 Good morning everybody. My name is Robert Lamb. I am Senior Fellow and Director of the Program on Crisis Conflict and Cooperation here at CSIS. Welcome and thank you for coming there between Emancipation Day, Holy Week, Spring Break, and a Red Line Train Breakdown. I am pleased to see that we actually have a reasonable turnout given the prevailing winds. The prevailing winds also being a declining interest in the region as far as I've seen in the past couple of years, which has been a bit sobering. I am very pleased to have with me here today some folks from the Center for International Private Enterprise who are going to be talking about some work that they've been doing on Pakistan in partnership with a group called Prime. I'm just going to the Policy Research Institute of Market Economy based in Islamabad, I think. And so believe it or not, I actually have three people here with me. The third isn't Mark Schlieffer is Regional Director for Eurasia and South Asia at the Center for International Private Enterprise, or CYPE, if you can pronounce it, and has sort of overall responsibility for CYPE's relationship with this particular project. Ali Salman is actually on the telephone from Islamabad with us, but he's probably missing dinner right about now. He's the author of several studies and monographs for different media publications and is the person who led the work on the scorecard that he's going to be presenting later today, well, just for minutes actually. And Kurram Hussain is a practice sense scholar at the Asia Program at the Wilson Center who will be our discussant for this conversation. Before I turn it over to Mark to introduce the project, I wanted to just briefly go around the room, so I mean it's a small enough group that we can all know who each other are. So I'll just model brief. I'm Robert Lamb, Director and Senior Fellow at CSIS. We're going to introduce you. So, sir. Hi, John Sullivan with CYPE. And I'm sorry, I will ask you to use the microphones because we're videotaping it. We're not live streaming this on the internet, but we are videotaping it and we'll post it afterwards. So this is not an off-the-record intimate private roundtable. This is a public conversation that thousands of people will watch via iTunes U. So to turn the microphone on, there's a little button in the front. Thanks. My name is Kurt Hageman. I'm from the global sector at CYPE. You also need to get really close to the microphone. I'm April Snedeker, Program Assistant for Eurasian South Asia at CYPE. Hi, I'm Leah Gregg. I'm with DAI. I'm Ellen Vanneke and I'm also with DAI. Pete Gatier with USAID's Development Credit Authority. I'm Perka Ahmed. I'm at CYPE and I'm currently at... I'm John Samson with International Relief and Development. Kim Betcher CYPE. Anna Dawson, Communications Assistant at CYPE. Anna Nagrakiewicz, Director of Multiregional Programs at CYPE. Tim Wallace, CYPE. Greg Wilhoek, Director of Government Relations and Afghanistan Program Officer for CYPE. Andrew Wilson, CYPE. Jennifer Anderson, CYPE. Hi, so thanks everyone. So as you know, it was about a year ago that Pakistan held a fairly historic election. It represented a time when a civilian government survived its entire term without getting overthrown and was succeeded by a democratically elected civilian government. The current government, PMLN, has put out a policy program. Obviously, it deals with a wide range of issues. On the economic side of things, the issues are particularly important because, as we all know, Pakistan's economy has been in terrible shape for quite a long time. There's a jobs crisis. There is a severe energy crisis that's dragging down Pakistan's ability to raise revenue for its businesses, to operate factories for civilians, to have light on at night. And it's been a major drag on its economy. And as well, there's a great deal of poverty and inequality in Pakistan that is also creating an enormous drag on its economy. One of the things that I like about the Center for International Private Enterprises is they've been looking at these issues, the role the private sector in development for many decades, longer than almost anyone else. They have an extremely high and deep level of knowledge about different parts of the world and a great deal of experience on the ground and managing projects. And so I'm delighted that I have the opportunity this morning to partner with all of you to help release this report. We're very much looking forward to hearing the results of the scorecard to see how the PMLN government has done in its first year. So with that, I'd like to turn it over to Mark Schlieffer for some introductory remarks. Thanks very much, Bob. And thanks, of course, to CSIS for hosting us and for giving us the opportunity this morning to give Ali Salman and prime the opportunity to share their work with an audience in Washington. I'm just going to make a few remarks before we turn it over to Ali to present the results of the scorecard. And just give you a sense of the genesis of this project and how this research came about. So I just had a field office in Karachi for about seven years. And one of the things that we've done on a regular basis is host a conference of all of the presidents of all of the chambers of commerce from across the country. And when we first opened our office, we found that the business community was reluctant really to come together around any sort of unified policy message. In fact, getting them even in the same room was rather difficult. With time, we began to see progress in terms of their willingness to talk about policy issues and to work in a transparent fashion with the government to try to push for an agenda and to speak publicly and to reach out to the media and whatnot. And the president's conference that we hosted every year started issuing an annual declaration. They do it in a place in Pakistan, not far from Islamabad called Bourbon. And they call it the Bourbon Declaration, which is an annual sort of summation of their key policy demands for the year. And as Bob alluded to in the in the run up to the historic June 2013 elections, we knew that we had to encourage our partners in the business community who organized this conference together with us to sort of take it to the next level with the increasingly sort of, let's say, optimistic signs that we were getting as the June 2013 elections neared that the previous government would actually serve out its full term. We knew that it was important to try to encourage those elections to be contested on a policy basis rather than personality-based politics. So with our partners in the lead, what they did in that conference was they invited representatives of all of the political parties to actually show up and for the first time really listen to the business community articulate its needs for policy reform. And representatives of the five major parties, including the three sort of major parties that contested the elections, sent their chiefs of economic policy to this president's conference and really engaged in a dialogue with the business community for the first time. And one of the demands that emerged was that the parties articulate a concrete policy vision for the elections and write an economic platform or a manifesto, as they sometimes call it, an economic agenda as part of their party platform for those elections and actually campaign on that basis. So fast forward to after these historic elections, when a new government comes into power, we were sitting with Ali Salman in Islamabad and we were talking about what comes next. And we said, well, you know, we can't just leave it at sort of they wrote this economic agenda and they campaigned on it and sort of where do we go from here? And the idea that that came out of that conversation was, well, let's take everything that the government promised to do and write it down and measure their progress in implementing it on a quarterly basis. And then partnering with key players in the business community, let's bring some sort of amplification to that through the media, through debates in civil society, organizations and whatnot. And after some time, with some limited financial and some technical assistance from Saip, what Ali Salman and his colleagues at the prime think tank came up with is the scorecard project that he'll be presenting to you today. The original idea that we had was to try to do this at both the national and at the provincial levels, sort of bearing in mind the constraints of doing this for the first time, for now, we're doing it only at the national level. And the approach is pretty simple. The government promised to do a lot of things or the then candidates promised to do a lot of things. You write them down and you measure them. Some of this information, as Ali will explain, can be gathered from public sources, various government websites, the state bank of Pakistan. Some of it can be gathered from World Bank or IMF sources. Some of it is pure numbers that you can evaluate. They promise to he'll get into the details a little bit, but make certain changes in terms of, let's say, tax-to-GDP ratio. It's fairly easy to check whether that's happening or not. Other issues concern more the development and passage of legislation. And that tracking takes place both by monitoring legislative developments in parliament and also by monitoring the media. And then Ali and his team assign a score to that. What he's actually going to be presenting for you today is the second in a series of scorecards. So the elections were in June. It took a little while to ramp the project idea up. So the first scorecard came out in January, which covered the first January of six or so months of the new government. And this scorecard today now is going to cover that period from about January until through the end of March. And the idea here is Sypes planning to keep this going on a quarterly basis for, at least for the foreseeable future, working with Prime. And what's interesting, I think, and this sort of just to wrap it up on this, and then I'll turn it over to Ali via our telephone link, is that Sypes, our interest in this is not just from Pakistan's economic development point of view. Sypes is a democracy organization and our funding for this project and indeed many of our projects comes from the National Endowment for Democracy. And so our interest really here is from a government accountability point of view. It's about establishing a track record of performance and interacting with civil society and the business community to put that track record out there publicly so that citizens have the opportunity and the information to make an objective evaluation of their government's performance and then to use that information going forward in their electoral behavior in the future. And the idea here is that you've got indigenous groups in Pakistan from the think tank side and the business community side that are, as we would say, holding the government's feet to the fire in terms of performance, but also looking to improve that performance going forward and also looking to make sure that citizens have the information they need to make decisions about what kind of government they want. So without, I guess, without any further ado, I think I'll turn it over to Ali and he will present the results to you of the second quarterly scorecard. Thank you. Ali, Saman, please proceed with your presentation. Yeah, hi, good morning. Am I clear and am I audible to all of you? Yes, you are. Please go ahead, Ali. We hear you. So good morning once again. I'm thankful to FIPE and CSIS to provide us the time and opportunity to share the result of the second tracking report of the government economic agenda. And Mark has already provided you the background and the purpose of the scorecard reporting. So I'm going to jump over directly first. Firstly, I'll explain how we measure score on what criteria do we measure score, how we assign it, and then the results. First of all, I'd like to share a couple of important things that since we launched this report in January, it has been received positively by the press and electronic media. They have run their own stories and sold by friends in the government that when we circulated the report, the first tracking report to the parliamentarians, the Prime Minister of Pakistan actually has asked the planning ministry to prepare a similar scorecard breakdown into ministries and breakdown of manifesto goals in the ministry. So it shows that this kind of work, if consistently carried out in an objective manner, does have an impact in terms of raising citizen voice and building pressure on the government's performance. So I'm viewing that the presentation is on. Can it return to slide number two, how the report then is mentioned? We're there, Ali. Yeah. So the score is essentially assigns a score on each of the economic goals we have identified. We have broken down the manifesto into 91 quantifiable and measurable goals. And based on the information available, we have given on each indicator a score from 0 to 10. And as you can see on your slides, out of 10, we have 2.5 for policy development and 2.5 for institutional reforms of governance and five for implementation. We have developed central rules in which we say that if the policy has been developed or already exists, then we give them a score of 2 to 2.5. Obviously, besides policy, we need governance and implementation machinery and institutional reforms to carry out. So the score is assigned on the basis of the level of progress. And lastly, the implementation gets the score. So each of those 91 indicators then gets scored on the basis of these three parameters on the basis of the data available. And then we also have rules for assigning zero if the progress has been reversed. And no negative marking is done because we believe that this would affect the average, the non-mated average disproportionately. We assign nil if no progress is made. And we also note that since it is the very beginning and it's still the first year of a democratic government which has been five years, so we write as-yet-no development in the indicators in which no development has taken place. The key difference between as-yet-no development and zero nil is that in the letter as-yet-no development, the score or that area is then computed, is not computed and it's computing the average. So we give a fair margin of the government or to the government to in terms of performance over next four years. And then the average of the subcomponents are taken and then we assign to the overall areas. The PMNN manifesto, if you can turn to the next slide please. This is how the scorecard looks like. As I already explained, on the left hand-on the left side column, you have the first chapter of manifesto economic revival. This is just an example. And in the right columns, you have all those scores mentioned with the first column, with the second column actually showing the data and terms of baseline. The baseline was chosen as the 10th June 2013, that is the time when the government took over, excuse me, when the government took over. So we signed scores on three areas, economic revival, energy security. We'll try to get this link back. So meanwhile, while we try to get the link back, I'm just going to shoot a quick email to Ali and let him know that the phone line is down. So please pardon me. Maybe while we try to get the link back, we could actually ask for him to make a few quick remarks so that we're not... Here we go. All right, so we're going to try to get the link back. But just maybe give a couple quick remarks and then we'll try to turn it back over to Ali. Okay. Actually, I don't have much to say about the methodology other than perhaps some concern regarding how weightage is going to be assigned to the various criteria, the legislative policy developments, institutional reforms and implementation. Because some of the measures that are being talked about are more difficult than others. It's easier to pass legislation, it's harder to implement it. And so perhaps, you know, as per the methodology, I'm not sure I think both would end up carrying the same weight. And it might be worth in subsequent reports to actually assign weightages. Of course, that becomes a very subjective enterprise. And number two, some of these promises are easier to deliver on than others. So clearly, it's a way where the methodology can focus the attention on some of them, rather than just giving us a numerical value for each. It's entirely possible Ali already has ideas on all of this. So perhaps we, you know, once we've had a chance to hear him out on that. Number two, the baseline, the choice of the baseline. Now, 10th June, 2013 is definitely when political career of the government began. But the economy actually had been operating for from long before. So it's a bit tricky actually to establish a baseline in these kinds of assessments, because depending on where you set the baseline, you're going to get a different result. And it might be worth giving a little more thought how that will work. Apologies for that. We're just going to try to reestablish the connection. Hello, Ali. Not sure what happened there. We lost you for a minute, but we are happy to hear you back back in action. So please, please feel free to continue the presentation. Thanks. Okay, thank you. We are on slide number four, economic revival. And I was just explaining a few scores. Now you can see on the right side column, the various scores have been assigned and the total score out of 10 in the economic revival government has received a score of 4.47. And in the second row on the top, you actually are seeing the overall score, which is the aggregate score of the three components. Now, let me give you a perspective here. For instance, the target set in the tax reform, tax administration, lowering of tax rates, facilitation of tax collection for the taxpayers, increasing the tax to GDP ratio, these are all, there are about 15 subcomponents which contribute to an assessment of where the government is standing in terms of tax reforms. And as you can see, this is the lowest score which the government has received is 1.75 out of these 10 components in the economic revival. And if you this is a sort of interrupt, Ali, could you clarify what, could you clarify what slide you're on please? Yeah, sorry, this is slide number four, economic revival. Great. Thank you. We're with you. Yeah, so, so I was explaining the tax reform issue in which out of the 10 scored subcomponents, the government has received the lowest score. Similarly, the state on enterprises, sorry, the state on enterprises, the government is, has promised to sort of start the privatization and the process has begun, but it seems that the process is rather slow at the moment. There are opportunities for Pakistan in terms of industrial growth and also trade development. Pakistan has received GSP plus status from the EU, the Confessionary Tariff Regime. So we hope that this will be used as, you know, this will be used to boost up the trade and export from Pakistan. There are some indicators that the, the private sector has actually grown in terms of, for instance, its, its excess or its usage of the commercial credit over one year has grown exponentially. And when you compare the figure in terms of one year, the private sector credit has, has increased by four times. So these are all the factors which have been considered while giving scores in various components which right now are in the front of your screen. And as I said, just to repeat my point, the, the score in the area of economic revival is 4.47. If there are any clarification questions on this slide, I'll be happy to stop her for a second before moving on. Please continue. Okay. So then let's turn to the next slide, please, which is again, one of the most important area if the government is now targeting the energy security. You can see the results in 10 components. And as I said earlier, the PMNN, the PMNN party has actually done a good job in terms of defining their exact goals of how, for instance, they're going to sustain or they're going to ensure energy security for the country. However, the very first goal which they announced has not been achieved. They, for, you know, for an integrated energy policy, the institutional arrangement decided was that we will have one in a integrated ministry of energy and natural resources, but we have not achieved that. So you don't see any development in that area. Then you can see various components of the energy sector. One area of maybe your interest would be number five, which is the permanent elimination of circular debt. Circular debt is the payment which are stuck in the system because of defaults and because of the poor collection of bills by state enterprises or by private customers. Although this government temporarily solved this problem last year by paying around $5 billion in one goal, which was the outstanding component, which was the outstanding payment to the electricity producing companies. Again, the outstanding debt in this sector is about $3.5 billion. So therefore, you can see in the area five, circular debt, the score is low at 3.25. Area number nine, high priority to import gas through pipelines may be of interest to our friends in US because the government committed, for instance, it will meet the shortfall in gas by pipeline agreements within the region. Obviously, due to the geopolitical situation, not much progress has been made on this. So the score is low at 2. There are certain reforms beginning to happen, but the pace of the institution reforms is rather slow at the moment. In the energy sector, we have seen China being very actively pursuing various investment opportunities in Pakistan. We can say that we are expecting positive development, but so far, mostly the agreements are yet to be materialized. There are NOUs signed, but in exception of one agreement, there are many energy-related areas in which more investment is needed. So we continue on this area, energy security, and move on to next slide. This should be slide number six. This is the continuation of energy security, remaining five components. And you can see that in the very first area, development of new coal fields and setting up of new coal-fired power plants, there is a high score of seven. Pakistan, it is well known in the area of southern Pakistan province of Sindh. Pakistan has very vast reserves of coal or lignite, which is not exactly coal, but there is an immense opportunity for investment of energy. And the government has signed up projects and have started projects recently, or commission projects recently in that area. Pakistan had also exhibited a potential in hydropower, but then there has been a lot of political tensions and resistance by smaller provinces on threatened dams, and therefore, there has been no development in that area. Pakistan does have alternative energy like solar energy and other sources, and there have been positive progress in that as well. Ultimately, the government has declared following that they want to establish a whole sale market for electricity. It is a very ambitious goal, but what we see is something different happening. The government has announced, for instance, direct contracting with companies in discussions with China, with Russia, with Turkey. And so direct contracting has its own issues, and the score is still at this moment in terms of development of the whole sale energy market. So the energy sector, the final result is the score is 4.34 out of 10. And now I'm going to move to the next slide, which is the third and the last area in our assessment. This is relatively, in a very few indicators are available, in which the government has continued the previous government, People's Party government program of the Benazir income support program, and it has actually increased the amount available in what is well-managed conditional cash transfer. And therefore, the government has received a high score of 7. And also the spending on non-pension social protection has increased in last budget. Although there is another promise on the agenda, legislate the right to food, but so far no development has been happening. There is a discrepancy, as you can see that we only have three indicators in this area. So obviously, as compared with 15 components in the energy security or 10 components in economic revival, we only have three. Average will still be computed. And it has, you can say, a slightly disproportionate effect on the overall score. And just to summarize, now, this is the summary slide, slide number eight, overall score for your reference. This is where relatively Pakistan economic performance in the light of manifesto of the government and in the light of our assessment stands right now, about 4.47 in economic revival, 4.34 in energy security and social protection, 6.5 leading to an average of 5.1. Now, just to put you in perspective, when we did this score in January, the overall score was 4.4. So you can see that there has been some increase in the performance from 4.4. The overall performance is at 5.1. Now, we can also say that government has also made some efforts to reduce the size of government as well as lessen taxation and regulatory burden overall in the economy. Now, what are the priority areas where the government should be moving? Again, we have identified certain areas from the manifesto which needs government attention. One of these is actually reduction in the government expenditure and not just in the expenditure on the presidency or by the next second period. Then the government must gear up its effort on the privatization of state-owned enterprises. And one important prerequisite for that is the setting up of independent and professional boards and introducing corporate governance in the state-owned enterprises, which was legislated last year. Incidentally, also site Pakistan played a positive role in that. And then we continue to the next slide, number 10, and we emphasize that the government must reduce the number of federal and provincial taxes and also the rate of taxes. And so we need to encourage more people to actually bring in the tax net rather than encouraging them to evade the taxation. Government has gear up its efforts to open up trade with India and also increase its efforts in Afghanistan. But my view is that our view is that it has stopped a shot of granting MFN status to India, apparently for security and political reasons at the moment. In our view, it must go on and open up the borders for them. There is an apprehension in the business circles that government is in the name of regulation, maybe extending its control over the business through arbitrary controls on the regulators, such as the Security and Exchange Commission and Competition Commission. That needs to be avoided. The regulatory environment has to be maintained as an independent regulator. And lastly, the government needs to continue its and improve its relationship with the private sector. Now the next slide is how you can actually ensure the energy security in this country. In the past, it has happened that we have given subsidies to the consumers and extraordinary incentives to the energy producers. But we have not really come closer to an open and competitive energy market, particularly in the transmission and distribution and also partially in generation, which has meant that Pakistan is significantly facing shortfall of energy. And the business and industries are all waiting for sort of revival in terms of energy infrastructure. And therefore we believe that it has to be continued as one of the top most important priority for the government. So I think I'm done with this slide. I'm again thankful to all of you in DC this morning. And we can take questions right now or later after other guests have spoken. Thank you very much, Ali. That's a very comprehensive view of the government's policies and how they've done in the past nine months in implementing them. I'd like to turn it over, I should say back over to Mr. Hussain, who's obviously a very well regarded columnist and journalist in Pakistan in residence at the Wilson Center and very knowledgeable about all aspects of Pakistani politics and policy. So turn it over to you. Thanks. Thanks, Robert, for that very kind introduction and also a shout out to Ali Salman and Islamabad for a great job done with preparing these or tracking these manifesto targets so carefully and so closely. Like this, I've already shared a couple of thoughts regarding the methodology that's being followed here. So I'd like to, I suppose, react to the picture that's emerging from what this report is actually telling us. Number one, there is very little doubt that the overall economic story of this new government in Pakistan is a positive one thus far. And by and large, the tracking report is actually showing that too. The improvement between the last report and this one in overall achievement of targets is speaking to that. All of the various institutional voices, the independent institutional voices, whose job it is to track macroeconomic and structural developments in the economy closely concur on this point. The state bank of Pakistan and its monetary policy announcements has echoed a very positive sentiment. The IMF in its first and second review has also echoed a very positive sentiment that by and large things appear to be moving in the right direction. GDP growth rate, growth is increasing, large-scale manufacturing is leading this turnaround. The fiscal deficit and expenditures are under control, revenue measures are being implemented. So by and large, there appears to be a very positive story coming out and I think Ali Salman's report and the report by Saib is also echoing that. It's not certainly giving us any reason to doubt what the IMF and the state bank have already told us. Now having said that, it's also equally important to understand, I think, that this was in fact the easy part. Turning around the overall macroeconomic indicators was quite possibly the first order of priority for sure, but the part of the story that came the easiest. Number one, the real story begins now and that's something that occurred to me even more so and I think the last two slides that Ali Salman showed us, the ten bullet pointed one, the priorities going forward. If you look at each one of those points that was on the screen, you really get the feeling that the game is only just beginning and the third review of the IMF that is scheduled for May will be held and then shortly after that whatever agreed targets come out of that review will be written into the budget in June and that fiscal year and the implementation of those structural and the pursuit of those structural reforms is really where the game is going to get going in earnest. Before going on to that, let me just add that the government has been helped along in turning around the macroeconomic picture by a couple of things. One was the arrival of unanticipated liquidity from abroad. The reserve target, the government was in a very tight reserves position up until December of the fiscal year and there was not really a clear picture going forward about how they intend to meet their net international reserves targets and how they're going to be able to bring about currency stability, which had been an important part of the promises that they had made. So suddenly the arrival of $1.5 billion out of nowhere certainly helped in turning around the reserves picture. The other is on the fiscal side. There was a considerable amount of help given to the government by the fact that last year, right before the end of the last fiscal year, there was a retirement of about 582 billion rupees worth of the circular debt. That was done days before the end of the fiscal year last year and the reason behind doing it days before was so that money in fact gets counted in last year's fiscal deficit figures, which have been now being reported as 8.8% of GDP. Of course, this year you will not have a retirement on that order of magnitude plus with such a high base from 8.8% bringing the deficit down to a target of 5.8% will be helped along. The fiscal side has also been helped by including in the revenue figures figures that have traditionally not been included in fiscal areas, such as the universal support fund maintained by the telecom companies for making telecom infrastructure accessible to the poor. That's been brought under under government control, whereas it used to be an independent fund. They've also been helped along by an unusually high provincial government surpluses, which in the last report I saw before coming here was at 170 billion rupees, more than half of which was accounted by the government of Punjab. The previous government struggled with this issue and struggled with trying to get the government of Punjab to run a provincial surplus to bring some of that money back into. But going forward, the macroeconomic picture has been helped along by cleverly adjusting the baseline and it's also been helped along by the utilization of liquidity. But nevertheless, there is a resumption of confidence that the recent Euro bond flotation, for instance, shows that the return of confidence is not only a domestic factor, but international investors looking at Pakistan also feel that it's potentially a good bet for five to 10 years, even if at unusually high spreads. Going forward, the real challenge is now emanate on the structural side. Those targets are going to be decided in May and implementation is then going to begin as of the forthcoming budget. Two areas are going to be absolutely central and critical to this and Ali Salman's presentation touched on both of them. In fact, he has central place to both of them. One is tax administration and the other is energy. This is where the government is going to meet its biggest test because this is where they start touching on the real rackets that operate beneath the surface and how they deal with this, how they go about bringing the two bureaucracies under control, the power bureaucracy and the tax bureaucracy is going to be an important test. So that's something to keep an eye on. I suppose I can stop here at this point if you want to open discussion. Thanks very much. To open up the discussion, let me just thank all of our speakers for excellent, very interesting and detailed presentation on the state of Pakistan's economic policy. A question that I had for Ali and as well for Mark and Karam is, at the end Ali, you had a list of recommendations. First of all, are you still on the line, Ali? Yeah, I am hearing. Excellent, good. So we don't have to repeat ourselves. If, you know, as the state privatizes some of the state and enterprises that obviously reduce its revenue, if you're recommending as well reductions in tax and reductions in government debt, obviously that will have an effect on government revenue as well. Where is the government going to get money to invest in infrastructure that is needed? Obviously the international community is a potential source, but it's not clear to me that increasing dependence on international aid is a policy that anybody's really recommending. Would you care to speak to that issue? Yes, I think it's a very important issue. Now, first of all, I think we need to understand and the government would create surplus capital and financial fiscal space for investment in the infrastructure once it stops subsidizing and once it stops spending its money on the loss making enterprises. There is estimated about $5 billion every year the government throw this money after bad. And then there is another $5 billion estimated by IMF, which is the revenue loss due to tax exemptions and the concessionary regime called SROs in Pakistan. Now these are the sources available within the current fiscal space in Pakistan. And I think that the priority therefore should be to create this and to materialize this kind of money which is on the table to be available for investment over the next few years. The taxation issue is very sensitive and I noticed that when I say that lowering the tax rate, there is a concern that maybe because of poor administration, Pakistan GDP ratio tax, GDP ratio can may even further slide down. But I am very confident that this government actually had achieved in late 90s fairly high tax to GDP ratio close to 13% by actually reducing and simplifying tax structure. It was unfortunately 2002 onwards when we had made a very complicated income tax code and furthermore even more complicated sales tax or value added tax regime. We have moved from a simplified tax to complicated tax and we have lost revenue. So I think these are these resources available within the country and I totally agree that we don't need to depend on aid. The foreign aid is hardly 1% of national GDP. I don't consider this as a major driving factor. I mean there could be as Khurram rightly pointed out this one transaction which has helped for now but I don't think so that we should plan or assume that more such transactions are on the line and we have to look inside for resources. From what I understand this government has been quite or this party has been quite innovative in being able to raise funds for infrastructure finance in the past and the kind of things we are hearing them talk about today indicates that you know the prime minister has spoken about a build-operate transfer basis for instance for financing some highway projects. So I think raising resources will not be that big of a problem for them depending on the terms that they are willing to offer but the thing is that recovering that money over the course of the next few years will be a big issue. So you write to flag this as a problem where the funds will come from for infrastructure finance. The failure of the 3G auction recently seems to be a kind of a perhaps a real winner. They were expecting two billion dollars and got something on the score of gets wide about 400 million or something so I just I just wonder if. Well I mean what's the with the 3G auction it's yet to take place on the it will take place on the on the 23rd. So we'll know at that point now what's happened is that writers has run a story saying that as per their sources they're not citing any name sources they're claiming that the government has only raised 850 million dollars based on the sealed bids that were submitted on Monday. The government for its part particular chairman of the telecommunications authority has very strongly gone on the record to deny this saying and says in fact because he's seen the sealed bids he's saying that no the in fact the auction is oversubscribed. So we don't yet know what we'll know on the 23rd what outcome of that is. Second the amount that they're actually looking for from auction if you look at the IMF documents for the balance of payments the target is about 1.2 billion dollars that they're looking to raise from that auction of which about something like 200 million I believe has already been raised so it's just 1 billion that's from the auction itself. Reuters report is saying well they've raised 850 million so even the short fall there is not as big as what the report is making us believe. The 2 billion figure is just a figure that the finance minister had put up at the back in January after a cabinet meeting so the real figure is actually 1.2 billion. So it's usual a more positive picture than this one? Yeah excellent when when I call on you please introduce a please turn on the microphone introduce yourself and then keep your question fairly brief so that we can get as much discussion as possible. Thanks. Yes Andrew Wilson from SITE. Ali your presentation seems to indicate that with a lot of with a lot of governments that the the government's very good at spending and still has some challenges in income. One of the issues that's plagued Pakistan over the years has been not only expanding the tax base but making sure that duo taxes pay their taxes and that's always been a question especially I guess in terms of rural land holders. What progress has this government made not only in simplifying the taxes you've already indicated but expanding the tax base for making sure that taxpayers are paying their fair share? Good question Ali. Yeah thank you so much for this very important question. I am I'm afraid that as our score guard is also showing on the tax government has received the lowest score on the tax reforms so far. So my immediate answer to this question is is that one the federal government is now consistently saying that for instance the imposition of agriculture tax or income tax on the agriculture income is a provincial domain after the revolution constitutional amendment so it's not really bothered to to carry out the expansion of the tax in that area but really it has not moved ahead in terms of expanding the tax net at the moment and there is as we know that there is like this large informal sector economy in Pakistan by any estimate it is not less than one-third of the the GDP the national GDP and so therefore these are all the taxable enterprises you know which are operating extra legal sphere but which are not in taxes so I am my answer to this question is I have not seen so far government making any previous attempts to reform the tax collection and tax infrastructure except maybe that it has published recently that a piece of taxpayer so it has you know brought some media attention to those who are paying taxes or those who are paying very low taxes so that has stood a lot of media debate and it will in coming days it was just released yesterday but I haven't seen in terms of the reforms in terms of outreach you know the government has to take the private sector into confidence that it means serious business and you know it needs to show confidence in those small enterprises which constitutes 90 percent of our enterprises to to encourage them to register themselves and identify themselves and contribute to the national taxation the government has committed with the IMF to send out something like 70,000 income tax notices to non-finance the IMF is reporting close to 68 or so thousand of those have been sent out so a very spirited effort to have been made and this is a measure that for about the the last government tried to do for about three separate years and was unable to so we've actually seen one major tax administration effort to at least on the income tax side the problem is that out of the 68 or so thousand income tax notices that were sent out something like 6500 of those people actually stepped forward in response to the notice and fire so you've got a hit rate of about less than one in 10 now how to improve that hit rate in the subsequent years is an important challenge and that's a challenge on the structural side of things that's a way to try and improve the tax administration the audit powers and maybe even legislative changes to try and reduce the role of anyways I mean the fact is that that presents a challenge on the sales tax side the government had in its first budget included some very some measures to try and get people to get themselves registered as sales tax agents but there was a big human cry from the business community against that and and they caved in now these were measures that the previous government had also tried in about three or four occasions and if you look at the past 20 years you notice that it's been tried on on numerous occasions and each time the backlash from the business community is too much and the government usually caves in this one was no different so and the IMF actually frowned on that caving in so to speak and then there was also tax amnesty scheme given to a big capital the operators of large scale fixed capital that if you invest a certain amount of money you can actually claim tax exempt status for when based on the amount of money that you've invested which again the IMF flag does tax amnesty scheme and frowned on the practice so you've got a mixed record emerging you know you can definitely see the government trying to make an effort in the income tax side and then finding that there are structural constraints now whether or not they follow up on those structural constraints is something we'll wait to see in subsequent years on the sales tax side you're seeing a lack of will to actually confront them the the unregistered parties and on the large scale fixed capital side you're seeing willingness to play ball so to speak and in an effort to try and get the tax compliance and amount of revenue up by but by through some kind of a negotiated process yeah big out the A with a USAID two quick questions because first would be on the private capital I think you mentioned that credits grown about five times and where's that credit going because it doesn't seem to be going to you know like the heart of the economy with the SMA sector is it just going to like these hard big businesses on the international side and then the second would be on the privatization is where are the priority sectors that you see that the prioritization should focus and where it's going to be focused going forward Ali yeah so the the first question is can you hear me now yes sir first question is where the additional private sector credit is going and now the data available with the state bank shows that it has invested in very diverse proportions from the textiles to the services and now you should which we should realize that you know that 60% of Pakistan GDP is essentially services and which includes the wholesale and retail operations and the hotel industry and the other services which are actually the recipients of extra private sector credit takeoff happened last year also people have invested in the agriculture activities agriculture growth has been stable over the long run and it has actually several occasions has compensated for you know for low performance in in the industrial activity as the second question in terms of the the priorities for private decision right now the government is actually going for a low hanging fruit and the low hanging fruit is essentially capital market transactions it is offloading it has offered to upload its shares in in banks in large oil and gas development corporation and other certain other large entities in which the government is a significant shareholder though it is not in the management position the the other priorities which the government is focusing on announced is a couple of electricity utility companies and sort of the big names in privatization like Pakistan international airlines Pakistan railways as it seems to me that have they have been shelved at the moment the the railway ministry in charge is actually against the idea of privatization so it's it's not going to be privatized in any time sooner Pakistan international airlines the national black carrier is again you know there are efforts to sort of improve its corporate governance we have we've also I'm about to purchase new aircrafts and dry leaves or wet leaves but again I I don't see it going towards privatization anytime soon and and I'm also afraid that there is already a political opposition to it to the entire idea of privatization in the previous regime there were a lot of additional employment generated in those state owned enterprises and that's not easy to get rid of now that it's very important to understand that in the last government they by the you know in terms of the law the there's a 12.5 percent share of our employees of all state owned enterprises and the it has been already implemented in the previous regime and unless the government revises that law which governs all transaction of privatization or manage a sort of golden shake hand or other schemes I think that remains a sort of that will decrease the appetite I would say for private sector investors in the direction more questions yeah Ali thanks very much this is a john samson from international relief and development one of the areas mentioned in your report was the lack of confidence of the private sector particularly in the economic revival I was wondering if you could speak a little bit more to that as well as I'd be interested to know how specifically you're tracking that confidence measure for this report thanks thank you Ali yeah thank you as I said we measure essentially on the basis of what the manifesto stated and in our detailed report I hope that you have access to a detailed report we issued the email sometime back you mentioned that the the government had announced the creation of a business council and an economic advisory council in which the private sector is is a participant and it has already created that it has met seven times and so it has sort of showing some kind of confidence however we we also looked at the other available measures of private sector confidence there are other surveys available for instance the there is this overseas chamber of commerce which is with the vegetation of all multi-nations in Pakistan which recently issued its survey about business confidence in the in the economic fundamental and it you know the situation it portrayed was not very hopeful right it showed very slight improvement over the last few months in terms of its confidence in the in the in the government economic policy so our assessment is affected both by what you know these confidence measures have resulted in terms of how business community is seeing that and also what government own promises stand for hi i'm cat coulee from dai um i'm not sure but i think some of the authority that pushes these or some of the indicators forward has been devolved and really runs at a provincial level so i was wondering if you could speak to some of the more nuanced differences in pace of reform or um intensity or thoroughness of reform between Punjab and sin specifically um and also if there's anything going on to close the gap between some of the other provinces so i think there's something disparity thank you very much so the question is on the um on the provincial you know can you repeat the question for me please it's at the um since a lot of authorities have been devolved to the provincial level um i think the question has to do with um the uh the capacity for the national government to um to implement all these and how that affects the pace of reform is that yeah and to what extent if you were to tease the figures just related to Punjab out of the national averages you know like what kind of disparity would you find and is there any effort to close that gap yeah well actually after the devolution uh took place um province of sin has established its own authority for tax collection province of Punjab has also uh followed this is the this is the collection on services for sales tax of the value added tax the the the the income tax the custom duties and other direct taxation and most of the indirect taxation still remains with the federal government um and um in most of the economic policy matters the federal government still has the lead in terms of um the um the decision making there is an increasing role for an intra-provincial um body um in which the provinces are represented economic coordination council chaired by the prime minister um which which has the authority to um to take decisions at national level so by and large I would say that um the there be for instance the sales tax the collection of sales tax on services has been has been devolved province of sin has actually shown a good promise uh the collection in by the provincial authority has actually increased and uh Punjab is likely to follow but so far I don't have figures with Punjab government but I I know for sure that sin government actually showed much more greater collection in terms of sales tax than it was done in the federal government time our scorecard however there are many very few factors which we had to exclude and it didn't affect much in terms of the overall assessment of the economic situation I hope that I directly get your question great thanks very much hi this is leah greg also from dhi and I was wondering could you speak more to uh within the economic revival scorecard job opportunities and job creation and uh kind of go a little more in depth into what that's measuring and what are some of the policy uh policy development or implementation that the government has been moving towards yeah sure um now the government had announced um a couple of schemes uh for job creation at at the at the national level one of the scheme is called the prime minister youth business loan scheme which exactly uh targeted at the disbursement of loans and so far six to you can say six to nine months in progress the you know we can see that progress has happened in that particular area the other um the other measure for this particular indicator was the extent of private sector training which I have already noted has increased um in last one one year so on the business that we have uh this notion that job opportunities are are being created however there is also um an additional point here the pakistan data statistics recently also released um its um an assessment of unemployment situation in the country um although there's a lot of problem to be honest with its methodology and definition of what is unemployment but the official statistics are that unemployment in pakistan is about five five percent but it's really hard to believe so I I would say we will stick to what the government has promised in its manifesto and where how we do we assess it I'm just saying I wonder if you could um if you could comment as well sort of on the overall economic situation in pakistan um particular the job situation and the economic crisis and your thoughts on um the direction that that is going now um and some of the steps that the government you think should take regarding employment I've always found the the numbers put out by the bureau of statistics to be very very problematic I find it very hard to work with them um that's because I've dealt directly with business people and I'll tell you I'll give you one example um I went to an industrial uh estate one of the largest in pakistan and I wanted to know how many people they hire how many people they employ and the I was told by the chairman of that industrial estate that they themselves don't maintain that data they said that most of the people we hire is on contract labor they're with us today they're gone tomorrow most people in pakistan who are most workers in pakistan work under those terms they they they have a job today they may not have it tomorrow um and the wages are indexed to minimum wage although on many cases they're being paid less than many wage but even the factory owners themselves don't maintain the data of how many people they hire at the end of the month the fact few of themselves can't tell you uh how many people they hired because they literally hire people they they work they're they're paid they're paid out in cash and then they leave um they've got some idea on their permanent payroll but but but total employment figures the factory people themselves don't have it if employers themselves don't have it I don't see how the state can um so I have a very hard time actually running with the with employment data um so it it's it becomes very difficult to say whether or not the this sort of economic turnaround the government is doubting is one that creates employment or whether it's one that's that creates profits only and no jobs it's difficult to say we can surmise but there's no real quantitative ground regarding the the the energy crisis I mean um do you want it overall thoughts or this is a long-term problem um there are two major issues uh that that the government is up against uh and you know we've had three governments tried to tackle these these issues and fail in the process so we're waiting to see whether this government proves itself very different uh issue number one is the the the the deteriorating fuel mix uh over the past quarter century or so the role that oil is playing in the in the generation of electricity has been growing bigger and bigger and um up until 2002 2003 that wasn't seen as a big problem because oil wasn't that expensive and much of the thermal requirements for the power plants came from indigenous natural gas but from 2002 till now in the past one decade uh oil prices have shot up and natural gas production has come down and number of stakeholders on the natural gas side has increased as well so um so so with this double whammy in fact uh you know diminishing supplies of indigenous gas rising costs of imported oil uh that's really at the root of what we call the the power crisis it's not that there's not enough capacity to generate the electricity it's that there isn't enough capacity to pay for the the electricity that we can generate so much of the the generation capacity sets idle and uh number two is of course the the power bureaucracy this is one of the most powerful bureaucracies in the country and um i've i've had a chance to see it up close in the year 2008 i made a documentary series on the power crisis in which i actually went to and stayed for a few days and each of the power plants the public sector power plants in pakistan i spent a few days over there interacting with the in each of them and then also in the coal fields in uh in lacra and um it was it was very easy to see that the the inefficiencies that are there and the enormous difficulty that the independent board of governors that were installed by the last government were having in ensuring compliance and uh you know the last government installed independent boards on each of the distribution companies and uh the boards found that the management just was not responding to them just not taking instructions not uh complying with uh with uh um any any any directives so getting the power bureaucracy to actually respond to reform minded initiatives is a big challenge and um the musher of government tried it the the biggest government tried it we'll wait to see if this government manages to succeed of course one wishes that they do thanks very much mark the same basic question um the um would your thoughts on the overall situation of poverty and um and jobs um in pakistan and what do you think needs to be done well you know um i mean i i think to a certain extent i have to kind of sidestep your question because um sort of from a you know i mean i think there's two reasons first of all you know sort of from a from a sip point of view we we tend to defer to the experts in terms of of commenting on on the very specifics um but also i think from a from a from an overall point of view also i you know i think as as both ali and khoram have pointed out you know there's there there are a lot of um structural and institutional um arrangements that also need to be negotiated i think going forward um you know ali's report very clearly indicates i think that there's a certain amount of momentum and that there's a certain amount of um there are there are a certain amount of of uh of positive signs and changes that have been introduced but you know khoram rightly pointed out also that uh it's in terms of the the structural arrangements and the institutional arrangements and the implementation uh you know where where the rubber is going to really meet the road um and um i think both ali and khoram have also pointed to the uh to the difficulties in in getting the statistics right um and um you know i think the one thing that i i hear coming from both of their comments is that uh to some extent the government is is in a little bit of a difficult position where they have these uh dueling pressures of economic revival which would uh seem to let's say mitigate in in favor of uh re relaxing um certain um certain tax burdens on the private sector yet at the same time we also know that the imf as khoram pointed out is putting a lot of pressure in terms of ramping up tax collection and that was something that was also i think reflected in andrew's question as well so those those dueling pressures are there so you know i think very much of the jury is still out ali we have about um uh oh um mr sylvan please just a very small well it's actually a very large question but it's a very small point and that is if you're in the private sector and you're running a company and you don't know how much you've spent on employment how can you put together a pnl sheet i don't know um they you know they they will have aggregate data on uh on on how much they've uh put into their company um in in terms of you know they they'll have two separate payrolls for one the one that's for the contract label which is where the bulk of their work is coming from maybe a third one the third one for the taxpayer maybe a tax collector maybe but um um there'll be one for the contract labor that is hired on the day-to-day basis which is the majority of the workforce uh and then there'll be another one for the permanent and that that data they'll have they'll have an hr department and they'll they'll be able to tell you but how many people have actually worked there over the past one month they won't be able to tell you but they might be able to tell you what their their total business was over the past one month what they paid but how many people that that represented we don't know so you know that that makes it difficult to assess how many people entered the workforce you might be able to get some data on uh on on how much they paid in a in a monthly period or something but uh but but but but it'll be very hard for you to get numbers of people that are entering the workforce basically so it sounds like both the public and the private have some reforms that they need to undertake um usefully so um Ali we have about uh 30 seconds remaining so i'll give you the final word yeah it's a pleasure being uh all of you um one final thought i want to share is that i think the audience and the friends of pakistan in washington dc needs to look pakistan uh beyond i would say the security lens or security perspective not happening in pakistan in terms of economic activity um well we've lost ali um but that's okay um the the his point is well taken um and in fact that's something that our program has been has done the last few years we did a lot of work on security the security relationship between the united states and pakistan but about two three years ago we really started shifting the focus to um more private sector development um trade um issues in fact right now um my fellow sidika hameed is in pakistan wrapping up um this year's study um on the on the state of investment and entrepreneurship in pakistan which will be out sometime the next few months um so um with apologies to uh to ali which will send separately um i'd like to thank ali saman of prime churn who's saying of the wilson center um and um mark john and jennifer of syp for uh for organizing this and um thank all of you for coming today