Have floods pushed Pakistan to get its act together? Not yet

McClatchy NewspapersOctober 7, 2010 

ISLAMABAD, Pakistan — The U.S. and other foreign donors are voicing alarm that Pakistan's civilian government, having failed to organize rescue and relief during the floods that devastated a fifth of the country this past summer, still hasn't produced a reconstruction plan for the 20 million people affected.

They also fault President Asif Ali Zardari for failing to shake up the government's top-heavy cabinet with a reputation for corruption and the government of Prime Minister Yousuf Raza Gilani for failing introduce taxes on the wealthy to pay for day-to-day government and for reconstruction.

Experts and officials say a restructuring is crucial to the future of the state, at a time when Zardari's government is facing a political crisis that threatens its survival.

The vacuum in governance in Islamabad has added to U.S.-Pakistan tensions, which already are high over American helicopter and pilotless drone incursions across the border from Afghanistan, a symptom of a broader clash over Afghan policy and the sanctuaries that the Taliban and other militant groups enjoy on the Pakistani side of the border.

"We are committed to helping Pakistan but Pakistan has to help itself," said a senior Western diplomat, who requested to remain anonymous to speak more candidly. "We know it's not easy to make changes, particularly in difficult times, but it is difficult times that focus the mind to bring difficult changes."

The political and fiscal gridlock are making it difficult for the Pakistani government to focus on tackling extremism and helping to rescue the failing campaign in neighboring Afghanistan, analysts say. Thursday a suicide bombing ripped through a famed shrine in the southern city of Karachi, where a mild spiritual form of Islam is practiced that's anathema to extremists, claiming at least 10 lives, and injuring 65 more.

"While success in its ongoing struggle against extremism is critical to the country's well being, the other war that it should be fighting, but is not, is essential for its survival. That war is against vested interests, which prevents taxation of the elite and derails the best laid-out plans for improving the efficiency of the government as well as of the public sector," wrote former finance minister Shaukat Tareen, in an opinion article Thursday in Daily Times, a Pakistani newspaper.

Some, however, see the floods as an opportunity for the country, providing the impetus to long-needed restructuring and a focus on the rural areas, where the majority of the country's population live.

Although the floods ravaged as many as 40,000 square miles of land, the affected areas, when they dry out, and others that were spared will potentially be more productive in the next few years, assuming government provides help for farms to get back on their feet.

Some economists had predicted that the floods would wipe out growth, but the International Monetary Fund forecast Wednesday that the Pakistani economy would still expand 2.8 percent this year, down from its previous prediction of 4.5 percent.

Pakistanis are among the least taxed people in the world. Large parts of Pakistan's economy go untaxed, including the country's landowning elite, while the declared assets and yearly tax returns of even its members of parliament draw widespread skepticism in a country where corruption and tax avoidance is ingrained in the national culture.

Pakistan repeatedly has pledged to the IMF that it will broaden the narrow scope of its sales tax, but it has missed deadlines for doing so, including the latest on Oct 1.

So far, the world has donated $640 million to the Pakistani flood effort in response to an urgent United Nations appeal, plus another $866 million outside the appeal, and pledges total some $500 million more, according to U.N. figures released on Oct. 4.

The U.S. has contributed $362 million of that sum, according to the U.S. Embassy in Islamabad, separate from the $1.5 billion in annual civilian assistance program and the roughly $2 billion in yearly military aid that Pakistan currently receives.

None of the money that's coming in for the floods covers reconstruction work, only immediate relief and "early recovery." Experts say there is no plan and no funding in place for rebuilding, a bill that's expected to run into the tens of billions of dollars. Some 2 million houses, more than 12,000 schools and thousands of miles of road have to be rebuilt.

The government also is under intense pressures for reform from within — from the courts, the opposition, the media and the powerful military. The coalition government in Islamabad has an unwieldy Cabinet of over 60 members. Many ministers and bureaucrats have reputations for incompetence and corruption, with several, including Zardari, holding their positions because a controversial legal amnesty had wiped out graft charges against them.

State-owned enterprises, ranging from steel mills to airlines, a vehicle for corruption for their politically-connected bosses, lose around $3 billion a year. There are some 300 state agencies tied to various ministries in a bloated bureaucracy. Chronic double-digit inflation, galloping national debt and a yawning budget deficit will have to be tackled, economists say.

According to several Pakistani and foreign officials, who asked not to be named because of the sensitivity of the issue, the military has presented the government with a list of inept and dishonest officials it wants dismissed, a move backed by at least some of Pakistan's Western allies.

Zardari, who's resisting the demand to sack members of his government, insisted this week that the "victory" of his reconciliatory approach to politics was that "no one wants an undemocratic act" now. Many in his own party think that he'll have to cull allies if the government is to survive. Zardari called this week for a one-off "flood tax" but gave no specifics and suggested that each province would have to decide whether to impose it.

"You can't run a country with tax to GDP ratio of 9 percent, particularly when you're fighting a war on terror," said Jahangir Tareen, an opposition member of parliament. "For the first time, tax has become such an important issue, as somehow we could get by in the past."

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McClatchy Newspapers 2010

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