The latest news is the Supreme Court taking suo moto notice of the bankers helping themselves to large dollops of cash as ‘bonuses’ for their performances delivering high profits for their institutions. The bankers have already given themselves gold medals for their being voted ‘banker of the year’ and, of course, ‘Best Central Banker of the Year’ to two State Bank governors.
These bankers, mainly of the National Bank and State Bank of Pakistan, have presided over the sharpest decline in industrial production in the country. This decline has caused the largest unemployment in the country, and could have triggered a massive revolt.
The poverty levels are already below known records, while desperation-driven suicides for economic reasons have become a daily occurrence. The interest rates have been maintained at ridiculously high rates, so that it is not economically viable for industry to be financed with bank funding. The high rates are very good for the banking sector but certainly not good for any other commercial activity, most certainly not for industry, which is dependent on cheap funding.
Industry and house building are two sectors that are protected by all governments with cheap money, for the simple reason that housing and industry provide the two basic needs of people, shelter and jobs. A shortage of either may cause the downfall of any government.
The entire economic woes of Pakistan today are the mismanagement of the finances of the country, with resources being channelled into non-critical areas while banking has been given to managers to serve only the politically correct. This has lent itself to abuse by the borrower on the premise that if the loan is a political favour it is exempt from repayment.
It is increasingly obvious that the politician will not police himself but would prefer to bend the law rather than obey it. Hence the Supreme Court will find itself hamstrung by the politician at every step.
While we will not involve ourselves in the morality (or lack thereof) of politicians, still we must direct our finance to where it can be best utilised.
The entire industrial slump could have been avoided by lending to the industrialists to establish their own power plants at reasonable interest rates. With a surplus of power the industrialists would have ensured the maximum efficient utilisation of his production, the collection of dues and repayment to the oil companies.
However, with bankers insisting on keeping interest rates high, they have succeeded in making their banks richer at the expense of industry and making the people poorer. In fact, the growth of the European and American economies has been their access to cheap capital. Cheap labour is a myth, for without cheap capital no industry can survive. In Pakistan it is not possible to retrain the bureaucrat into giving up his compulsion for control.
Unfortunately, we are at a stage where the politician is out of his depth in understanding the mechanics of finance or industry – or railways for that matter. What would Mr Bilour know about the railways? It is not his job. His job is to get allocations for his ministry and to stop pilferage. That is the way Lalloo Prasad did it. He fought inside parliament and got the required funding. That should be Mr Bilour’s strength and not waste his time on why the air conditioning is not working. The only case where this principle applies and is working is with the defence ministry where the minister is ‘hands off’.
President Zardari is strong enough to implement these simple rules, ensuring that the politicians restrict themselves to trading barbs in the assemblies. The bureaucracy should run their departments, as is the norm.
FAKIR AYAZ
Karachi
