seen fleeing and two South Korean marines were killed. North Korea cites the reason for their shocking bombardment as a response to the South’s military drills in the area while South Korea says that it offered no provocation. Speculations are rife that North Korean leader Kim Jong II’s son is keen to flaunt his military prowess after being named heir-apparent, and hence this unexpected attack.
Whichever way one chooses to look at it and whichever side one chooses to believe, there is cause for concern in a region that has been a hotbed of confrontation and uneasy peace since 1953. The Korean War may have ended in 1953 but with the presence of some 28,000 US troops in South Korea, Japanese support for the South and North Korea having built nuclear weapons to counter its neighbour’s nuclear umbrella agreement with the US, peace exists on very fragile terms.
The Korean divide is a great human tragedy; families have been separated and traditions have been fractured. It is the regimes on both sides that are inherently different from each other with North Korea staying true to its communist roots and South Korea being uplifted by the US as a capitalism-following polar opposite. Although the western media is biased in its view of North Korea, when seen objectively this attack could very well be a cry for attention by a land isolated for too long by sanctions and international disapproval because it chose not to abandon its ideology after 1991. The US has always pushed any holdouts of socialism into a tight corner from where they have been forced to their knees. North Korea is having none of it.
The region will remain volatile until peace keeps walking on eggshells in and around the Korean peninsula. This incident has illustrated just how important a proper resolution to the Korean issue has become. The answer does not lie in isolating North Korea but in engaging it and its people in talks aimed at encouraging both sides to abandon their hostility. *
Management of the economy has never been Pakistan’s strong point. Successive regimes have wedded themselves to the international capitalist system and depended on doles from international financial institutions (IFI) and other donors to run the economy. The situation has gone from bad to worse with the country now finding itself having to choose between the devil and the deep blue sea. On the one side is the critical need to raise money to meet development and running expenses and on the other is an exploitative international system of lending that has entrapped the country to an extent that without loans, Pakistan, with its current economic structure and style of governance, cannot even meet its running expenses, let alone meet the needs of development. While some opposition members may have found satisfaction in dubbing the federal finance minister an ‘IMF recovery officer’ while debating the proposed RGST, the stark reality is that Pakistan has little choice but to meet IMF conditions if it hopes to receive the badly needed next tranche of its loan. The IMF board’s fifth review meeting of the country’s economic performance is due in December and imposition of RGST is one of their conditions. Also, there is intense international pressure on Pakistan to tax its rich for sustained assistance from richer nations. With the fiscal deficit expected to go well beyond the estimated figure of 4.7 percent and unabated borrowing by the government, Pakistan needs all the financial help it can get. While it is highly desirable that the government cut down its expenses to reduce the fiscal deficit, as the opposition members are arguing, this is only part of the solution. There is a need for expanding the tax net to all untaxed incomes without burdening the poor. However, this cannot lead to Pakistan extricating itself from the debt trap, as Dr Abdul Hafeez Sheikh would like to have us believe. Radical cuts in luxury expenses, and a revolutionary programme of economic reform, involving industrialisation of the country leading to diverse export surpluses, backed by strong political will, are necessary for this to happen. Only fancy talk cannot steer the country out of the perennial debt trap. *
SECOND EDITORIAL: North Korea scrutinised again
Tuesday morning’s surprise bombardment of South Korean island Yeonpyeong by North Korea has drawn worldwide attention and heavy criticism. South Korea responded in kind after which its government leaders met in an underground war room to deliberate their response in case of increased attacks. Civilians were seen fleeing and two South Korean marines were killed. North Korea cites the reason for their shocking bombardment as a response to the South’s military drills in the area while South Korea says that it offered no provocation. Speculations are rife that North Korean leader Kim Jong II’s son is keen to flaunt his military prowess after being named heir-apparent, and hence this unexpected attack.
Whichever way one chooses to look at it and whichever side one chooses to believe, there is cause for concern in a region that has been a hotbed of confrontation and uneasy peace since 1953. The Korean War may have ended in 1953 but with the presence of some 28,000 US troops in South Korea, Japanese support for the South and North Korea having built nuclear weapons to counter its neighbour’s nuclear umbrella agreement with the US, peace exists on very fragile terms.
The Korean divide is a great human tragedy; families have been separated and traditions have been fractured. It is the regimes on both sides that are inherently different from each other with North Korea staying true to its communist roots and South Korea being uplifted by the US as a capitalism-following polar opposite. Although the western media is biased in its view of North Korea, when seen objectively this attack could very well be a cry for attention by a land isolated for too long by sanctions and international disapproval because it chose not to abandon its ideology after 1991. The US has always pushed any holdouts of socialism into a tight corner from where they have been forced to their knees. North Korea is having none of it.
The region will remain volatile until peace keeps walking on eggshells in and around the Korean peninsula. This incident has illustrated just how important a proper resolution to the Korean issue has become. The answer does not lie in isolating North Korea but in engaging it and its people in talks aimed at encouraging both sides to abandon their hostility. *
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