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Indo-Pak Stalmate & The Kashmir

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The relations between India and Pakistan have always experienced the Low and High degrees with later offering strategic dialogue with full support from the People of Pakistan while the former remained aggressive showing utmost hostility and acrimony due to extremist forces within their country. The arch-rival India has never trusted Pakistan despite assurances and this mistrust has affected their bilateral relations given the existing circumstances.

The terrorism is yet another key problem that has crippled the economy of Pakistan as Pakistan has given countless sacrifices by fighting the Afghan war at the behest of America.

With extensive relations with the world especially Pakistan’s best friend China, India’s atrocities in Indian occupied Kashmir have been intensified with the passage of time. The use of Chemical weapons and widespread human rights violations, defying the UN resolutions on Kashmir valley demanding a plebiscite, the Indian aggression has infinite boundaries.

Even Indian nefarious design did not stop here; they are planning to alter the article 35A of Indian Constitution to change the status of the State of Kashmir in a bid to change the disputed status of the territory. There are widespread protests in Jammu Kashmir against such move and the leaders of Kashmir Freedom movement are either detained or put on house arrest. The Indian Supreme court is hearing the case.

The constitutional provision of Article 35A does not allow people from outside the state to buy or own immovable property, seeking permanent residence, avail any state-funded scholarships or get the government jobs. It also gives power to the state legislature to define “permanent” residents. Historically, the Article 35A was added by a Presidential order to Article 370, in 1954 that applied the independent status to the state of Jammu and Kashmir.

Recently, a Delhi-based NGO “We the Citizens” had filed the petition in the Supreme Court of India challenging the articles 35A and 370. The application argued that the above-mentioned articles were discriminatory towards the citizens from the rest of India. The Chairman Peoples Democratic Party (PDP) and Former Chief Minister of State of Jammu and Kashmir Mehbooba Mufti has warned the Indian Government that any tinkering with the aforesaid articles will result igniting violence in the valley that will be beyond the control of the security agencies.

The people of Azad Jammu and Kashmir also condemned this move and demanded from the world community to intervene and exert their pressure on India to back out from such tampering with the said provision of the Indian constitution. The Islamabad’s policy statement sent a strong message to New Delhi to refrain from such the move as Pakistan will raise this issue at UN and other International forums to win support of the world community to force India change it’s desperate trying to abrogate the articles 35A and 370 which lay the basis of Disputed Territory and stops the outsiders from buying the immovable property or seeking citizenship to turn the Muslim majority into minority through temporary settlements that may weaken the claims of Pakistan on the claims of Muslim majority as per the Independence plan of  1947.

Pakistan has always fought a defensive war be it 1965, 1971 the fall of Dhaka, Kargil war and the subsequent heated war of words and the indiscriminate firing incidents on the Line of Control from the Indian side, resulting loss of civilians lives. Though Pakistan retaliates strongly yet Indians are the first to offend and harming the peace process .

The Political leadership remained divided over building close relations with India to maintain peace in the region. Both PPP and PML-N tried to have close relations with India and start the strategic dialogue with India and signed Confidence-building measures. PPP government remained close to Rajiv and Indira Gandhi’s Indian National Congress Government while PML-N leadership maintained close relations with BJP. Though both countries started the peace talks at Foreign Secretary-level but given strong the pressure from militant or extremist forces, it was always India who cancelled the peace talks at the eleventh hour giving no solid reasons of such cancellation or rolling up dialogue process.

The blame game for internal involvement has brought them too far but the meaningful dialogue can bring them together once again. The great nations always settle their disputes through negotiation table as wars always bring misery to people and the destruction that takes years to rebuild the country’s infrastructure.

Both the Nuclear capable countries must think sensibly and restart the strategic dialogue to find a solution to the Kashmir problem and end the long rivalry that has created distrust and prompts them to have heavy defence budget rather than focusing on other sectors such as infrastructural development, Education, Health, trade, commerce, IT and Sports.

It is ironic that the enmity as has also gripped the cricket and the fans are disappointed due to the refusal of India playing the series with Pakistan within India and Pakistan or at the neutral venue such as UAE. Sporting events bring the people together and play a pivot role in the normalization of circumstances but regrettably, this option was also lost by India.

It is the twenty-first century; the world is developing rapidly with advancement in science technology especially in Communication Technologies. Both the neighbours can collaborate with each other to help boost IT infrastructure as both countries have strong IT Professionals since Indian IT experts heading the leading Software giants such as Microsoft, PayPal, Google and Yahoo.

The Prime of Pakistan had envisaged his vibrant and robust foreign policy during victory speech that he intended to maintain relations with the world such as Iran, Afghanistan, Saudi Arab, US and India on the equality basis and even offered India to come forward by one step, he will go forward two steps to start the dialogue on the core issues.

The talks at foreign minister level between the two countries were announced at UNGA but abruptly cancelled by India succumbing to internal pressure given the upcoming General Elections of India likely in May 2019.

Imran Khan lashed out India of being arrogant over the cancellation of talks at foreign Ministry level.

The ruling BJP eyes the 2019 General Elections and thus intended to create hype with their strong stance against Pakistan by cancelling the peace talks in order to get support from Indian people to win general elections 2019 and regain the Government for another term.

Well, India needs to change its attitude and should immediately start the dialogue to address the issues and find out peaceful solutions to the problem including the Kashmir issue by taking the Kashmiri Leadership on board. CPEC is a game-changer for Pakistan and the region. The positive outcome of the peace talks may pave the way for India to benefit from the CPEC by joining CPEC as Partner.

CPEC can be made secure if we have peace with the neighbours such as India and Afghanistan and stability in Afghanistan is in favour of Pakistan.

Let the peace have a chance, let’s learn to live like good neighbours sharing our experiences and developing resources and promoting trade through people to people contacts. To pave the way for talks, India has to take initiatives such as ending atrocities in Kashmir, demilitarizing it and involving Kashmir leadership to find out a peaceful solution that may be acceptable to People of Jammu and Kashmir. Let the people of Kashmir decide their future.

Pakistan is ready to hold consequential talks and the Indian positive response is awaited to bid adieu to this long acrimony that has hampered peace process and bilateral trade ties between two strong nuclear powers. The SAARC forum can be instrumental for the countries to include SAARC member countries in CPEC  provided that India does not backtrack from the Peace Process.

Development

The Development of microfinance industry depends upon the resilience and risk management: SECP Chairman Amir Khan

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Islamabad : SECP Chairman, Aamir Khan emphasized that in these challenging times the development of microfinance industry depends upon the resilience and risk management, achieved through quintessential pillars of liquidity-tapped through private capital and technology embracement. Khan was addressing the Non-Bank Microfinance Companies Stakeholders Forum organized by SECP to devise a way forward and collaborate strategic response to cope the challenges posed by COVID-19 pandemic and ensuing lockdowns.

The SECP Chairman Amir Khan, along with Commissioner Specialized Companies Division, Farrukh Sabzwari chaired the session. Representatives of Pakistan Microfinance Network (PMN), State Bank of Pakistan (SBP), National Bank of Pakistan (NBP), Pakistan Poverty Alleviation Fund (PPAF), Pakistan Microfinance Investment Company Limited (PMIC), Karandaaz Pakistan and multilateral donor agencies including the World Bank, International Finance Corporation (IFC) and Department for International Development (DFID) attended the session.

 The Chairman SECP advised NBMFCs to go far product diversification to insurance solutions and saving products and build capacity of their workforce to attain business development and operational efficiency. He endorsed formation of a working group consisting of nominees from SECP, PMN, PMIC and NBMFCs to further analyze the situation. The working group will also take up the matters with relevant forums including ministry of finance, SBP and multilateral donor agencies for possible solutions.

Khan expressed SECP’s firm commitment to providing all possible support to industry not only during the current pandemic times but also in developing the industry on a strong footing. SECP Commissioner, Sabzwari highlighted the measures taken by SECP to provide relief and flexibility to the NBMFCs and their wholesale lender in managing funding requirements. He also talked about SECP’s advice to NBMFCs to defer and reschedule borrower loans.

Participants acknowledged SECP’s timely intervention to provide regulatory relief to NBMFCs in managing their credit lines and funding requirements. However, industry representatives expressed their concerns on potential defaults by borrower and liquidity crunch that may lead to capital crisis in the industry.

They raised the need of new money injection into the industry through collaborative efforts of microfinance regulators and the government. Representatives of international donor agencies attending the Forum expressed their resolve to extend fullest possible support to Pakistan’s microfinance sector.    

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Development

Gov’t releases Rs 533.33 billion for various development projects so far

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Islamabad: The federal government has so far authorized release of Rs 533.33 billion for various ongoing and new social sector uplift projects under its Public Sector Development Programme (PSDP) 2019-20, as against the total allocation of Rs 701 billion.

Under its development programme, the government has released an amount of Rs 230.3 billion for federal ministries, Rs 175.65 billion for corporations and Rs 43.46 billion for special areas, according to a latest data released by Ministry of Planning, Development and Reform.

Out of these allocations, the government released Rs 38.5 billion for security enhancement in the country for which the government had allocated Rs 53 billion during the year 2019-20.

An amount of Rs 81.37 billion has also been released for the blocks managed by finance division under the government’s 10 years development programme.

Similarly, for Higher Education Commission, the government released an amount of Rs 27.07 billion out of its total allocation of Rs 29 billion while Rs 301.47 million were released for Pakistan Nuclear Energy Authority for which the government had allocated Rs 301.48 million in the development budget.

For National Highway Authority, the government released Rs154.94 billion. Under annual development agenda, the government also released Rs 10.7 billion for Railways Division out of total allocation of Rs16 billion, Rs 7.7 billion for Interior Division, and Rs 8.38 billion for National Health Services, Regulations, and Coordination Division.

Revenue Division received Rs 4.3 billion whereas the Cabinet Division also received Rs 30.18 billion for which an amount of Rs 39.986 billion has been allocated for the year 2019-20.

The government also released Rs 26.9 billion for Azad Jammu and Kashmir (AJK) block and other projects out of its allocations of Rs 27.26 billion and Rs 16.54 billion for Gilgit Baltistan (Block and other projects).

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Covid-19

Pakistan’s small businesses hit hard by COVID-19

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Small businesses in Pakistan have been adversely affected by the Covid-19 pandemic. The low demand at home, disruptions in supply chains, constraints in international trading, and expected prolonged lockdowns are now leading to severe cash flow problems, the inability to pay back debts and cancellation of orders from clients. 

This rising uncertainty is gradually leading them to lay off employees which will have welfare implications. In some sectors where recovery is difficult to predict, small businesses have started planning for the worst: complete shutdown. This crisis could also imply a much bleaker outcome for the startup ecosystem in Pakistan.  

The government has announced a SME relief package. The central bank has also come forward to relieve some of the funding and finance related concerns of private enterprises. Yet, many micro and small businesses do not understand how to apply or if they are eligible, to receive such assistance. There are others who argue that this one off relief may not be enough given that businesses are going to face depressed demand for a longer term. Pakistan’s past record of small businesses trying to access such fiscal packages is also not encouraging, partly because many such firms do not access formal banking channels for their needs or banks impose steep collateral requirements. Also, large segments of micro enterprises have the entire or some components of their businesses in the informal sector.

Federal and provincial governments have two issues to address now: how to ensure that small businesses are able to access and utilize existing government-provided assistance, and secondly, what more can be done to support private enterprise in these times.

A progressive fiscal policy and commitment to redistributive taxation is in line with the spirit of Riasat-e-Madinah to which Prime Minister Imran Khan often refers to. A sincere effort is required to reduce the burden of compliance costs faced by small firms- often filing returns several times during a year and to multiple tax bodies across the country. 

Dr. Vaqar Ahmed

On the former, it would be best to start by addressing information and outreach gaps. As the problems for businesses are evolving in real-time, hence there remains a need for structured and more frequent public-private dialogue which should be inclusive enough to also give representation to women, youth-led firms and social enterprises. Such a dialogue will also give a sense to the government about how these businesses will get affected in the forthcoming rounds of Covid-19.

On the latter, I believe the forthcoming budget for the fiscal year 2020-21 should be seen as an opportunity not only to provide support to collapsing businesses but also to put in place economic incentives that encourage enterprises to consider resilient business models. A large part of this has to do with reimagining a better taxation regime.

A progressive fiscal policy and commitment to redistributive taxation is in line with the spirit of Riasat-e-Madinah to which Prime Minister Imran Khan often refers to. A sincere effort is required to reduce the burden of compliance costs faced by small firms – often filing returns several times during a year and to multiple tax bodies across the country. It is an opportunity now to automate, rationalize or eliminate several filing and payment layers in taxation to ultimately help reduce the cost of doing business.

After a lot of persuasion from local think tanks and the International Monetary Fund (IMF), federal and provincial governments agreed to establish a National Tax Council (NTC) to harmonize the general sales tax (GST). 

Currently all provinces have a different structure of GST on services. There are also issues regarding definition of certain activities which the federal government may assume to be under its jurisdiction. Perhaps smaller firms have been the hardest hit due to the fragmented tax structure across the federation and it is time now to expedite NTC’s establishment and work in this direction. Even when the system is finally harmonized, the GST should not be collected by multiple windows at federal and provincial levels. A unified tax return and collection should be made possible through online mechanisms.

It will also be timely to think about which sectors should be motivated to scale up production and services in the face of this health-related emergency. Hospitals and private clinics operating at micro, small, and medium scale are primary candidates for cut in GST on services and even rationalization in direct tax rates. Firms producing personal protective equipment should also see a relief in taxes. The trade taxes faced by such producers or even hospitals importing from abroad need to be revisited. The agro-based and food processing enterprises will need similar help as their input supplies face price and supply volatilities.

Covid-19 also increased demand on several other sectors providing essential services. Our policy circles have rarely seen these sectors as important for the social and mental wellbeing of society until the pandemic struck. It will now be timely to recognize the services of firms (including schools) providing online services. The economic policy managers must think out of the box how best to leverage e-commerce in the battle against Covid-19. 

– Dr. Vaqar Ahmed is an economist and former civil servant. He is author of ‘Pakistan’s Agenda for Economic Reforms’ published by the Oxford University Press. Twitter: @vaqarahmed

Courtesy : ArabNews

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