Sensing CNG uncommonly…

 

Sensing CNG uncommonly…

Syed Samime-ul-Hassan Kazmi traces the history of CNG crisis and relates it with the fundamentals of market economy.

Pakistan is the largest user of Compressed Natural Gas (CNG), as an alternate fuel used in vehicles, surpassing Iran, Argentina and Brazil. There are around 3331 CNG filling station operating throughout the country in year 2010. A conservative estimate reveals 3.7 million vehicles are rolling on CNG fuel in Pakistan. The CNG as an alternative fuel was introduced in 1992. The policy was pursued in order to reduce import bill of petroleum products by exploiting indigenous energy resources.

There are around twenty eight (27) private and public sector companies engaged in oil and gas exploration and production activities. Among them fifteen different (15) companies are producing natural gas of around 4.03 BCFD (2011) to meet the domestic demand of all sectors. CNG consumption accounts for 9.1% of total natural gas consumption as per Hydrocarbon Carbon Development Institute (HDIP). The total consumption of gas is around 1241 BCF, while CNG sector consumes 113 BCF. However, the crisis of CNG would have not arisen, if domestic demand has met adequately by local production.

In the period 2001-11, CNG sector witnessed an average growth of 39.5% culminating in year 2005-06 to 59.1%, while 2011-12 experienced growth rate of 10.8%. It can be observed clearly in the Figure 1. From 2001 to 2007 the growth in CNG was much higher as compared with growth in petroleum products. After 2007 the gap between growth in CNG and petroleum products narrowed down. In year 2010 the growth in petroleum products and CNG were almost same 15.8% and 14.2% respectively.  The convergence set in.

The major reason of this tremendous growth and then subsequent decline was price differential between CNG and petrol, as CNG is a substitute fuel for petrol. However, there is positive price correlation between substitute products. The rise of petroleum products in international markets pulled the demand of CNG in domestic market. For example, price of Honda automobiles follow the trend if increase in price of Toyota happens in absence of any price regulation. So, when price of product increases then demand of substitute increases due to price differential benefit. Eventually, price of substitute comes to point of equilibrium. In case, when price differential is regulated (preserved) then demand of substitute remains the same or even increases. Thus, supply could not meet the demand and growth in demand decreases due to non availability of substitute product.

In case of CNG imbroglio, shortage of supply forced OGRA – as shortage of supply does in market – to raise the prices and reduce the difference between CNG and Petrol prices. In June, 2012, Petroleum Minister assured Save the Industry Forum regarding price differential between petrol and CNG would soon be reduced to 40 per cent from the existing 55 per cent. Apparently, the statement implied to ensure much needed gas supplies to power and fertilizer sector. Because the policy measure was to raise prices of CNG so, demand of CNG can be controlled and supply of natural gas to other sectors can ensured.

The apex court in its ruling dated October 25, 2012 raised objection over the linkage of CNG price with petrol price with differential as PKR 9.55 (CNG) and PKR17.48 (Petrol). The objection supports free-market principles – price differential should not be regulated rather price depends on difference of products utility. But, the court concern seems more pointed to weekly adjustment of petrol prices according to the International market trends. These adjustments raise prices of CNG due to price appreciation of petroleum products internationally. Even in absence of OGRA regulation prices of CNG would have gone up because of substitution effect.

Further, court advised OGRA, an alternative to fix the price of CNG at affordable level. The alternative suggests prices of CNG should be set on the basis of audited revenue estimates of CNG filling station. So, those filling stations making unjustified profits can be checked. Contrary to this concept, decision also questions OGRA’s authority to set profit margin and operating costs for CNG filling station operators. Perhaps, setting profit margin and costs on one hand and fixing price on basis of revenue on other is one and a same thing and depicts contradiction in court’s decision.

In response to Supreme Court decision government conceded to abandon weekly pricing of CNG relative to petrol. Rather, CNG prices shall be fixed by OGRA for the six months starting from 1-07-2012. The Federal Government annulled MoU signed between government and CNG association on the formula of working out operational cost of CNG stations. Instead, OGRA will develop new formula based on availability of gas, linkages with alternate fuel, discussion with stakeholders and scrutiny of audited accounts of CNG stations.

The court raises concern over the difference between prescribed price and the selling price (including Gas Development surcharge GDS) to CNG stations. The ruling noted difference of PKR15.68/kg and PKR 14.3/kg in region I and II respectively can be a reason for price hike. The government gives justification of GDS as means to finance exploration and production activities. However, court did not deem this reason satisfactory for the GDS.

In wake of Supreme Court decision the CNG issue has become enigma. The nucleus of issue lies in CNG prices and uninterrupted supply to consumers. No institution or any regulation can fix price while assuring consistent supply of the product. Fair prices can only be determined in market based on demand and supply principles. This is the only efficient alternative to increase public good. The profit is the right of the businessman and unjustified profit can only be controlled by promotion of fair competition and free market practices rather than scrutinizing financials of private enterprises.

6th December 2012

Author is a Research Associate at Policy Research Institute of Market Economy (PRIME). He may be contacted at: syed.samimulhassan@gmail.com

 

 

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EFN 2012 Statement on Liberal Views on Populism

EFN Asia conference 2012 was recently held in Hong Kong in which Pakistani delegation comprised Olaf Kellerhoff, Mr. Zubair Malik, Dr. Ayub Mehar and Ali Salman, who attended the conference with the support of Friedrich Naumann Foundation. The delegates issued following statement with consensus.
We the liberals believe that populism is the promise of state-mandated, unsustainable benefits to the broader population without consideration of the long-term costs and benefits. It relies on highly emotive statements. In fact, populism is counterproductive to general well-being and progress, as illustrated by the economic decline of the many countries that have pursued populist agendas.

We are concerned that governments in Asia are turning away from the policies which have been demonstrated to promote prosperity in many parts of the world.

We are confident that people will reject populist policies once they understand the true costs associated with them.

Those costs include an increasing dependency on the state, weakening the rule of law, property rights and individual freedom. Populism also reduces the ability of individuals and local communities to make their own decisions, and undermines the competitiveness of businesses.

Recent moves in Asia to subsidise food and fuel, and to transfer cash are all examples of populist policies that have done more harm than good.

We are confident that if Asia commits itself to liberal values such as property rights and the rule of law, the region will prosper.

We commit to:

  • Provide alternative liberal solutions to the real problems that give rise to populism, and educate about the benefits of liberal policies, using positive language and examples.

 

  • Provide public support to politicians, political parties, business groups and other stakeholders that support liberal solutions.

 

  • Expose the high costs in terms of money and disastrous end results of such policies

 

  • Educate politicians and students

 

  • Engage with the media to educate the public more widely

 

  • Engage and create strategic alliances with civil society

 

  • Meet on a regular basis to strengthen our network.

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Ramadan Economy: A critical review of Ali Salman’s Book

Gulmina Bilal Ahmad: a liberal activist

In this article, liberal activist and Director of Individualland, Gulmina Bilal Ahmad takes a critical view of Ali Salman’s recent study on Islam and Free Markets. “A free market economy has its own failsafe to handle unethical and corrupt practices, but the rule of law fundamentally holds the key to preventing such activities from taking hold.”

The subject is being frequently debated nowadays. Due to the rising inflation, especially of food commodities, whether the state should exert more control over prices. With the prices of essential commodities rising further during the holy month of Ramadan, the debate also brings in a religious perspective. Recently, I had the pleasure of attending a book launch of a study titled State Intervention in commodity markets: Discord between economic freedom and social justice in Islam by Ali Salman. The debate in the study revolves around whether or not Islam permits state intervention in the economy, especially in the case of price control. The writer has explained the concept of an Islamic economy and through his research has presented the view that Islam promotes economic liberty. He has reached the conclusion that price control and state intervention in the economy is not allowed under the Shariah.

Salman maintained the view that a free market along with consumer protection measures is the principle of an Islamic economy. The concept of the welfare state in Islam has been attributed to prosperous and responsible individuals rather than the state. The book provides a refreshing perspective over the discourse that has been ongoing since a very long time. As I have been studying the book, it has left a lot of questions and confusion in my mind regarding the subject being discussed. The confusion regarding this study not only pertains to the liberal perspective of a free market economy, but also concerns certain paradigms that were altogether ignored.

First, it may be my personal view but I disagree fundamentally with fusing religion with economics. Religion is a divine contract between an individual and a divine entity; it cannot be related to the overall subject of a free market. At the individual level, it might have a part to play within the economy, but imposing it on the entire functioning is not beneficial. The literature fails to explain the aspect where people who are not subscribers to an Islamic perspective are part of the market economy. Even General Zia had to introduce certain provisions for non-Muslims, during the implementation of Islamic laws. In my opinion, the book does not pertain to the secular argument of the free market economy, ignoring the fact that there are also communities from other beliefs contributing to the economy.

The other observation that I would make here is that in the second section of the book, the writer has based the discussion on ‘The general case of liberty’. Through a liberal perspective or perhaps any perspective for that matter, liberty is central to every activity. In a free market economy, liberty is core to its functioning, not a ‘general’ value. This dismissal of liberty to a generality might perhaps be a matter of semantics rather than of belief since Salman is a committed liberal.

An interesting observation that has been made by Salman is that “Islamic economics is concerned with the causes of poverty not that of prosperity.” This concept is close to the liberal view of economics that seeks to minimise the role of the state only to offer a level playing field to all economic actors and shield against exploitation. In other words, this is as close to the liberal definition of ‘public interest’ as can be. While I would have liked Salman to elaborate this point further, he chooses to restrict himself to this observation without any further engagement with the reader. One would have liked him to highlight that poverty is relative to the existence of prosperity. There is an inverse relationship between both and without the existence of prosperity the level or presence of poverty cannot be defined. The writer has left the readers hanging in a limbo, as the book is unable to clarify and explain this relationship.

On the subject of the role of the state, I was surprised that neither in the report nor at the book launch no one mentioned the importance of the rule of law. A free market economy has its own failsafe to handle unethical and corrupt practices, but the rule of law fundamentally holds the key to preventing such activities from taking hold. This also actually guarantees the minimum interference of the state in market activities, as the implementation of law will avert situations where the state has to take drastic measures for consumer protection. The checks and balances within the free economy make certain that all issues are resolved without government intervention, while the rule of law guarantees that the state only interferes when it is necessary to do so. There has been no emphasis on this particular aspect throughout the study. Unfortunately, a crucial and important aspect of economic liberty and state intervention was ignored. The scrutiny of the part played by the implementation of the rule of law would have presented a more interesting debate in relationship to a free economy.

Despite my views of certain shortcomings, this research has overall been a sincere and unconventional effort by Ali Salman, who has explained in detail the standing of free market within the Islamic ideology. He has also undertaken a historical analysis of economic liberty and the welfare state. This is a fruitful attempt to remove the misperceptions surrounding the free market economy, presenting it to be more in line with the historical, cultural and religious perspective. The effort should not stop here. Rather, it should be continued by other economists and researchers as well, so that a broader and an in-depth understanding of the free market economy prevails.

The writer is a development consultant and can be reached at coordinator@individualland.com. This review was first published in Daily Times, on 17th August 2012. 

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Is our banking system becoming unsound?

Banks have been swamped with demands of riskfree lending from the government, bulging levels of non-performing loans, drying up of genuine business projects and a general risk aversion amongst the bankers. This article shares fresh evidence of an increasingly unsound banking system in Pakistan.Pakistan’s financial sector liberalisation in general and privatisation of banks in particular has largely been hailed by experts on account of professionalisation, financial inclusion and penetration of banks. Notwithstanding the usual criticism of a high interest spread and high bank charges, strong evidences have now emerged which suggest that the banking sector has become visibly unsound.

Since 2009, the State Bank of Pakistan has maintained ‘financial soundness indicators’ of the banking system. These parameters include capital adequacy, assets quality, earnings and liquidity. The most recently released “Statistics of the Banking System” actually erodes the goodwill that has been associated with a liberalised banking industry.

The most startling fact is that the exposure of all banks to non-performing loans has more than doubled since 2006. The stock of NPLs in public sector commercial banks has increased from 9% to 21%, in foreign banks from 1% to 10.5% and in commercial banks from 5.7% to 15.5%. In the case of public sector commercial banks, the ratio of net NPLs to their capital is 44%, which was 6.4% in 2006, whereas this is 23.8% in commercial banks, up from 6.2% in 2006.

In nutshell, the assets of banks have become significantly more toxic. The bad quality toxic assets of the banking sector were the single most important symptom, though not the cause, of the great financial depression, the world witnessed recently.

The increasing exposure to NPLs has dampened the profitability of banks as well. Overall, the earnings before tax, when measured by returns on assets, have decreased by 24% over the last six years. Certainly, this reduction is much more pronounced in public sector commercial banks as it has come down from 4% in 2006 to 1.9% in 2012. Return on equity before tax has been reduced from 35.2% to 26.3% in the same time period.

Another disturbing indicator is the increasing cost of operations as measured by cost-income ratio. For public sector commercial banks, this was 31.8% in 2006, which now stands at a staggering 57.9% in 2012. For foreign banks, this has jumped from 49.8% to 69.3%.

Despite these developments, the liquidity in banks has increased from 31.9% to 44%. But at the same time, the advances-deposit ratio has decreased from 74.6% to 54.3%. It means that the banks are preferring to keep the cash to their tills.

The moral of the story

The banking system is becoming more unsound, less profitable, more expensive, more liquid and more toxic. Has the mantra of deregulation, denationalisation and privatisation failed?

My hypothesis is that the banks of all categories have been increasingly swamped with demands of risk-free lending from the government, drying up of genuine business projects and a general risk aversion amongst the bankers. Banks of all creeds share a similar fortune to varying degree now.

According to the State Bank, the top five banks, which hold 51% of total banking assets and 50.9% of total investments, have parked 82.2% of their investments in government securities. The foreign banks have parked 99.9% of their investments in government securities. This trend is common across the entire banking system. Now imagine that the federal government is ‘slightly’ less credible. Who will repay all this investment with such quality of governance?

That the return to an NPL-dominated regime, which was characteristic of nationalised banks, will only feed into risk aversion of bankers should not be a surprise. However, unlike the political pressures which were usually held culprit for these loans in the nationalisation era, the deregulated banks should bear the brunt themselves now. It means that the owners, directors and majority shareholders should be held responsible to this extent. If a bank fails on this ground, the state must stay away, and unlike what the Western governments did, must not socialise the costs of default. Although insurance of small deposits can be a viable consideration.

It is true that the bankers alone cannot be held responsible for uninterrupted demand of risk-free loans and a shocking absence of business projects of scale. Probably, the non-availability of business projects can be explained by poor, expensive and unreliable energy infrastructure. For the risk-free loans, the political ambitions of the government, always devoid of any economic wisdom, will be held responsible.

It is evidently clear that increased government borrowing not only sucks up available capital, but also induces risk aversion among bankers, and at the same time, makes it prohibitively expensive for the private sector to borrow.

The writer is managing partner of Development Pool – an economic research organisation – and is a founding member of Economic Freedom Network Pakistan

Published in The Express Tribune, July 23rd, 2012.

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Economics of Political Projects

The ideas which are not measured, in an economic sense, do not count politically.

Sasti Roti Scheme: Overall economic gains reduced at the cost of producers

It is commonly argued that the politicians use short term measures to gain political mileage at the cost of long term impacts. The politicians, on the other hand, inherently face a short term ‘business cycle’, and therefore they dedicate resources in projects that can yield visible results in a relatively short span of time. This is not entirely their fault, as the parliamentary democracy is inherently short-sighted and thus there is usually a stand-off between popular politics and bitter economic realities. As the nation draws nearer to elections, and all parties grill themselves in search of new mantra of development, it may be useful to suggest some parameters that serve the interests of democracy without failing economic realities.

My basic argument is: the ideas which are not measured, in an economic sense, do not count politically. This is contrary to what politicians and intelligentsia generally believe. I will argue that in the light of certain economic parameters, both short-term and long-term interests can be watched for. And we can create a marriage of convenience between economic wisdom and popular democracy.

A primary parameter is the social costs and benefits of a project or its welfare gains.

Take, for instance, the issue of minimum wage laws. The federal and some provincial governments have recently announced raising of minimum wage. Let’s put this to a theoretical test subject to empirical examination. It seems that the minimum wage is good politics as it seems to bring a political advantage while also ensuring social protection. But does minimum wage law, when implemented strictly, bring welfare of the targeted beneficiaries? In countries where this law is really enforced, rigid labor structures have impeded competitiveness as the employers resort to avoid hiring if the costs are too high. The Global Competitiveness Reports provide sufficient evidence for this.

The labor wage is a reflection of the marginal advantage that every labor would bring to the firm. This economic reality, when acknowledged, is also good politics. If we enforce the minimum wage laws in true sense, we are likely to observe an increase in the unemployment. Thus enforcing an apparently good legislation would have negative consequences for the politicians. Also, in countries, where the administrative structures are weak, announcement of a law and then presiding over its contempt and indifference will surely dissuade more voters than to persuade new ones.

The other popular measure that governments usually resort to is price control. Price control is not only an economic non-sense, but they are also a bad political idea, as they impede welfare rather than creating it. Consider.

Price control does not distinguish the consumers on the basis of their income levels- they are untargeted subsidies. Rich or poor, you pay the same Rs. 2 for buying a ‘sasti roti’ (cheap bread) from the registered tandoors. There is no way to guarantee that only the poor, or in fact, mostly the poor, would take advantage of price control. Often, the poor resides in rural areas, as in the case of Pakistan, who do not enjoy an equivalent access to the market. Thus the urban consumers, who are more vocal, tend to take more benefit of price control because of greater access.

Besides welfare, the other important parameter for politicians should be ensuring choice and freedom. Any government scheme enhancing choices for the people will not only be a viable economic idea but will also reap social and political dividends. Consider, for example, the Education Vouchers Scheme by the Government of the Punjab. Through this scheme, launched in 2006 under a very dynamic civil servant, Dr. Allah Bakhsh Malik, and intelligently scaled by the present government, we have created world’s largest population of students, more than 100,000 now, being financed through vouchers. In this scheme, the tax payers’ money follows the parents who choose a private school for their children. This way, the government fulfills its moral, and now constitutional, obligation to educate the children, without undermining personal choice and without resorting to expensive public schools. This shows that if sound economic wisdom is followed, welfare gains can be realized in a short span of time, and thus democratic politics can yield better future.

I suggest that every major regulatory and legislative proposal should be examined for social costs and benefits and the impact on personal choice by an independent panel of economists whose report should be presented in the standing committees as well as on the floor of the house. These reports will not be binding however they should come out with specific numbers on social costs and benefits of a new proposal. Backed with media, this analysis will create necessary political pressure on the politicians.

Political projects which disregard economic concept of social welfare and take away personal choice ruin tax payers’ money and ultimately, ruin their patrons. The ideas which are not measured, do not count.  One hopes that as the governments enter into their last year in the office, and as all political parties scribble their manifestos, someone would pay heed to this basic economic truism.

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Bio-diversity or Food Security: What was missed out in media

I recently spoke at a roundtable on ‘Bio-diversity under Threat’, organized under Center for Culture and Development and Human Rights Commission of Pakistan. This roundtable was attended by the representatives from civil society, farmer groups, Intellectual Property Office and others. Following day, this event was covered in the media, for instance in Dawn,  http://dawn.com/2012/05/23/govt-urged-to-protect-rights-of-plant-breeders/ and in Express Tribune, http://tribune.com.pk/story/382756/to-give-or-not-to-give-patents-to-plant-breeders/. 

Both news reports “censored” what I said in the roundtable apparently due to biased reporters who attended this event. One of them even met me after the event asking my contact details as she said “I want to ensure that I do not mis-quote you”. In fact, she chose not to quote me at all.

It is sad to see these reports, as they completely missed what I, as one of the panelists, said. I spoke on the importance of corporate farming and GM in expanding the food basket of the world, and presented a liberal view for globalization. I said that we can opt to choose the bio-diversity, at the heart of Plant Breeders Rights Bill, but possibly at the cost of food security. This was not the mainstream view of the roundtable and perhaps I was singled out by the reporters, and they decided not to even mention that I spoke at this event.

The roundtable focused on ‘bio-diversity under threat’ and discussed the importance of a pending legislation on plant breeders rights. While it is legitimate to push for the property rights of all, including the plant breeders, what we may miss is the importance of food security and food sufficiency. GMO (Genetically Modified Organisms) have revolutionalized the agriculture and has ensured that there is enough food for billions from a fixed source i.e. land. Corporate farming represents modern ways of farming, and while it does pose hazards for the environment, it has a sound promise, which has been proven true, of food security. In absence of corporate farming and GM technology, the world would have faced the dire consequences of hunger, which has severe consequences for the world’s peace. Pakistan, India, Mexico and lately several African countries stand testimony to the successful Green Revolution, that was result of a GM variety of wheat, which ultimately got these nations free of fear of dying from famine. Thus, while in emotive debates against globalization, such as the one reported, one may not forget historical facts. In the end, a quote from the father of Green Revolution, Dr. Norman Borlaug, Nobel Peace Laureate 1970:

“When the Nobel Peace Prize Committee designated me the recipient of the 1970 award for my contribution to the ‘green revolution’, they were in effect, I believe, selecting an individual to symbolize the vital role of agriculture and food production in a world that is hungry, both for bread and for peace.”

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Land Reforms: Defining legitimate property rights

In a well-researched and well-articulated article, Najma Sadeque, has argued for reopening the court verdict that had virtually stopped land reforms in Pakistan. She has presented historical, theoretical and even theological arguments to support her position. While I will not delve into the position of Islamic jurists in favor of private property rights, I would like to open up the debate further on the question of legitimacy of private property rights. Najma Sadeque holds that since the land was distributed by a colonial government to those individuals who served the Crown, it must be taken back, and the surplus land either nationalized or be distributed to the needy. So what happens to the private property rights?

In my opinion, it is historically debatable to define legitimacy of a government. The local and indigenous Indian tribes would treat both British and Mughals as conquerors and colonizers. Muslims, on the other hand, would consider only British as colonizers. There was no concept of private property rights in the Mughal era; the land records were maintained just to ensure revenue stream. British introduced private property rights in India, and of course continued with the revenue collection system. But so was the case with the early Islamic rulers, dating back to the Caliph Umar. Thus it is a futile exercise to associate legitimacy with a specific regime.

Private property rights thrive on the principle of absence of coercion. If it can be argued, and proven, that a specific piece of land was grabbed from an individual and legitimate owner, then certainly it merits the case of taking back the land and returning it to the original owner. Mere award by a state authority does not constitute coercion. Seen this way, the argument in favor of land reforms on the pretext of land ownership alone is weak and in-substantiated. Moreover, state involvement in such transactions would increase the demonstrations of patronage, and will not automatically result into justice.

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Peace, MFN and Dr. Palmer

A few weeks ago, I was doing a piece on Hafiz  Saeed,whoseems to be a loud opponent of the status of “Most Favored Nation” status recently given to India. Most Favored Nation, according to Wikipedia, means that the country recipient of this treatment must receive equal trade advantages like low tariffs or high import quotas.

Saeed fears that India will make Pakistan a “mandi”. He has expressed his concerns regarding Pakistani farmers running out of business. Saeed also believes that Kashmir conflict should be resolved before any trade with India.
Actually, India gains no more benefits from MFN than other trading nations like China get. “Mandi” means “market” in Urdu, which in Economics, means a place where buying and selling, occurs. The kind of dumping Saeed fears is already done by China. Secondly Pakistan’s food inflation is the highest in South Asia and cheaper food items can be a boon. Lastly, Pakistanis will also sell products in India and profit.
If some business seizes to be profitable, this is a sign of a healthy economy and the business will soon modify and return in the market.
I had a brief chat with Tom Palmer, an economist, a Senior Fellow at the Cato Institute and Director of Cato University.
Question: Pakistan has declared India, as the Most Favored Nation but some oppose it because they believe Indian cheap products will come in Pakistan and the farmers/businessmen here will run out of business.

Tom Palmer: “Well, one hopes that some “cheap” Indian products do come to Pakistan and some “cheap” Pakistani products go to India. Those Indians are not stupid. They don’t send their stuff for free.
And the same thing is being said on the other side of the border by Indian special interests. Oh, no! The Pakistanis will send us their cheap products! But the Pakistani businesses are also not stupid. They will want something in return. Businesses don’t send things “for free,” that is, without getting any things in return. It is goods and services that trade against goods and services.

Q: But will the local farmers run out of business?
TP: No, of course not. A great deal of farm production is for local use, in any case, and what trade will mean is that food for Pakistanis AND for Indians will fall in price as the extent of the market increases.

Q: What do you mean by fall in price? What about China-style dumping that India might indulge in? What about locals running out of business?

TP: The whole point of trading is to get things that others can make more cheaply, to go from things that are expensive for you to make to things that are less expensive for you to make, because you buy the expensive things cheaper from others.
That’s why I don’t make my own shoes, but buy them from a shoemaker. There is nothing special about international trade that is different from trade from one village to another.

Q. What about this argument that we need to resolve out conflicts with india before we allow trade with them….?

TP: I think this argument is backwards. If I must first resolve all of my arguments with my neighbor before I even speak with him, when will I ever resolve them? Trade is like conversation. It brings people together and it makes them more ready to be friendly. Moreover, it creates an incentive on both sides of the border to find common ground for peace.

Two minutes for the importance of trade

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Cost of Economic Non-Cooperation to Consumers in South Asia

I personally recommend attending this event. The quantitative assessment of the COENCOSA study shows a minimum consumer welfare gain of approximately US$ 2 billion a year by way of savings on aggregate consumer expenditure on imported products in selected categories.

SDPI- CUTS and The Asia Foundation Joint

Media Briefing

Chair

Mr Humayun Akhtar Khan, Former Federal Minister for Trade and Commerce and Member National Assembly  

Speakers

  •  Mr Shahid Fiaz, Director of Programs, The Asia Foundation
  • Dr Abid Qaiyum Suleri, Executive Director, Sustainable Development Policy Institute (SDPI)
  • Dr Vaqar Ahmed, Research Fellow/Head, Economic Growth Unit, (SDPI)

Date: Monday, 26th March 2012

Time:  03:00-04:00 pm 

Venue: National Press Club, F-6/1, Islamabad

(Concept Note)

The media briefing is aimed at highlighting and sharing the findings of a study titled “Cost of Economic Non Cooperation to Consumers in South Asia (COENCOSA)”, implemented by CUTS International with support from The Asia Foundation and in partnership with a group of like-minded organisations including Sustainable Development Policy Institute (SDPI) from Pakistan. The study assesses potential benefits of opening up trade between south Asian countries to consumers. The study covers five of the eight South Asian countries, viz Bangladesh, India, Nepal, Pakistan and Sri Lanka.

 

The quantitative assessment of the COENCOSA study shows a minimum consumer welfare gain of approximately US$ 2 billion a year by way of savings on aggregate consumer expenditure on imported products in selected categories. This gain represents about 31 percent of total current import expenditure on the selected product categories. Despite the slight variation in share on total gains, all countries stand to gain substantially in terms of gains per capita, in proportion with their economic size and population. Though Pakistan receives only 10.5 per cent of total gains, the lowest, it stands to save 59.04 per cent on its current import expenditure on selected products.

———–

ENTRY IS OPEN TO ALL

Faisal Nadeem Gorchani                                             Sadia Sharif

Policy Advocacy and Outreach                                        Policy Advocacy and Outreach

Sustainable Development Policy Institute                          Sustainable Development Policy Institute

38, Old Embassy Road                                                  38, Old Embassy Road

(Atta Turk Avenue), G-6/3,                                            (Atta Turk Avenue), G-6/3,

Ph: 051-2278134-6, Ext: 113                                           Ph: 051-2278134-6, Ext: 111

Fax: 051-2278135                                                          Fax: 051-2278135

Cell: 0333-5592210                                                        Email: sadia@sdpi.org

Email: gorchani@sdpi.org

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Intellectual Property: Does free market consider it free?

 

BT Cotton: Will it make our farmers happier?

According to a recent news item, the Punjab government has refused to agree to US agrichemical giant Monsanto’s demands for intellectual property rights protection for its BT cotton seeds and has accused the company of a “monopolistic” plan to take over agriculture in Punjab. Monsanto has maintained that it is not against the use of other seeds, just against the illegal transfers of its own seeds.

Monsanto’s position is challenged not only by the provincial government but also by farmers’ lobbies. Ibrahim Mughal, the chairman of Agriforum Pakistan has said that “Monsanto would destroy Pakistan. If we want a free economy in Pakistan, then Monsanto must not be allowed to market its seeds in Pakistan.”

Call for a free economy and opposition to the entry of a firm in a single breath is not only paradoxical but also ironic. Free market economy is featured with easy entry and exit and strong checks on anti-competitive practices such as monopolistic tendencies and cartelization.

Monsanto is not the sole provider of BT cotton seeds in the world and thus there is no threat of a monopolistic conduct from this giant rendering fears of Punjab government and farmers baseless. Seed Association of Pakistan has earlier pointed out several alternative suppliers. Pakistan’s own research institutes such as Punjab University’s Center of Excellence for Molecular Biology has developed BT cotton varieties successfully and waiting for government’s approval to commercially market their seeds.

The best way out of this quagmire is that government should stay out of actual business decisions. Certainly enforcement of intellectual property, standardizations and maintaining fair competition are the most important obligations of government. Government risks loss of credibility by taking steps beyond this boundary. Let our farmers, or buyers, and local and international seed manufacturers, or suppliers make free choices and assume risks of failure themselves.

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