The Committee Report on the 18th Constitutional Amendment

Pakistan has had a chequered constitutional history. 

It took the country nine years after independence to frame the first Constitution. This was one of the longest periods taken for this purpose by any country. 

In 1954 the Assembly was dissolved by the Governor General without any constitutional mandate leading to instability in the political system. The Constitutions of 1956 and 1962 were abrogated. The Constitution of 1962 violated the democratic principle of one-man one-vote as well as adult franchise and finally, being a centralized federation with a unicameral legislature, it was a flawed Federal structure. The result was the tragic event of the separation of East Pakistan. 

The 1973 Constitution was enacted in this back-drop of loss of a part of the country and consequent disillusionment and frustration. The nation salutes Shaheed Zulfiqar Ali Bhutto and all other political leaders and personalities both inside and outside parliament whose struggle contributed to the framing of the 1973 Constitution. 

This document, despite two military interventions, has stood the test of time and could not be abrogated. The essential features of 1973 Constitution are that it would be based on Islamic principles and be a Federal Parliamentary system with Provincial Autonomy in which fundamental rights and the independence of the judiciary would be ensured. 

Unfortunately the Constitution of 1973 was not implemented in letter and spirit and the democratic system got derailed at different times. The non-democratic regimes that took power sought to centralize authority and introduce various provisions which altered the basic structure of the Constitution from a parliamentary form to a quasi Presidential form of Government through the 8th and 17th constitutional Amendments. Thus, the equilibrium established by the Constitution of 1973 was disturbed which weakened the democratic institutions and inter alia deprived the Provinces of their legitimate constitutional rights in governance and in utilization of their natural resources. It also resulted in the absence of rule of law, lack of confidence in the judicial-system and distance between Provinces and Federation. 

 It was in this background that the Charter of Democracy was signed between Mohtarma Benazir Bhutto and Muhammad Nawaz Sharif on May 14, 2006. Subsequently an All Parties Conference was held in London and all the democratic forces continued their historic struggle for the democratic system and Provincial Autonomy. The dictators abortive attempt to retain power through extra-constitutional measures against the judiciary was thwarted by the historic “rule of law” movement which enjoyed universal support at home and abroad. The momentum thus created led to the elections of February 2008 and the eventual exit of General Musharraf. 

 The demands of amendments in the Constitution were raised by all political forces from time to time, in particular, stressed that there was a need for giving the Provinces autonomy, ensuring an independent and impartial judiciary and equality in sharing of resources between Provinces and the Federation. 

Therefore, with this objective in mind, the President , Mr Zardari, in his address to both Houses of Majlis-e-Shoora (Parliament) assembled together on March 28, 2009, asked the Speaker, National Assembly of Pakistan, to constitute a Committee of both the Houses of Parliament, with representatives of all political parties and independent groups in both the Houses, for the purpose of proposing amendments in the Constitution IA1 the light of Charter of Democracy (CoD). 

Thereafter, the President wrote a letter to the Prime Minister on April 9, 2009 calling upon the Government to take appropriate steps in this regard. 

As a consequence, the National Assembly in its sitting held on April 10, 2009, passed a Motion for constituting an All Parties Special Committee to recommend amendments in the Constitution in the light of the Charter of Democracy. 

The Motion also authorized the Speaker, National Assembly, to consult leaders of all Parliamentary Parties and to provide guidelines to the Committee. 

Similarly, the Senate of Pakistan in its sitting held on April 29, 2009, passed a Motion authorizing the Chairman Senate to consult leaders of all Political Parties in the Senate to make nominations of such members to the said Committee being constituted by the Speaker, National Assembly. 

In pursuance of the Motions adopted by the National Assembly on April 10, 2009 and the Senate on April 29, 2009, the Speaker, National Assembly, constituted. the Special Committee of Parliament in consultation with the Parliamentary Leaders appointed the Committee Members.

From time to time, when permanent Members could not attend, the following Members of the Senate and the National Assembly assisted the Committee: 

Senator Mr. Zahid Khan (ANP); Ms. Bushra Gohar, MNA (ANP); Dr. Nadeem Ehsan, MNA (MQM); Mr. Iqbal Mohammad Ali Khan, MNA (MQM); Senator Ms. Kalsoom Perveen (BNP-Awami). senator Prof. Ibrahim Khan (JIP); Ms Anusha Rehman Khan, MNA (PML-N) and in particular Mr. Zahid Hamid, MNA (PML-N). 

The Committee held its first meeting on June 25, 2009 wherein it took the following amongst other decisions, namely: 

Unanimously elected Senator Mian Raza Rabbani as its Chairman.

 Renamed itself as the Parliamentary Committee on Constitutional Reforms, and proceeded to frame its Rules of Procedure.

In the light of the Motions passed by the National Assembly and the Senate of Pakistan, the Committee formed its Terms of Reference as under:

The Committee shall propose amendments to the Constitution keeping in view the 17th Amendment, CoD and provincial autonomy, in order to meet the democratic and Islamic aspirations of the people of Pakistan. 

The Committee in its meeting dated June 29, 2009, decided to invite suggestions/proposals and amendments from the public at large through the press with a cut-off date of August 1, 2009, which was subsequently extended by the Committee to August 10, 2009. 

The Committee received a total number of 982 recommendations/ proposals and amendments through this process. 

The Committee in its meeting dated July 28, 2009, asked its members, who represented various political parties to submit their proposals for amendments to the Constitution by August 10, 2009. 

During the course of the meetings certain Private Member’s Bills pertaining to amendments in the Constitution, introduced in the Senate of Pakistan, were also referred to the Committee by the House. The total number of such amendments was 91.

During the various meetings of the Committee certain important issues related to and pertaining with, the Terms of Reference of the Committee came up for discussion. It was agreed that in these matters constitutional amendments were not required, but that they needed either amendments in the law or were policy issues, therefore, the Committee decided to make Recommendations to the Federal Government. 

A total number of 11 Recommendations have been made by the Committee which are attached at “Annexure-C”. 

That while examining the various constitutional amendments moved by the Members and received through other sources, the Committee endeavored to find a consensus within its Members. 

The decisions of the Committee have been taken by consensus, however, in certain cases where a particular Party or Parties were not in a position to resile from their stated positions, but in order to develop a consensus agreed not to oppose the Committee’s decision, it was decided, that in such a case the Party or Parties would reiterate their stated position without prejudice to the Committee decision, through a note to be called, “a Note of Reiteration” a total number of 11 Notes of Reiteration from various parties, were submitted which are attached at “Annexure-D”. 

The Committee in addition to its Terms of Reference, while examining the various provisions of the Constitution, 1973, kept in view the following amongst other criteria:‑ 

Transparency in system

 Minimizing individual discretion

 Strengthening Parliament and Provincial Assemblies

 Provincial Autonomy

 Independence of the judiciary

 Further strengthening fundamental rights

 The question of merit

 Good governance

 The Committee has proposed to declare the LFO and its subsequent amendments as being without lawful authority and of no legal effect, the 17th Amendment has been repealed, while certain provision pertaining to the increase in the number of seats of Parliament and the Provincial Assemblies, reserved seats for minorities and women, lowering of the voters age and joint electorate. 

The Committee has also proposed amendments in various articles of the Constitution dealing with Federal-Provincial relations. The intent of these amendments is to further strengthen the concept of federalism as enunciated in the Constitutional Accord of 1973 which subsequently finds expression as one of the basic principles of the 1973 Constitution along with provincial autonomy. 

On the questions of Federalism and Provincial Autonomy, the Committee has built on the basic idea of the 1973 Constitution, in terms of Article 153, i.e., the Council of Common Interests, in order to promote joint supervision of Federal resources and collective dispute management, while providing a collective leadership to further strengthen the Federation. 

The Committee held a total number of 77 meetings, with each meeting at an average lasting 5 hours, thus the Committee has spent about 385 hours during its deliberations. In the light of the above, the Committee has proposed amendments to 97 Articles in the Constitution, such amendments are contained in the proposed, Constitutional (Eighteenth Amendment) Bill, 2010, which is at “Annexure-E”. 

That the Committee expresses its special gratitude and acknowledges the work done by Mr. Karamat Hussain Niazi, Secretary, National Assembly, Raja Muhammad Amin, Secretary, Senate, Ms. Najma Siddigi, Joint Secretary, National Assembly who meticulously maintained the minutes of the meetings, Mr. Mehboob Ali, Joint Secretary, Senate who compiled the proposals/ recommendations/ amendments received from civil society and all the other staff members who w r-,e _associated or affiliated with the Committee during this period. 

The Committee also expresses its gratitude to Malik Hakam Khan, Senior Legislative Adviser/Draftsman, Ministry of Law, Justice and Parliamentary Affairs, Government of Pakistan for his efforts in drafting the proposed amendments and also to Senator Mr. S.M. Zafar, Senator Mr. Wasim Sajjad and Mr. Zahid Hamid, MNA. 

The Committee also expresses gratitude to the media in general for being understanding and accommodative, in particular to all those journalists belonging to the electronic and print media who waited for hours outside the Committee Room in order to provide accurate coverage. 

The Committee decided in its meeting on August 18, 2009 that all its proceedings will be in-camera and that no press release of its functioning shall be issued unless specifically allowed by the Committee. 

The intent and purpose of this decision was to provide the Committee members an open, free and frank atmosphere to discuss issues pertaining to the Constitution, on which public debate has already taken place, so as to provide its Members an opportunity to take decision. 

As this Report will become a part of history, therefore; in my capacity as Chairman of this Committee, it is my responsibility and duty to bring on record. 

The individual contribution of each member of this Committee is appreciated. Without their farsightedness, political maturity, sagacity and rising above party affiliation, while keeping the greater national interest in view, the unanimity in decision making could not have been achieved, and thus the Constitution (18th Amendment) Bill, 2010 which is a unanimous proposal would have failed.

Chief Justice Met Musharraf Before Announcing Steel Mills Judgment

By Nayyar Afaq/ March 17, 2009

On one hand, terrorism and extremism is getting their roots deep in society, while on the other, the country is suffering a worst form of financial meltdown. On one side, armed forces and intelligence agencies are getting maligned through international campaign, and on the other, an environment is getting set that Pakistan’s nuclear weapons are not in safe hands.

This time when nation needs to be united to face and defeat the challenges, there is a cat and mouse game in play among the political parties and a vast majority is considering Lawyers’ Movement as the only solution to the problems of Pakistan.

When a Long March and sit in (Dharna) for indefinite period was announced by the lawyers’ leaderships, and when a worst form of law and order crisis was emerging on the streets, embarrassing Pakistan in the international community, the government of Pakistan surrendered to the demands of lawyers, and announced the restoration of Mr. Iftikhar Chaudhry. This is a right moment to take another look at the so-called lawyers’ Movement.

This movement is based on the perceptions that Mr. Iftikhar Chaudhry is the symbol of an independent and free judiciary, and that all the mess is created by President Musharraf, who was not happy by him over his suo moto actions, and that the reference against the judge was forwarded by the Prime Minister Shoukat Aziz due to his personal grudges with Chief Justice, over the decision against Steels Mills issue. The reality, through information that is revealed here for the first time, is a little different.

Steels Mills Issue-Unspoken Facts

A day before the judgment of Steels Mills, Chief Justice Iftikhar Chaudhry rang the military secretary of President Musharraf and asked for a sitting with him at Army House to discuss the details of the judgment. President allowed him to come and also did call Attorney General of Pakistan. When all three sat together, President said, “I don’t know the legalities, but all what I would like to say is that you took suo-moto action against the privatisation of Steels Mills. I believe in the dignity and honour of the Supreme Court. So, whatever be the judgment, it must not lower your dignity and honour, but remember government is doing a good job for privatisation. Please don’t try to hamper this process.”

Then both the attorney General and Chief Justice discussed the legalities and came out with a mid way solution. Chief Justice himself told President Musharraf that a good via media is brought out and he is going to give this as a decision the next day. Then Chief justice went to the bench and told that President himself has decided to cancel the privatisation of Steels Mills. So, without any idea of betrayal, 12 member bench of Supreme Court gave exactly the opposite decision to what expected by the government.

In 1985, soon after being established, it was planned to increase the productive capacity of Pakistan Steels Mills Corporation (PSMC) to 2.2 million tons annually to make it economically feasible. Unfortunately, the successive governments did not take personal interests and concerns in this project and finally the debt over Steels Mills reached to 19 billion rupees till year 2000 and the amount required for increasing its productive capability reached more than 200 billion rupees. The biggest challenge after 12th October 1999 coup was to bring Economic stability in the country. Musharraf did manage to convince Shoukat Aziz to resign from City Bank and to come back toPakistanand serve the homeland. The economic situation was like a nightmare. Foreign reserves were remained only 0.7 billion dollars and sanctions were uponPakistandue to nuclear explosions. No one was willing to take ‘risk’ of investing inPakistan. After military coup, the situation was even more difficult. It worried Shoukat Aziz, but he accepted the challenge. He made a win-win policy for economic revival. The core of the policy was deregulation, liberalisation and privatisation. It worked well, and a confidence of investors recovered inPakistan. Even during those months after 9/11, when Pakistan and  Indian armed forces were alert stand by on borders with eye to eye balls contact, investment did not stop coming inPakistanand Stock Markets shown good trends. Things were going fine and in the positive direction, but the suo moto action by Chief Justice hampered the overall process by shaking the confidence of the investors.

The day when decision came out was surely very shocking for the government. President Musharraf himself had visited China and Saudi Arabiato convince them to invest on PSMC. Finally after many years, his efforts bore fruits and he got able to convince Saudi Arabiabased Al Tawairqi Group of Companies to invest in PSMC. In May 2006, an open auction held in Islamabad and Al Tuwairqi Group submitted a winning bid of $362 million for a 75 per cent stake in PSMC. It was being privatized in the profit of $ 13 million (without solding the land of Steels Mills). Due to the opposite decision of Supreme Court, hundred million of dollars which were lying in our banks by Mr. Tuwairqi to invest on PSMC and to establish another steels mills were brought out of Pakistan. Disappointed by the decision, Mr. Tuwairqi told everyone to wind up and went out, as investing in this country is not safe. This was again a great shock forPakistan’s Economy. Without wasting a single moment, President Musharraf rung up Mr. Tuwairqi and requested him not to change his mind for investing in PSMC. Unfortunately, after having a bitter experience of Supreme Court’s decision, Mr. Tuwairqi excused to invest on PSMC. This was what Mr. Iftikhar Chaudhry did with the Economy of Pakistan, but his ‘media managers’ applaud his decision as his national achievement.

Presidential Reference against Chief Justice of Pakistan (CJP)

Print and electronic media inPakistanis used to remain very active and in search of any thrilling story soon after its independence given by President Musharraf. Ansar Abbasi (The News) investigated about the Chief justice and found that always a favour was given to his son Dr. Arsalan Chaudhry, directly by the orders of CJP himself, which were mostly not on merit at all. Due to unknown reasons, he did not public this story. However, he slipped his tongue in Geo’s famous ‘Capital Talk’ in early 2007. Kamran Khan, from Geo, also brought Dr. Arsalan on telephone call in early 2007, asking about the news against him. Dr. Arsalan, the son of CJP denied the news and told media that he is going to Court to defend these allegations. CJP anxious about media reports raised this matter to President Musharraf in his meeting with him on 13th February 2007. President instructed the investigation agencies to explore the realities behind these reports. The famous letter from Naeem Bukhari stimulated the issue even more. When the investigation completed, the findings were very shocking for President. They all were going against CJP. It revealed that not even the allegations of media about his son are true but also more serious findings were brought into notice of President Musharraf, including his personal corruption and greed for protocol, for which he was not entitled for. It all worried President. CJP had been used to visit President in his office and house many times, even with his family. There was nothing wrong in the personal terms and relations between the both. President Musharraf, at this moment, however had to decide what to select. Either he had to prefer personal relations or to follow the legal course of actions.

On 7th march 2007, Prime Minister Shoukat Aziz advised him to send the findings to Supreme Judicial Council (SJC) in the form of reference to decide for the fate of CJP. Justice Jehanzeb Rahim of Peshawar High Court also filed a reference against CJP in his letter to President. This was the time, when CJP highly informed about this progress, rung DG MI, Major General Mian Nadeem Ijaz on 7th March 2007, and requested him to get the copy of reference and to hand over it to him. Next day, CJP called Abdullah Yousaf, Chairman CBR in his chamber at Supreme Court to discuss the same issue of reference being filed by Justice Jehanzeb. CJP asked Chairman CBR to favour him by making clarification to President that he was not at fault over the allegations written by Justice Jehanzeb. On the same 8th march, CJP also rang military secretary (MS) of President Musharraf to arrange an urgent meeting with President the next day. Although President was due to leave forKarachion 9th March, to participate in the Pakistan Navy exercise “Aman 2007”, but MS rescheduled the program and asked CJP to visit by 1130 hours on 9th March at camp office of the President’s secretariat. The same night, CJP rang DG MI to be present in camp office to assist him. On 9th March, during meeting, President informed CJP about all the findings of investigations, and asked for the clarification of his position. President told CJP that he is going to forward the findings to Supreme judicial Council. Realising that the findings are embarrassing for CJP, he gave him a way out as a courtesy move, saying, “If you find the hearings of SJC below your dignity and honour, then you can resign to avoid the case.” CJP said that he would face the allegations in SJC and would defend himself. President then signed the reference and officially it was sent to SJC for hearings.

This was what happened. Unfortunately, the media and political parties developed strange perceptions and vicious hype was created all around the country. No one on media ever read and present the material filed in reference. There were serious allegations against the CJP. Question is whether CJP above law? Should there be no forum for his accountability? Even President is not above law. There is a procedure written clear in constitution regarding his impeachment. The media and the lawyers of CJP escaped themselves out of hearings of SJC, by using the political and media fronts, making false perceptions. By claiming that a ’dictator’ sitting in ‘Army House’ has ‘summoned’ CJP and ‘threat’ him to resign, totally wrong environment developed, which hijacked the minds of public, and a civil disobedience sort of movement sponsored in streets and roads of Pakistan, labelled under ‘lawyers Movement’, powered by political parties and media.

Let us check whether President Musharraf had followed the constitutional path or not.

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Article 48

(1) – In the exercise of his functions, the President shall act in accordance with the advice of the Cabinet (or the PM).

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Article 209

(1) There shall be a Supreme Judicial Council of Pakistan, in this Chapter referred to as the Council.

(5) If, on information [from any source, the Council or] the President is of the opinion that a Judge of the Supreme Court or of a High Court,

(a) May be incapable of properly performing the duties of his office be reason of physical or mental incapacity; or

(b) May have been guilty of misconduct,

The President shall direct the Council to [or the Council may, on its own motion] inquire into the matter.

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Article 180

At any time when-

(a) The office of Chief justice is vacant; or

(b) The Chief justice ofPakistanis absent or unable to perform the functions of his office due to any other cause,

The President shall appoint [the most senior of the other judges of the Supreme Court] to act as Chief justice ofPakistan.

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So, what President Musharraf did was simply the constitutional route followed. There were media allegations about the misconduct of CJP. CJP even himself asked President to make enquiry about them. The investigations were being made. Prime Minister advised Mr. President to send the findings to Supreme Judicial Council. Under article 48 of constitution, President was bound to act upon the advice of Prime Minister. Meanwhile CJP himself asked to visit President atCampOfficeof President’s Secretariat. CJP was informed about the findings. He was willing to face the charges in SJC. Under the article 209, it was mandatory for President to send the reference to SJC, which he did.

What was unconstitutional in all that? Is Chief Justice above law? Or constitution can be hijacked by the rallies and public movements.

Unfortunately, what happened next made the social fabric of our society turned towards the worst and more worst. Supreme Judicial Council started hearings. CJP and his lawyers escaped the hearings by few excuses. They claimed that the judges of SJC are biased against CJP, and hence they must be changed. Media started campaign that President has nominated his own judges in SJC which was clearly wrong and false perceptions. The SJC was composed exactly according to the constitution, including the acting Chief Justice, two next most senior judges of High Court and two next most senior judges of Supreme Court. Then highly politicised and vocalised Aitzaz Ahsan, being invited frequently on the media channels used every tactics to provoke the feelings of public against President Musharraf and turning public in favour of CJP. The issue was sub judice and it was the contempt of court to speak about such issues live on TV channels, but everyone utilised the media forum to stimulate the public sentiments towards the movement of civil disobedience. There happened a chaos and anarchy everywhere inPakistan. President Musharraf said hundreds of times, that whatever be the decision, would be acceptable to the government. Taking this as a weakness of him, the highly politicised lawyers of CJP made such an environment that the hearings of SJC paused and the petition to stop its hearing was brought into the Supreme Court. Finally, after much mess, Supreme Court gave a verdict in the favour of CJP and he was reinstated on 20th July. Everyone applaud it well, not mentioning that Supreme Court had not given any importance to the charges filed under the reference. It was not fair at all, but being a verdict of Supreme Court, President Musharraf welcomed the decision.

Besides the ‘victory’ of reinstating CJP, the track record of so called ‘Lawyers Movement’ is so embarrassing. Let us have a brief over view how this ‘victory’ is being made and how throughout, lawyers have behaved:

1- Lawyers hijacked the accountability of CJP in SJC bypassing the Article 209.

2- Contempt of Court, being made every day by speaking live on TV channels against a sub judice issue.

3- Making allegations on the brother judges of biasness and personal interests just to escape the hearings of SJC.

4- Climbing at and breaking the gates of Supreme Court, just to pressurize the government and creating law and order situation by fighting with security forces and police.

5- President Supreme Court Bar Association Muneer A. Mailk forced the lawyers to join the so called Lawyers’ Movement by starting cancelling the membership of Bar Association of those lawyers who were not joining this brigade.

6- Attack on Khalid Ranjha (Government’s counsel) by lawyers when he was stepping out of hearing of SJC.

7- Attack on the car of Waseem Sajjad (Government’s counsel) by the lawyers when he was on his way to attend SJC hearing.

8- Attacking and beating a journalist ‘Khalil Malik’ by lawyers in the square of Supreme Court, just because he had published some material against the CJP.

9- Attacking and beating Advocate Naeem Bukhari in the quad of Supreme Court by lawyers, just because he exposed the ‘corruption’ of CJP in his letter.

10- When PM Shoukat Aziz went to submit the nomination papers of President Musharraf in Election Commission for Presidential elections 2007, lawyers surrounded the election commission, and Prime Minister remained under siege by these lawyers’ brigade for hours.

11- Throwing black poisonous acid on the face of Mr. Ahmed Raza Qasuri (Government’s Council) by a lawyer in the premises of Supreme Court. If he had no eye glasses on face, God willing, he might lose his sightedness.

12- Attack of hundreds of lawyers on Sher Afgan Niazi. God saved his life in this horrible incident.

13- Strikes by the lawyers of the courts. Common people suffered by much inconvenience waiting for judges and lawyers to entertain their cases.

14- Long rallies (extending even to 40 hours) by CJP and lawyers turning a sub judice issue to highly politicised campaign.

After few days of apparent silence, the restored CJP again started making personal bravado against President Musharraf, security agencies and intelligence agencies. A long list of suo moto actions were made every day to paralyse the functioning of executive, legislative and law enforcement agencies. Knowing that people and media of Pakistan were supporting the actions of CJP, he did every possible thing to embarrass the government. Suo-moto action against the traffic jam in Karachi is just an example of the attitude of a person who has nothing to care about the ills growing in own judicial system. He did nothing for making improvement in the courts. Cases still are going for 20, 20 years but he did not take any steps for betterment. Once, Geo TV’s famous show “Gumnaam” showed a spy camera video of the case of bribery by one judge, but CJP did not take any action against this judge. On the other hand, the channel was charged by the contempt of court and asked to make open apologies. CJP did not take any notice of any of the illegal activities of lawyers, like beating and attacking on Naeem Bokhari or spraying of acid on Ahmed Raza Qasuri’s face. He did nothing to stop the illegal activities of Qabza mafia or No. 2 drugs etc. He never took suo moto actions against those militants who were threatening the barber shops or Cds shops. He never did care of those extremists who were blasting girls’ schools. Not caring of his own rallies, which even extended over 40 hours, he however did take suo moto actions of traffic jams. Then, he started embarrassing the chiefs of intelligence agencies in courts. Once he said, “Not only you, I would even bring General [Musharraf] in my court.” He released first so called missing person after being reinstated, named Qari Abdul Basit, who was charged of the assassination attempt on General Musharraf. Supreme Court took suo moto action against Red Mosque operation. CJP in open and strong words spoke against President of this operation. Government, law enforcement forces and intelligence agencies were highly demoralised. Supreme Court started hearing the petition against the eligibility of President Musharraf to be a candidate for next term of President. Earlier, Supreme Court rejected the petition but later again started hearing the same like petition. Then, Supreme Court allowed President to be a candidate for Presidency, but bound the election commission not to announce the result. The sword of uncertainty remained hanging over the heads of the nation. After Presidential elections, Supreme Court tried to extend the decision by all possible excuses. It seems a mockery with the nation, that the hearing of petition against president’s eligibility was announced to be pending for even 10 days, just because one of the judges of the bench was going to attend the wedding of his daughter. Not only this, three times, CJP changed the compositions of bench listening the case of eligibility. It all was self evident that Supreme Court was simply planning not to allow President Musharraf to continue holding his office any more. Supreme Court was just delaying the decision against him till 15th November 2007, till the term of National assembly get completed and President Musharraf then had remained by no chance of making any amendment in constitution by the assembly. It all was nerve stressing and alarming for President. He had waited long for the full decision regarding the reinstatement of CJP to be announced by Supreme Court. Supreme Court was bound legally to release full decision in 90 days, but this period also passed without having the issuance of the full decision. Moreover, constitutionally Supreme Court was even not given by the mandate to entertain any petition against the President’s elections.

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Article 41 (Clause 6)

The validity of election of the President shall not be called in question by or before any court or other authority.

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Making the clear violation of constitution, Supreme Court was entertaining the petitions against President and was trying much to delay the decision till 15th November. Meanwhile, a bloody campaign of suicide attacks stimulated with so much acceleration in settled districts of Pakistan. Intelligence agencies and law enforcement forces were cornered by Supreme Court and all the fragments of the society. A form of civil war was going to develop in Pakistan. Government was in the state of semi paralysis. The general elections were near in few months. All the self exiled politicians were returning back to Pakistan with having strong lobbies behind in West. Under such state of affairs, ISI reported something very important and alarming. It was about the secret meeting of Aitzaz Ahsan with Mr. Khalil ur Rehman Ramday in the Geneva, Switzerland. This meeting was very meaningful in understanding what Supreme Court was planning to do with Musharraf. The case of eligibility of President was in court. Khalil Ramday was heading the bench. Aitzaz Ahsan was representing himself in court against the eligibility of Musharraf. It was legally very undesirable to set secret meetings between the judge and a lawyer. There were also various indications and reports about the foreign money involved to promote all that lawyers’ campaign. Reportedly this money was going to Aitzaz Ahsan through various channels, mostly including few NGOs and human rights’ activists. There were also the reports of Aitzaz’s undisclosed visits to India during all that campaign. Justice Rana Bhahwandas’ famous statement in very start of all that reference’s episode, “Soon, we would give good news to nation” was also something important to read between the lines.

All of a sudden, suspicions against the role of Pakistan in war against terror were being floated in international media. International community started speaking against Pakistan and starting asking for restoration of Democracy in Pakistan. To promote the dangerous agenda against Pakistan, ‘Newsweek’ magazine came out with a title story, “Most dangerous nation in the world is not Iraq or Afghanistan. It’s Pakistan”. Pakistan’s nuclear status was under a deadly threat. Ground field was well set to announce by world powers that Pakistan’s nuclear weapons are not safe and that terrorists could take control of them. Although IAEA had already announced that chapter of nuclear proliferation is closed for Pakistan, but Benazir Bhutto coined a strange statement that she could allow the access of international agencies to Dr. A.Q. Khan and that she could allow American forces to operate in Pakistan’s tribal areas. On one side, a well planned campaign was going on, and on the other hand Economy of Pakistan started suffering negative trends for the first time in last many years.

President Musharraf tolerated all that but finally when he found that things are slipping away from the hands of Pakistan, and that inaction at that time would lead to total chaos and destruction and the irrecoverable damage to Pakistan, he finally decided to impose the state of emergency on 3rd November 2007. Judges were offered to take oath under new PCO. Many judges accepted this offer and many refused. Those who refused, including Iftikhar Chaudhry, started a new version of Lawyers’ movement.

Let us see what constitution allowed President Musharraf at that time.

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Article 232 (1)

If the President is satisfied that a grave emergency exists in which the security of Pakistan, or any part thereof, is threatened by war or external aggression, or by internal disturbance beyond the power of a Provincial Government to control, he may issue a Proclamation of Emergency.

Article 270 AA (3)

All proclamations, President’s orders, Ordinances, Chief Executive’s orders, laws, regulations, enactments, including amendments in the Constitution, notifications, rules, orders or bye-laws enforce immediately before the date on the date which this Article comes into force shall continue in force until altered, repealed or altered by the competent authority.

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What more to be lost?

We must see what Pakistan has achieved so far and what has been lost after the campaign of lawyers. Unfortunately, it seems that we have lost everything, and achieved nothing. Pakistan’s Economy is out of business now. Pakistan is now on the list of most insecure countries. Pakistan’s institutions are breaking up. Rotten politicians are back on stage. Most corrupt and incompetent leadership is on the charge of government. Pakistan’s armed forces and intelligence services are maligned nationally and internationally. Pakistan’s nuclear status is at stake. What more wrong and what more horrible can be expected.

So far no movement or strong demonstration is made against the extremists and terrorists. Civil society and human rights activists are used to speak against them in very soft words, usually on TV screens, but not on roads. All the focus is to speak against former President, armed forces and intelligence services, which indirectly is meant to strengthen the anti-state elements. The duality of Pakistani media  is well exposed since 2007. First, it was said that General Musharraf is not going to remove his military uniform etc, but he appointed new army chief. Then, was said that he is not going to lift state of emergency, but he lifted it up. Then, was said that general elections would be rigged for favourable results, but the entire world observed that elections were the most free, fair and peaceful. Media broke much news that former President is going to fly away from Pakistan in 48 hours, but all was bogus. Then it was said that President is going to dissolve the assemblies, but even it did not happen. On the other hand, political parties are well naked as well. The same PPP, which supported Lawyers’ Movement with full energy, started speaking against this movement after being elected. Mr. Zardari signed thrice the agreements for restoration of judges, but then refused it. The time, when Lawyers’ Movement was having last breaths, the decision of Supreme Court regarding the disqualification of Sharif brothers, ignited it again. Things are crystal clear. Lawyers used the politicians and later PML-N used the lawyers for their vested interests.

All patriotic Pakistanis must open their eyes and must smell the conspiracy behind. CIA and RAW are fully active and involved behind all that mess. They had set well their assets in media to promote anarchy and disinformation in Pakistan. Media has done nothing in discouraging the extremism and terrorism. Media has promoted the international campaign more than them. The focus and concern is shifted from the issues of national interests. No one cares of the economic fall down. No one asked where the foreign reserve of 16.7 Billion dollars has gone down to 5 billion dollars in few months under democratic government. No one asks for the reason why we are forced to beg IMF. No one asks why Dr. Samar Mubarik had been forced to leave his seat. No one cares of the funds of Nuclear and missile research program being cut by more than 50 %. No one cares from where Baitullah Mehsud of Waziristan is getting satellite information and weapons and suicide jackets. No one is caring of the separatist organisations in Baluchistan. Media is not telling us that for 7 months, the funds of paramilitary and police of NWFP are stopped by the government and that Pakistan armed forces are supplying weapons to them. Media would never tell about the holiday being announced by Chief Minister Balochistan, Aslam Raeesani on 15th August 2008 to synchronise it with Indian Independence Day. Media is not focussing about the drones attacks on tribal areas. What media is speaking for is just about the lawyers’ movement. So that Pakistani nation never get able to think of any other issues, which are far important for the sovereignty of Pakistan.

It’s all a psychological war. Nation must open their eyes. We must not been misguided by the propagandas and perceptions. Our enemies have played a dangerous double game. We must not give them any impression that Pakistan is going through a situation of civil war and disintegration. We must not suffer paralysis through analysis. We must stand for Pakistan armed forces in such state of affairs. Pakistan is not ready for British form of democracy. Pakistan is more important than democracy or constitution. Human rights, civil liberties, democracy and constitution are just the part of nation. Nation is not the part of them. We must safeguard Pakistan. Pakistan comes first.

Mr. Iftikhar Chaudhry is back in his office as a chief justice. PML-N’s pressure tactics win. Army Chief again has shown patience and resolution to avoid playing any role in politics. But game is not ended. It’s just a start. Time not always remain the same. Future would decide about it and about the role of Mr. Iftikhar Chaudhry. There still are many constitutional and legal issues. What would be the fate of those judges who have taken fresh oath under PCO? Would he give the favour to those, who supported him or would he demonstrate the neutrality? Would he take the notice over NRO, when the case against it would re-start in Supreme Court? Would he take actions against those judges who took oath under PCO on 3rd November 2007? Would he like to reform the session courts, high courts and Supreme Court? Above all, would he like to proof that the findings in Presidential reference were not correct and that he is not guilty of anything wrong. What if the disqualification of Sharif brothers remain hold? Would PML-N again start the violent campaign? What about those countries and the guarantees, which made reconciliation just before sit in (Dharna), instead of possible Martial Law.

Let us end this article by the last words of letter of Naeem Bukhari to CJP:

“My Lord, we all live in the womb of time and are judged, both by the present and by history. The judgment about you, being rendered in the present, is adverse in the extreme.”

(www.geocities.com/nayyarafaq)

Constitutional Distribution of Natural Gas & Hydro-Electric Power

Natural Gas and Hydro-Electric Power

1. Provisions for Distribution

 

Article 161 of the 1973 Constitution makes explicit provisions for the allocation of royalties from natural gas production and generation of hydro-electric power. It stipulates that the net proceeds from excise duties and royalties on natural gas collected by the federal government shall be paid to the province in which the well-head of the gas is situated. Similarly, for hydro-electric power the stipulation is that net profits earned by the federal government shall be paid to the province in which the hydro-electric station is situated. The National Finance Commission follows Article 161 when it decides the allocation of natural gas and oil royalties. These do not go into the Federal Consolidated Fund (from which the Divisible Pool is derived), but form a separate fund which after deduction of fixed percentage collection charges by the federal government is returned to the province of origin.

 

This would appear to be a simple and straightforward mechanism for allocation of royalties, but in practice it has been fraught with problems and is another source of dispute between various provincial governments and the federal government, as well as of inter-provincial disputes. The key disputes are as follows:

 

2. Balochistan

Balochistan is the largest province by land-mass in Pakistan: it covers 44% of the country, and has a bigger area than Punjab and NWFP combined. The province’s population, however, is the smallest in the country, accounting for just 7% of the total. The consequent sparse population distribution raises significant development challenges. Balochistan is one of the most resource-rich provinces in Pakistan. It has considerable reserves of natural gas accounting for almost half the country’s total gas production, as well as coal and minerals including platinum, silver, copper and uranium. However, there is considerable resentment in the province at what is perceived as exploitation of its natural resources by the federal government.

 

It is estimated that 36-45% of Pakistan’s gas is produced in Balochistan. Production infrastructure has been installed under the aegis of the federal government, bringing in large numbers of non-Baloch technicians and workers. Balochis resent the fact that they are not employed in these projects, or are only hired as unskilled labour. They concede that there is a skills shortage in the province, but assert the federal government should provide locals the training to carry out the requisite tasks.

 

The second bigger Baloch grievance with regard to natural gas is about its use and royalties. Gas was discovered at Sui in 1953, and supplied to cities in Punjab in 1964. But it was not until 1986 that Balochistan’s capital Quetta received gas and only then because a military cantonment had been established there. 17% of the gas produced in Balochistan is used in the province; even today, just four of Balochistan’s 26 districts have a gas supply. The gas from Balochistan that goes to the rest of the country is sold at a much lower price than gas produced in Punjab and Sindh. The province has received only 12.4% of the royalties due to it from the federal government. The backlog dating back to 1953 owed to Balochistan runs into tens of billions of Rupees. The federal government claims it does not have the funds to pay this back; Balochis fear the payment will be written off. Baloch resentment at the usurping of its natural gas by the federal government and other provinces is manifested in political opposition and in armed action. There have been numerous attacks on gas pipelines in the province. Some of these are the major supply routes to parts of Punjab: disruption in gas supply has caused industrial production in Punjab to shut down for prolonged periods. It should be stressed that anger over natural gas use and royalties is only one of several Baloch grievances against the centre. Baloch leaders point to the lack of development in the province, which lags behind the other three in all human development indicators. The government counters that it is resistance to modernization by local sardars and tribal chiefs, fearful that education and health facilities would lead to their power being weakened, that is the real obstacle. There is definitely some substance to these claims. The federal government has announced a massive package of development assistance for Balochistan, running into several billion Rupees, but Balochis are skeptical about who will really benefit from the money. Much of the money will go on large-scale infrastructure projects. The Musharraf government has put great emphasis on these, seeing improved infrastructure across the country as the key to long-term economic growth. Many of the projects are situated in/planned for Balochistan. One that is underway is the development of Gwader on the coastline into a deep-sea port. Gwader was chosen for strategic reasons: it is closer to the Gulf and further from India than Pakistan’s current only port of Karachi. Gwader Port is being built with Chinese assistance, and is due to be completed in 2010; it will be able to receive oil tankers of over 200,000 tons. Linked to the Port is the creation of a free-trade zone, and a road and rail network connecting Gwader to Central Asia. The Chinese are discussing setting up an oil refinery at Gwader.

 

The government claims Gwader Port will bring prosperity to Balochistan, but locals see it differently. They point to the influx of non-Baloch workers and residents to the region something that is expected to increase massively as the Port is completed and liken it to the ‘colonization’ of their province. There are complaints that the Government made little effort to involve local people in plans for Gwador and to secure consensus for the project. Tribal leader Nawab Akbar Bugti accused the government of ‘trying to change the Baloch majority into a minority by accommodating more than five million non-locals in Gwader and other developed areas.’ As with the development of natural gas fields, there are complaints that local labour is only being used for unskilled tasks and fears that revenue from the Port will go outside Balochistan. The fact that much of the land around Gwader has already been bought by property developers and investors living outside the province, adds credence to Baloch concerns about marginalization.

 

Alongside infrastructure development, the government has announced plans to establish three more military cantonments in the province: at Gwader, Dera Bugti and Kohlu, adding to the two already present at Quetta and Sibi. The latter are in addition to numerous military/police roadblocks and check-posts across the province. Balochistan has the heaviest concentration of military personnel in the country greater even than in Azad Kashmir. Balochis see the planned cantonments as a further attempt by the federal government to control their province by force, and specifically to facilitate the exploitation of its natural resources.

 

2.3Current Situation: Simmering Conflict

Baloch anger at the perceived exploitation of the province’s natural resources, coupled with alarm at recent development projects and the planned military cantonments, erupted into sporadic armed action in 2004 and more intense conflict in January 2005. The catalyst for the latter was the rape of a female doctor working at the Sui gas plant, allegedly by a military officer. Baloch insurgents attacked the gas plant. During the course of the year there were frequent attacks on military and other targets in the province. The federal government responded by increasing the number of military personnel in the province and launching counter-attacks on insurgent strongholds. President Musharraf warned the Balochis in a television address to end the attacks on pipelines and other insurgency, otherwise the government would deal with them even more harshly than in the previous 1973 Baloch insurgency. However, criticism and political pressure from other national politicians and parties, and no doubt a desire to avoid a repeat of the 1970s war, prompted the government to simultaneously engage with the Balochis and seek a negotiated solution. A parliamentary committee headed by Pakistan Muslim League President Chaudhry Shujaat Hussain was formed in 2004 ‘to examine the current situation in Balochistan and make recommendations thereon’ and divided into two sub-committees. One, headed by former-Senate Chairman Wasim Sajjad, was mandated to address the question of provincial autonomy. The second, headed by Senator Mushahid Hussein, was to address the immediate crisis in the province.

 

In March 2005 Wasim Sajjad’s sub-committee recommended a complete revision of the Concurrent List; announcement of the National Finance Commission award before budget; distribution of federal resources on the basis of provincial poverty, backwardness, unemployment and development levels, rather than just on population size; and activation of the Council of Common Interests.

 

The Mushahid Hussain sub-committee’s recommendations included: increasing gas royalties and surcharges; maximising provincial representation on the boards of oil and gas companies operating in the province; implementing job quotas; shifting the Gwadar Port Authority head office to Balochistan and giving 7% of the port’s revenue to the province; holding in abeyance the construction of cantonments at Gwadar, Dera Bugti and Kohlu; and a host of infrastructure-development and confidence-building strategies. It thus endorsed many of the key Baloch demands. A powerful committee was formed to implement these recommendations. It was to meet monthly, but had done so just twice in its first eight months. Not surprisingly, virtually nothing has been done in terms of implementation of the Wasim Sajjad and Mushahid Hussain committees.

 

Lack of implementation was one factor in continuing violence in the province. In December 2005 a rocket attack was launched on Kohlu, when President Musharraf was present. Subsequent clashes between armed forces and insurgents loyal to Nawab Akbar Bugti, who had by then openly joined the insurgency and was in hiding from the authorities, led to the latter’s death. This further fuelled Baloch resentment at the centre. Periodic attacks on gas pipelines, military installations and other targets continue. The province could be described as a site of low-intensity conflict, but with the very real danger that full-fledged conflict could erupt at any moment.

 

While there is much to criticize in Baloch insurgent actions and the leadership of the tribal chiefs – often working for their own vested interests rather than those of the Baloch people they claim to represent – there is no doubt that many of the Balochi grievances against the centre are justified. The recommendations of the Mushahid Hussain sub-committee, if implemented, would be an important step in addressing long-standing Baloch grievances and promoting trust and cooperation. Balochistan has to be developed, and large infrastructure projects are one part of that effort, but so too is the provision of health, education, water and sanitation and other services to all parts of the province. Furthermore, development should be carried out in a manner that is participatory, based on consensus and has local ownership: development should not be imposed from outside.

But equally important is the introduction of genuine democracy and political participation in the province. Unless an effort is made by all sides – to bridge the widening gulf between Balochistan and the federal government, there could well be a repeat of the 1970s civil war with potentially catastrophic consequences for Pakistan.

 

3. NWFP

 

3.1 Hydro-Electric Power

Much of Pakistan’s hydro-electric power is generated in NWFP, site of the largest dam at Tarbela. The mechanism for allocation of hydel power revenues is provided in Article 161 of the Constitution, as seen above. The Article explains that ‘”net profits” shall be computed by deducting from the revenues accruing from the bulk supply of power from the bus-bars of a hydro-electric station at a rate to be determined by the Council of Common Interests, the operating expenses of the station, which shall include any sums payable as taxes, duties, interest or return on investment, and depreciations and element of obsolescence, and over-heads, and provisions for reserves.’ The Council of Common Interests (CCI) did not meet until 1991, and it was actually the National Finance Commission which agreed a formula for allocation of hydel profits. In 1986 the NFC constituted a committee under the chairmanship of A.G.N. Qazi to determine the rate of net profits on hydel power. The committee comprised members of WAPDA, the federal and NWFP governments. It came up with the so-called

A.G.N. Qazi formula, which was subsequently endorsed by the CCI in 1991.

 

Until 1991, NWFP did not receive any royalties for the hydel power generated in the province. Hence, when the CCI met, the NWFP government insisted that the President should become guarantor for WAPDA to ensure regular payment of net profits as well as backdated dues. The President Ghulam Ishaq Khan agreed and issued a Presidential Order stating that in case of default by WAPDA or any other authority making bulk purchases of electricity from the provinces, the federal government would guarantee the payments. In FY 1991-92 the NWFP government received Rs.5.99 billion as net profits. This figure increased in subsequent years, but then the federal government imposed a cap of Rs. 6 billion on annual payments.

 

Successive provincial governments attempted to recover the arrears from WAPDA and, failing that, from the federal government which under the agreed formula was guarantor for hydel profit payments. Little progress was made, not helped by frequent changes of government (and President) in the 1990s. In 1996 the then Advisor to the PM on Finance assured the NWFP government that the Ministry of Finance would adjust the hydel payments to NWFP, and that this would be included in the budget for FY1997-98. And the federal government agreed to the 1996 NFC Award, which stipulated that in the event of consensus on arrears not being reached, payments to NWFP would increase by 11% each year. However in 1996 the government was again dismissed and fresh elections returned Nawaz Sharif to power in 1997. The NWFP government formed a committee in 1997 to pursue the recovery of net profits on hydel power. The military coup of October 1999 dissolved national and provincial assemblies and suspended the Constitution so the matter was again dropped. It was the restoration of elected assemblies in 2002 which paved the way for renewed discussion and efforts to recover back dues from WAPDA.

 

3.2Tribunal Ruling

An Arbitration Tribunal was set up to resolve the dispute between the NWFP Government and WAPDA over payment of net profits from hydel power. The MMA government agreed that pre-1991 dues could be decided later, so the Tribunal decided just on the dues owed from FY1991-92 to FY2004-5. The Tribunal heard arguments from both sides from March 2005 to September 2006. It was unable to arrive at a ‘satisfactory calculation of NHP’ and therefore used the formula originally suggested by the NFC, i.e. calculating a 10% annual increase from 1990 onwards. Significantly, the Tribunal interpreted Constitutional provisions for ‘net profits’ as being counted after WAPDA had taken its profits. Other parts of the Tribunal’s judgement suggested the CCI’s role was limited to setting the rate of hydel power, and not to determine net profits. In sum, while the Arbitration Tribunal ordered that dues had to be paid by WAPDA to the NWFP government, it considerably slashed the amount that had been claimed by the latter.

 

As new dams are built, some in NWFP, outstanding issues of payments to provinces need to be resolved, and clear guidelines set for future allocation of hydel power revenue.

 

 

Pakistan Constitution: National Finance Commission

Troubled History of Federal-Provincial Relations

 

Pakistan is a federal state, comprising four provinces (and Azad Jammu and Kashmir), but relations between the centre and the smaller provinces in particular, have often been fraught. This situation can be traced back to the creation of Pakistan in 1947, at a time of great uncertainty and conflict. The new country’s leaders faced a litany of problems a virtually non-existent administrative structure, shortage of funds, ethnic divisions, two ‘wings’ (East and West Pakistan) separated by India, differing views on whether Pakistan was created to be an Islamic state or merely a safe-haven for the Subcontinent’s Muslims from Hindu domination, and before long war with India over Kashmir. The solution they came up to deal with these many challenges had three related elements:

 

bureaucratization, centralization and homogenization. Under the British it was the bureaucrats who had been responsible for daily management of affairs. Motivated by the urgent need to develop an effective administrative structure, and aware that the Muslim League’s main support base had been left behind in India, the new leaders opted to continue bureaucratic rule, and play down the political participation and the democratic process. This laid the foundation for weak democracy, which persists to this day. Muhammed Ali Jinnah, the country’s founder, believed the best way to ensure the survival of the new state was through a unitary, central government. Central domination was established early. The NWFP provincial government was dismissed within a fortnight of Pakistan’s creation, and the Sindh government of M.A. Khuhro seven months later. Noted analyst Khalid Sayeed writes that civil servants ‘effectively controlled the entire administration in the provinces and thepoliticians there were kept in power subject to their willingness to obey central government directives.’

 

To overcome the many ethno-linguistic divisions in the new country, its leaders sought to forge a new national Pakistani identity based upon loyalty to the state, Urdu and Islam. Urdu was chosen as the national language because it was a legacy of India’s last Muslim rulers, the Mughals, and thus the medium of ‘high’ Muslim culture and literature. Urdu was also spoken by many of the powerful bureaucracy. It should be stressed that Urdu was not native to any of the provinces of Pakistan. Opposition to Urdu was particularly vocal in East Pakistan but the government dismissed this by telling Bengalis: ‘(w)ithout one State language, no Nation can remain tied up solidly together and function’.

 

Within a few years of Pakistan’s creation the centre of power shifted from the bureaucracy to the military. This is something that also persists to this day. Pakistan’s sixty-year history has been dominated by military government: Ayub Khan, Yahya Khan, Zia-ul-Haq and Pervez Musharraf. Stints of civilian government in between have been marked by corruption and inefficiency, paving the way for renewed military government. Political parties argue that the early suppression of democracy and the continued domination of the military have prevented them developing the institutional strength needed for stable government. For much of Pakistan’s history the main thrust of the military was on controlling the country’s foreign policy, particularly with regard to India and Kashmir, and the nuclear program. But increasingly, the military is becoming entrenched in the economy and spreading its tentacles into business and money-making ventures. This gives it a new, arguably more potent, motive to remain at the helm of affairs. What has not changed over time is the drive for centralization and the suppression of provincial autonomy. Under Ayub Khan all four provinces of West Pakistan were amalgamated into One Unit. Years of economic exploitation of East Pakistan and denial of political power culminated in the 1971 War and the creation of Bangladesh. Z.A. Bhutto’s dismissal of the Balochistan provincial government on the pretext that it had been plotting to secede from Pakistan, led the Balochis to try to follow the example of East Pakistan. They waged a five-year insurgency against the centre in the 1970s which was eventually quelled by the army. Punjab, the largest of the country’s remaining provinces, rapidly became the most dominant. As the army displaced bureaucrats from power, Punjab’s influence grew. Many now equate Punjab with the central government. Resentment among smaller provinces at what they see as their exploitation by the centre, is thus often targeted towards Punjab. Pakistan’s troubled history of federal-provincial relations and the domination of the military (in turn dominated by Punjabis) has led to a strong sense of distrust towards the centre among the constituent units specifically the smaller provinces. They do not see the central government as an ‘honest broker’, they do not believe it will protect their interests. The issues over resource distribution between federal and provincial governments have to be viewed against this backdrop. It helps explain why there are so many problems in resource distribution and why finding solutions is so difficult.

 

 

PART A: FINANCIAL RESOURCES

1. Fiscal Federalism in Pakistan: National Finance Commission

 

Pakistan is a federal state and as such has different tiers of government: federal in the centre, and four provincial governments. Since 2001 there has also been a third tier of local governments (comprising district, tehsil and union administrations). The Constitution divides functions between federal and provincial governments. The federal list – functions that belong exclusively to the federal government – includes foreign policy, currency, and defence. The concurrent list, with subjects that can be dealt with both federal and provincial governments, includes education and health. Anything that does not fall in either list automatically becomes the responsibility of the provincial governments. Assignment of functions has to be matched by assignment of funds to carry them out. In an ideal situation, each tier of government would have access to sufficient funds to carry out the functions assigned to it. However, in Pakistan the bulk of revenue is collected by the federal government, leading to what is known as ‘vertical imbalance’: differences between taxation powers (revenue) and expenditure assignment. Vertical imbalances are addressed by fiscal transfers from federal to provincial governments. Different provinces have different fiscal capacities and needs. Some generate more funds than others; some are more developed than others. Furthermore, in some provinces it costs more to deliver public services and promote development than in others. All this leads to what are known as ‘horizontal imbalances’ between provinces. These too are addressed through fiscal transfers with, ideally, more resources going to poorer, less developed provinces. In the case of Pakistan both vertical and horizontal imbalances are addressed by fiscal 1. Fiscal Federalism in Pakistan: National Finance Commission transfers decided by the National Finance Commission.

 

The National Finance Commission was established under Article 160 of the Constitution. It decides the division of financial resources between federal and provincial governments, as well as between provincial governments. The NFC comprises the following members:

 

Minister of Finance of the Federal Government;

Ministers of Finance of the Provincial Governments;

 

Such other persons as may be appointed by the President after consultation with the Governors of the Provinces; generally one technical person is appointed from each province according to provincial government’s nomination.

 

The Constitution provides for a new NFC Award to be made every five years. This ensures predictability, while leaving room for adjustments to be made in accordance with changing circumstances.

 

The NFC Award has three components:

 

Divisible Pool – This comprises all major federally collected taxes (including personal and corporate income tax, GST on goods, customs duties, etc).

 

Provincial Origin Revenue – Revenue that originated in the provinces but was collected by the federal government, e.g. income from gas royalties.

 

Special Transfers – These are lump-sum transfers in the form of grants or loans, with or without conditions attached, that the federal government makes to select provinces to meet particular needs.

 

The main aspect of the NFC Award is the size and distribution of the divisible pool. The NFC decides what percentage of federal resources is retained by the federal government, and what percentage goes to the provinces. This should be sufficient to enable the provinces to discharge their constitutional functions and meet the socio-economic development targets set by the federal government. The NFC then decides the distribution of the provincial share. Since 1974, population has been the sole criteria for horizontal distribution of resources between the four provinces. The last full NFC Award was made in 1997 [See Box 1]. It allocated 37.5% of the Divisible Pool to the provinces, with this amount being sub-divided among the four on the basis of population alone.

 

Provincial origin revenue is returned to the provinces as straight transfers, once a collection charge has been taken by the federal government. In the 1997 Award the federal government deducted a 2% collection charge. Special grants of Rs.3-4 billion each were made to NWFP and Balochistan in that Award, because of their relative backwardness compared to Sindh and Punjab. There was also provision for transfer of matching grants to the provinces. In total, including special grants, the provincial share of the 1997 NFC Award came to 43.6%.

 

Agreement could not be reached on the 2002 Award, so the 1997 Award remained in force. However, in 2005 President Musharraf announced an Interim Award whereby the provincial share of the Divisible Pool would increase to 41.5% in FY2006/7 and to 46.25% in FY2010/11. This is a substantial increase in the provincial share of the Divisible Pool in the 1997 Award, but still This section assesses some of the main issues with fiscal resource distribution in Pakistan. Under each issue, the basic problem with the current system is outlined, followed by a review of various points to be taken into consideration when devising solutions. short of the provinces’ demand for at least 250%. A further Rs.27.75 billion is to be given to the provinces as grants, to be distributed in the following proportions: Punjab 11%; Sindh 21%; Balochistan 33%; NWFP 35%. Grants-in-aid will be increased annually in line with the growth in net proceeds of taxes forming the Divisible Pool.

 

2. Issues in Distribution of Financial Resources

 

This section assesses some of the main issues with fiscal resource distribution in Pakistan. Under each issue, the basic problem with the current system is outlined, followed by a review of various points to be taken into consideration when devising solution

 

2.1 Vertical Imbalance:

Assignment of Taxes a) Problem At the moment, most ‘buoyant’ (productive) taxes in Pakistan are assigned to the federal government. These include income tax, GST, import and excise duties. The Constitution assigns very few taxes to the provincial governments. As a consequence, federal revenue is much greater than provincial revenue. But since considerable functions have been assigned to the provinces, this leads to vertical imbalances and the necessity for substantial fiscal transfers from federal to provincial governments.

 

B) Points to Consider Ideally, taxation powers should match expenditure assignments. However, in Pakistan there is limited scope to reform the tax system because for practical reasons, efficiency and economy, many taxes have to be collected centrally. Provincial collection of GST on manufactured products, for example, would be difficult to calculate because goods are sold throughout the country. Many national companies file tax returns where their head offices are located, but have offices/factories in all provinces. Modern-day work practices mean many people’s jobs take them all over the country; provincial income tax collection would be a logistical nightmare. Provincial assignment of import and excise duties would lead to Sindh benefitting disproportionately since Karachi is Pakistan’s only port. However, even under the provisions of the 1973 Constitution, there are significant revenue-raising options for provincial governments which are not being fully utilized largely due to weak tax and user charge collection. If the provincial collection system was strengthened, increased own source revenue generation would bring about significant reductions in vertical imbalances would be significantly reduced. Furthermore, there are some options for revenue reassignment from federal to provincial governments, e.g. giving provinces control over agricultural land tax. a) Problem One of the key principles of fiscal decentralization is that sub-national tiers of government should have access to a secure source of funds and should have the autonomy to decide for themselves how those funds are allocated and utilized. The NFC Award was supposed to ensure provincial autonomy by making fiscal transfers formula-based and predictable. However, provincial dependence on federal transfers clearly reduces provincial autonomy. The federal government has the power to hold back/delay release of funds, and can exert considerable influence on how funds are spent. Furthermore a lot of non-Divisible Pool fiscal transfers are discretionary in nature, and not formula-based. The related problem is the currently limited size of the provincial share of the Divisible Pool, which does not sufficiently provide fiscal autonomy to the provinces. Add to this the fact that provincial governments have to work under much harder budget constraints than the federal government; their borrowing capacity is limited. What this means in practice is that many provincial functions are undertaken by the federal government because it has the fiscal capacity to do so and the latter do not. Road construction, for example, is a provincial responsibility, but major road and other infrastructure projects are frequently undertaken by the federal government. B) Points to Consider As just seen, if the provinces were to take full advantage of current provisions their own source revenue and thus fiscal autonomy would greatly increase. However, the major way to enhance autonomy is by increasing the provincial share of the divisible pool on the basis of defined formulae. The provinces have consistently demanded that at least 50% of federal revenues (and ideally 60%) go into their share of the Divisible Pool. But there is great reluctance on the part of the federal government to do this. The other mechanism to ensure fiscal autonomy is to make all transfers formula-based and not discretionary.

 

2.1 Incentivizing Fiscal Effort and Promoting Accountability a) Problem Since the provinces are so dependent on fiscal transfers from the federal government they have little incentive to raise their own revenue. Fiscal transfers also reduce accountability because one tier of government collects funds while another spends them. With own source revenue generation, since the same government that received money as taxes is responsible for spending those funds, it is easier for the public to hold it accountable for how it does so.

 

b) Points to Consider

Own source revenue is an important means of promoting fiscal autonomy. Seen in this context, any increase in the provincial share would mean even more transfers to provincial governments and thus – if suitable incentives are not built in even less fiscal effort on their part. The problem is how to ensure that provincial governments get adequate resources from the federal government, and yet have strong incentives to strive to raise their own revenue as well. One way to achieve this is through matching grants, whereby provinces are rewarded for their fiscal effort with additional funds. The counter-argument to this is that provinces that already have strong fiscal capacity will benefit from this, thereby increasing inter-provincial differences. In order to promote accountability, a system should be designed such that provincial government revenues comprise an appropriate mix of own-tax revenue as well as transfers from above.

2.1 Horizontal Imbalances

a) Problem Currently, population is the only factor used in deciding the distribution of the provincial share of the Divisible Pool between the four provinces. There are a number of problems with the use of just this one criterion: b) Points to Consider Punjab, which has the biggest population and thus benefits the most from the current arrangement, is the only province that would like to see this retained. NWFP and Balochistan would both like to see backwardness included as a criterion in the NFC formula. An important argument against this is that it would provide a big incentive for provinces to remain backward it would deter development and progress. Sindh, which has the largest per capita income of the four provinces, is demanding fiscal effort be taken into account. As discussed above, this would incentivise greater OSR generation by the provinces, but would unfairly advantage those provinces that are already in a strong financial position. These inter-provincial differences, as well as disagreement between provincial governments and the federal government on the distribution of the Divisible Pool, have been the major obstacles in finalizing a new NFC Award. there is a minimum threshold administrative æcost of service delivery which all provinces incur, irrespective of population size; some provinces are more backward than æothers, and hence in need of greater resources; this encourages population growth, when æwhat Pakistan desperately needs is to control its expanding population; it gives no reward, and hence no incentive, æfor fiscal effort on the part of individual provinces.

 

Clearly, there are arguments in favour of and against demands for both backwardness and fiscal effort to be included in the NFC formula. What is needed is a formula that promotes fiscal effort whilst at the same time reducing inter-provincial inequities.

 

2.1 Composition of NFC

a) Problem

The National Finance Commission is mandated to carry out what is a highly technical task. Yet over half of its members are elected representatives politicians rather than fiscal decentralization experts. b) Points to Consider The predominance of elected representatives in the NFC has implications for both the quality and objectivity of its decision-making. ‘Quality’ because it will be difficult for non-technical people to understand complicated fiscal decentralization concepts and the full implications of different options for intergovernmental transfers; hence, through lack of expertise, they could make decisions that are not best suited to address the challenges faced. ‘Objectivity’ because, as politicians with vested interests, their decisions could well be influenced by what is needed to protect those interests rather than what is in the greater national interest. Having majority technical experts on the Commission would ensure quality and curb political bias.

 

3. International Experience and Options for Pakistan

There are many other countries with federal structures like Pakistan, and which face similar challenges with regard to resource distribution, ensuring fiscal effort, promoting horizontal fiscal equity, and so on. Pakistan can draw lessons from their experience. It would be impossible in a discussion paper of this limited size to exhaustively describe resource distribution mechanisms in other countries. Instead, select examples are given to illustrate particular practices relevant to Pakistan: In , provinces have access to virtually all tax bases, including some not available to the federal government. All provinces levy personal and corporate income taxes, payroll taxes and excise duties on specific items such as alcohol and tobacco; all but one have a general sales tax; all levy taxes on resource revenues or profits generated within their jurisdictions. The federal government levies many of the same taxes, but there are federal- provincial income tax and sales tax harmonization systems which result in a reasonably harmonized income tax system [ though otherwise provincial tax systems differ substantially, generating horizontal imbalances]. Overall, provinces and municipalities (local governments) raise more revenue than the federal government, and finance a substantial portion of their own expenditure. The assignment of taxes in favour of provinces in Canada thus reduces vertical imbalances.

 

Option for Pakistan: Increase taxation powers of the provinces, but ensure tax harmonization measures are in place to avoid duplication of federal and provincial taxes.

 

3.2 Vertical Imbalances: Intergovernmental Fiscal Transfers

 

In Germany, the Constitution sets out in detail provisions relating to revenues and expenditures of the federal government and of the various Lander (provinces). This includes general economic indicators. Finally, various federal ministries make transfers for specific purposes. A major concern about the Indian fiscal transfer system is that, although formula-based, it does not specifically target fiscal disabilities of state; and it has disincentives for improved fiscal management by the states. specifying constitutionally mandated sharing of federal tax revenues with the Lander: this effectively makes them non-discretionary, unconditional transfers to the Lander. Thus, even though these transfers constitute around 40% of the revenue of the Lander, their unconditional nature and constitutionally mandated status, mean the Lander enjoy considerable fiscal autonomy. Option for Pakistan: Give provinces a fixed share of federal tax revenues (as opposed to net proceeds), thereby addressing vertical imbalances and promoting fiscal autonomy. In the the vertical fiscal gap is considerable, since states raise only some of the revenue they need themselves. The gap is closed by a wide array of conditional transfers, both block and specific. Conditional transfers are used to promote accountability in state executive branches, and they serve as important instruments by which the federal government can encourage state governments to design their public service provision programs in such a way as to be compatible with national objectives. Option for Pakistan: Increase fiscal transfers to provinces, but use conditional transfers to ensure provincial spending on national priorities such as health and education. In , the Constitution provides for transfers from the central government to the states by way of tax devolution and grants in aid or revenues. The Constitution also provides for a Finance Commission to determine every 5 years the transfer of funds to the states. In 2000 the Eleventh Finance Commission recommended the distribution of 28% of net proceeds of sales tax to the states. The Planning Commission is the second biggest dispenser of funds: 22% of transfers to states in 1998-99 were from the Planning Commission (60% from the Finance Commission). It distributes resources according to a formula developed and periodically modified by the National Development Council. Both Finance and Planning Commissions base their transfers primarily on United States India

 

Option for Pakistan: Design fiscal transfers to address fiscal disparities in provinces, favouring those with lesser fiscal capacity, but at the same time providing incentives for fiscal effort.

 

3.3 Horizontal Fiscal Equalization (HFE)

 

In Germany HFE is achieved in three main ways. Firstly, 75% of the VAT share of the Lander is distributed on an equal per capita basis. This is an effective form of equalization given that expenditure needs will be heavily influenced by population size. Second, there is an explicit equalization system entailing transfers between the Lander. There is an interstate revenue pool into which rich Lander pay and poorer Lander draw money according to specific criteria. The major factors determining the amount of equalization funding are revenue capacity and population density. The third component of German equalization is something unique to Germany the German Unity Fund. This is geared towards raising the fiscal capacity of Lander in the former East Germany to levels comparable with those of the former West. The German system of equalization is reasonably successful at ensuring that all Länder have the financial means to provide reasonably comparable public services to their residents.

 

Option for Pakistan: Establish an interprovincial equalization system in which richer provinces put money into a joint fund, and poorer provinces draw resources out. [Note: there is likely to be strong political opposition to this from richer provinces.] Alternatively include revenue capacity and population density as criteria in deciding distribution of resources between provinces.

 

In, the principle of HFE is that ‘each State should be given the capacity to provide the average standard of State-type public services’ operating at average efficiency and making an average fiscal effort to raise OSR. The States receive both specific purpose payments (SPPs) and unconditional block grants. The total pool of block grants is negotiated between federal and state governments. This pool is distributed between states using a formula that starts with hypothetical per capita distribution but then adjusts this figure taking into account expenditure needs, revenue needs and receipt of SPPs. This results in more populous states, such as New South Wales and Victoria, getting less in block grants than they would if the money was distributed on per capita basis only; but less populous states in which services cost more, getting more money. The sparsely populated Northern Territories, for example, receive A$1 billion as opposed to the A$0.2 billion they would get on the basis of population alone. The Australian fiscal equalization system is often seen as a model for other countries. Option for Pakistan: Include revenue capacity and expenditure needs as criteria in deciding the distribution of resources between provinces. [Note: inclusion of grants received could be problematic.] In the Constitution makes a similar provision; requiring federal equalization payments to ensure that provincial governments have sufficient revenues to provide public services at reasonably comparable levels of taxation. The country has a systematic system of unconditional equalization transfers. Unconditional transfers came about as a result of political pressure exerted by the provinces, who were concerned about their autonomy. Option for Pakistan: Provide additional fiscal transfers from the federal government to those provinces which are unable to provide a basic standard of services. Ensure that everyone in Pakistan has access to basic Australia Canada quality services. Note: use of conditional fiscal transfers would probably be more appropriate in Pakistan.

 

3.4 Composition of Resource Distribution Bodies

 

In Australia the Commonwealth Grants Commission provides advice to the Commonwealth (federal government) and state governments on the distribution of the pool of general revenue assistance. The CGC is only concerned with the distribution of the revenue pool and not with its size: the latter is negotiated annually between federal and state governments. The CGC has a permanent staff of around 50, the majority of whom are ‘technical people’ with backgrounds in accounting, statistics and economics. The CGC is headed by four part-time members, appointed through a consultative exercise between federal and state governments. Commissioners are appointed for their particular expertise rather than their representational role. The CGC works on technical aspects of fiscal equalization, sharing with the states its methodology and assessments. The states, even those ‘losing out’, are generally very accepting of the CGC’s judgements because they know they are dealing with an expert body.

 

Option for Pakistan: Increase the proportion of technical members on the NFC and reduce political representation: turn it into a primarily expert body making impartial decisions, whose authority and judgments are respected by federal and provincial governments alike.

 

4. Recommendations

 

Overall, Pakistan’s fiscal transfer system has to be modified to:

 

• ensure fiscal autonomy to the provinces whilst also promoting fiscal effort and accountability; 
• ensure all provinces can provide a minimum basic level of services; 
• reduce inter-provincial disparities. There are clearly a wide range of options for Pakistan to choose from in striving to achieve a more optimal distribution of funds between federal and provincial governments. Fiscal transfers, in particular, offer considerable scope to help Pakistan overcome the issues it currently faces and promote effective service delivery and horizontal equalization. Based on the preceding analysis and review of examples from international practice, it is possible to come up with some specific recommendations to improve the distribution of fiscal resources in Pakistan:
• Change the composition of the NFC to make it a technical body, whose judgments will be accepted as expert and objective. Finalize a new NFC Award after extensive consultation with all provinces and key stakeholders to ensure consensus. Increase the size of provincial share of federal resources to ensure provincial governments have adequate funds to meet their expenditure responsibilities. Add fiscal effort and backwardness as criteria along with population in deciding the distribution of funds between the four provinces. Promote the use of conditional fiscal transfers to provinces, geared to reward fiscal effort, efficiency and to ensure spending on national priorities such as health and education. Provide special assistance to backward areas æto reduce provincial differences in service delivery and development indicators. Assign additional taxes to provincial governments to reduce vertical imbalances, whilst ensuring there is no duplication with federal taxes and/or making provision for tax harmonization measures. The current system can be considered as taking Pakistan part of the way to where it needs to be. The NFC provides for an institutional, formula-based and predictable system of resource distribution and transfers. But given the obvious inequalities between different parts of the country and the effort needed to ensure Pakistan will achieve the MDGs on time, more is needed.