President Asif Ali Zardari has, according to his spokesman Farhatullah Babar, responded to the 10 November letter written by Nawaz Sharif, the PML (N) leader in which he had raised a number of concerns and proposed remedial measures. The President's letter is a succinct response and can be viewed as the economic vision of the PPP government, a vision that had not yet been articulated, due to what many argue was the need for the Finance Ministry to deal with the severe macroeconomic crisis that the incumbent government inherited and has, to date, failed to resolve.
This failure, PPP supporters maintain, is attributable to the massive loss due to the August/September floods, while critics argue it is due to the government's flawed policies. The President, in his letter requested Nawaz Sharif's support for the passage of the Reformed General Sales Tax (RGST). If this support is forthcoming then it stands to reason that the PPP would not need any of its increasingly recalcitrant coalition partners' support for the bill. The letter added that the 15 suggestions made by Ishaq Dar, a long-term PML (N) loyalist, with respect to the RGST had been included and must be the basis of the party's support for the bill.
Those who consider these suggestions presumptuous on part of the President, given that Nawaz Sharif has publicly announced his party would oppose the bill in the House should recall that Nawaz Sharif's letter did note that the need for mobilising more resources was 'understandable', but added: "it must be done by preventing losses to the state-owned entities (SOEs), leakages in the tax collection process and by better enforcement of the tax regime, rather than by accentuating the suffering of the already distressed citizens.
Moreover, the failure to take any substantive steps to reduce the non-productive expenditures such as rationalisation of the size of the cabinet is adding to the common man's frustration."
The President ignored the latter suggestion, of slashing non-productive expenditures, but did note that measures to restructure the SOEs that are costing the exchequer in excess of 300 billion rupees in annual bailout packages, would begin implementation within the next calendar year.
The President referred to the establishment of the Cabinet Committee on the restructuring of the SOEs as reflective of the government's intent in this regard and revealed that business plans for Pakistan Railways and all other SOEs including the Pakistan Steel Mills, Pakistan International Airlines, Trading Corporation of Pakistan are under preparation and would be implemented within 4 to 6 months.
The President's critics would no doubt claim that the implementation period is simply not realistic for three reasons. First, there has been no reversal in government policy to appoint senior management in SOEs, as well as using them as employment exchanges, premised on party loyalties and not on merit or qualifications.
Second, private sector management alone would be unable to turn these SOEs around until and unless they are empowered to take personnel and pricing decisions independently. And third the government has been making commitments to restructuring SOEs for over a year now and there is genuine non-partisan skepticism over any claim that the restructuring would be completed in less than 6 months.
Be that as it may, the President did invite Nawaz to join the government in taking difficult decisions. The letter noted that the private sector would be brought into the management of power sector companies and this one sector alone would save around 250 billion rupees in 2011-12.
The President did not resist from taking a dig at the corruption allegations hurled by Nawaz Sharif against Benazir Bhutto in 1996 on her government's support of the Independent Power Producers (IPPs) by pointing out that the country would have benefited from a 6.5 cents per KW for a locked period of 20 years. Prices today are of course much higher.
Corruption would now be tackled, the President implied in his letter, with the chairman of the Standing Committee on Ehtesab agreeing to reconsider the Accountability Bill and to deliberate upon the outstanding issues arising out of the PML (N)'s dissenting note. This bill has been pending for over two and a half years and one doubts if serious differences between the two major parties would be resolved any time soon.
Nawaz had also urged the government to withdraw the POL price rise immediately and the President correctly pointed out that oil prices are determined by the international market. He also adroitly tackled the issue of subsidies implicitly recommended by Nawaz in his letter: "A subsidy can only lead to fiscal indiscipline that Ishaq Dar referred to as Finance Minister, and will contribute to inflation indirectly by increasing the fiscal deficit."
What must be lamented by the people of this country is that Nawaz Sharif in his letter did not urge the government to begin to tax the income of the rich landlords, or tax assets, liquid or immovable, held abroad by Pakistani citizens, and the President did not refer to these weighty issues that would reduce the burden on the hapless poor.