Nepal — More Feudal Than Others?
|September 25, 2009||Posted by Staff under Progress Report, The Progress Report|
Nepal — More Feudal Than Others?
Sugar and Political Power in Pakistan
Whats making a living really like in South Asia? Is the competition between some religious fanatics and some Western states the whole story? We trim, blend, and append two 2009 articles from (1) Kantipur, Sept 11, on Nepal by Narayan Khadka (2) the Pakistan News, Sept 12, on crony capitalism (a redundant phrase?). The writer lectures on development economics at Oxford.
by Narayan Khadka and by Dr Adeel Malik
- More feudal than others?
The socio-political culture that evolved from feudalism was characterized by patronage and slavery, subordination and strong military type order, rent-seeking and exploitation, etc. Countries of South Asia — especially India, Pakistan, Bangladesh, Nepal and Bhutan — have some form of a feudal bondage of democracy. Politics in these countries is strongly tied to landownership; and family lineage is the main springboard for leadership. Political patronage and nepotism are quite common. Caste and class background is a more powerful factor in politics than personality, education, and abilities.
Similarly, political organization is run as a quasi-bureaucratic institution with a static hierarchical order where status and strict protocol are more important than ideas. In this kind of politico-bureaucratic system, orders heavily influenced by personal or clique interest flow from the top potentate down to the cadre level as decisions of the party. Leaders live like rajas, maharajas, sahebs, and nawabs.
- Sugar and Political Power
The economic interests of our political elites are strongly entrenched in the current power structure. The operation of sugar markets in Pakistan offers a telling story of how both markets and public policy are routinely captured by vested political interests. Sugar is economically inefficient, enjoys one of the highest rates of protection, and is dominated by a small number of political influential owners.
In Pakistan’s recurring sugar crises, the role of politics is central: from the sanctioning of a sugar mill to its financing and operation. Of the nearly 78 sugar mills, at least 50 per cent are owned by politicians or their family members. They sit on all sides of the political divide, represented in cabinet, treasury, and opposition benches.
The list of owners includes such influential political figures as President Asif Ali Zardari himself, Speaker National Assembly Dr Fehmida Mirza, Sind Provincial Minister Zulfiqar Mirza, the Chaudhrys of Gujrat, et al. President Zardari has financial stakes in five sugar mills. His main political contender, Mian Nawaz Sharif’s family, owns three sugar mills.
The sugar cartel has also operated with impunity under military dictators. The nation has witnessed at least two sugar crises when our self-proclaimed father of good governance, General Pervez Musharraf, was safely ensconced in power. The presence of Humayun Akhtar, the son of another military general, Jahangir Tarin and other stalwarts of the PML-Q in General Musharraf’s cabinet ensured a smooth sailing for sugar interests.
The politics of sugar has its roots in the late 1980s when sugar mills were sanctioned through political connection and state-owned commercial banks extended money to finance these. This political patronage reached its new heights in the 1990s when successive regimes sanctioned sugar mills to politicians and their kith and kin and offered them generous credit lines from public banks. The bulk of these loans were later written off — a daylight robbery of public resources. Many of our current sugar barons are beneficiaries of the infamous debt write-offs of the 1990s.
In Nawaz Sharif’s first government, when sugar related corruption reached its apogee, the Heavy Mechanical Complex (HMC) was barred from producing sugar plants, making Ittefaq Foundry the main provider of sugar plants. And the unit pricing of sugar plants was systematically increased. Plus, Ittefaqs over-priced sugar plants were financed by commercial banks. Far from generating new business opportunities, public money was transferred to political incumbents. It was not a level playing field in which ordinary businessmen could compete in a free and fair manner.
Competition is not their operating principle. Industry insiders reveal that there are at present more mills than required. Had it not been for this state patronage, the more inefficient mills would die their natural death.
The sugar sector is sheltered from international competition and has remained largely untouched by nearly two decades of trade liberalization. When sugar prices fell in international markets, the sugar cartel convinced the government to impose additional duties, denying the benefit of this price fall to ordinary consumers. Ironically, the reverse happened when sugar prices recently soared in global markets. The mill-owners were quick to pass on the price increase to consumers. Today, Pakistan’s sugar industry is one of the most economically inefficient in the region
The industry has made few attempts to slash its costs by developing other byproducts of sugar, such as molasses, beet pulp, and cane wax. The sugar industry can also be gainfully used for the generation of electricity. Perhaps, it is far more profitable to manipulate the market and derive uncompetitive rents than to engage in domestic and foreign competition.
JJS: At its root, the problem is land monopoly. So the solution is not war but land justice. The West could do more good by setting a better example and sharing the value of land equitably.
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