Of all the problems besetting us today nothing is more critical than the economy, particularly the rapid evaporation of our foreign exchange reserves into thin air. We were on the verge of defaulting when 9/11 made us the temporary darling of the West.
While prudent economic polices did contribute to our economic resurgence and the building up of our foreign exchange reserves, our so-called “brilliant” economic team was neither intellectually honest nor innovative, its reputation built on debt forgiveness, debt rescheduling, aids and grants and the massive infusion of foreign funding to fight the “war against terrorism.”
Shaikh Nayhan Bin Mubarak Al Nayhan sponsored a study in 2004 to ascertain why Pakistan was lagging behind in home remittances. When Shaukat Aziz was personally approached by Bashir Tahir, the CEO of Dhabi Group, the prime minister gave wholehearted support to the study. In actual practice, neither he nor his administration extended anything more than mere lip-service.
The study group headed by Pervaiz Shahid carried out physical research on the ground in Pakistan, Sri Lanka, Bangladesh and the Philippines. It would have been ideal to include India, but that country was deliberately left out.
In contrast to the studied (and motivated) indifference in Pakistan, the Philippines government gave wholehearted support. 3.2 million Filipinos were registered as employed abroad in 2003, 82 percent of them women.
- A very efficient department has representative centres in all small cities and towns in the many Islands of the Philippines. Not only giving good information about possible employment abroad, these centres requisition the services of these employed abroad when visiting home on leave to give information about conditions in the the country where they were working.
- The Philippine Central Bank invested money in a particular software meant to disburse money instantly to the many branches of many banks on one software platform.
- This software was given free to the banks so as to commonality. The minimum hardware requirement to support the software was laid down.
- The banks remained open 24 hours seven days a week. If anyone remitted money anywhere in the world before midnight Philippine time, it was instantly transmitted to the account of the recipient next day. Obviously this built up trust in the home banking system for Filipinos abroad and they did not go outside the banking system.
- The results were tremendous. $8.6 billion were remitted through banking channels home in 2003, approximately $2,700 per expatriate Filipino per year.
The department concerned with coordinating emigrants in Sri Lanka was not as efficient as that in the Philippines, but good enough for the 900,000 Sri Lankan workers employed abroad to remit $1.25 billion annually, with each Sri Lankan having sent approximately $1,400 in 2003.
The banking system is used more than hawala, and a negligible amount of money is transacted outside banking channels.
Bangladesh in 2003 had 2.3 million people sending $800 million annually, about $350 per head. Like in Pakistan, Bangladesh has a very active hawala trade outside the system.
Pakistan was easily the worst. In 2003, with 3.5 million Pakistanis abroad sending only $900 million per annum, or approximately $260 per head. This is one-tenth of what was being sent by expatriate Filipino and one-fifth of that being remitted by the average Sri Lankan.
According to available information, non-resident Indian was sending $4,000 per head in 2003.
Bangladesh has shown considerable improvement, with 2.5 million sending around $9 billion in 2007 ($3600 per head), double the amount sent by the 3.7 million Pakistanis sending $6.1 billion ($1650 per head) in 2007.
Hawala is OK as long as there is inflow, unfortunately there is greater outflow from Pakistan.
- The hawala mafia has great influence in the Establishment, and for obvious reasons. There is so much money to go around, and the corrupt have to send their ill-gotten gains abroad, for purchase of assets and property outside Pakistan.
- The hawala system is estimated at around $14-15 billion, which means about 8-9 percent “service charges” or “commission” of Rs5-6 for every dollar. The hawala facilitators earn about $1.2 billion, and the country loses $15 billion annually, or $45-50 million every working day.
Pervez Musharraf did not do what he, and before him Zia-ul-Haq, could have easily done through authoritarian rule: eliminate the hawala trade as Indira Gandhi did as a civilian dictator when she imposed emergency rule in India in 1975.
To eliminate the hawala trade, Mrs Gandhi jailed all hawala traders, seized all their propertes and bank accounts and the funds en route. Today the Indian expatriate on an average sends $4,000 per head annually, all through the banking system. Given the 8-9 million non-resident Indians abroad, this comes to a cool $30-35 billion annually.
This country’s exchange value has already dropped about 40 percent in the last couple of months. Before it goes into a free fall somebody must do something to prevent the outflow.
We do not have any time left, it has to be done, and now! If 3.7 million Pakistanis were to send $4,000-4,500 each annually (about $350 per month) it would amount to about $15-20 billion annually.
When foreign exchange dealers are put out of business permanently, there will be no outflow of the $15-20 billion going out presently.
If Asif Zardari really means “Pakistani Khapay,” he must mandate Shaukat Tareen to stop this illegal outflow by any means possible, and as soon as possible
The writer is a defence and politicalanalyst. Email: isehgal@pathfinder9.com
Source: The News, 21/10/2008
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