Feisal Naqvi

Archive for December, 2012|Monthly archive page

Lying to ourselves: a response

In Uncategorized on December 26, 2012 at 7:58 am

My previous article, “There will be blood” has been politely, but firmly, criticized in a post titled “Lying to ourselves.” That post , in brief, says the following:

–        My column was excessively emotional

–        The belief that we are not “fighting back” is a “myth of Mayan proportions”; belief in that myth shows that I am living in a bubble which has little to do with reality.

–         The 20,000 number killed by me is incorrect.

–        The media is deliberately silent when it comes to collateral damage from military operations

–        We are becoming as brutalized as the people we are supposedly fighting.

Let me try to respond to these criticisms one by one.

First, the figures I had cited are admittedly disputable. I concede that a safer estimate of the number of people killed by the TTP is 10,000.

Second, I don’t have a problem with the post being emotional. I am privileged enough to be granted a bully pulpit for saying what I want to say. My interest as a columnist is in communicating and reaching out to people, not in writing a legal brief. I’m not saying that I fake the emotion; just that I don’t see any reason to hide it if that is actually what I am feeling. The more important question is whether my emotion is leading me to faulty conclusions. In this case, I don’t think it did.

Third, I think the author of the post wrongly conflates my point with that of a different author. I am well aware of the fact that there is an armed conflict going on in the tribal areas. My point is that this conflict is not reflected in our social attitudes towards that conflict and especially the TTP. In fact, the precise question I had raised was “What does it take for a society to be sickened by its own behaviour and to change its attitudes?”

The specific point that I am referring to is the fact that our predominant social response to the war with the TTP is to deny that there is a war going on or even that the TTP is trying to wage war on the state. Instead, we blame anybody but the TTP for the atrocities which happen on a daily basis. Just today, Qazi Hussain Ahmed has suggested that the TTP should be allowed to open an office in Pakistan. What we see instead of public uproar is a slow legitimization of the TTP as being just aggrieved – whether because they want to bring Islam to us heathens or because they are disturbed by drone strikes. I think the TTP are terrorists, plain and simple. Let them first be prevented from killing my fellow Pakistanis and I will then worry about their grievances. I have no obligation to be sympathetic to murderers.

The author of the post may well have a legitimate point that our military response is wrong. I respect that view even as I disagree with it. However, my point is simpler. We cannot fight a war against an enemy while simultaneously refusing to condemn that enemy. The TTP does us no favours of that sort. And our confusion only makes it easier for them to operate.

So far as silence regarding collateral damage is concerned, my point is that I simply do not have access to what happens there. As cynical as it may seem, out of sight is out of mind. The TTP’s victims, on the other hand, die in plain view on my television screen every night. Does that mean that collateral damage is acceptable?  Obviously not. But at the same time, there is a fundamental difference between TTP strikes and a military response.  The TTP is deliberately targeting civilians. The Pakistani Army is not deliberately targeting civilians but cannot strike back without also killing innocents. If you do not accept the death of innocents as an inevitable consequence of war then the only other option is for the Pakistan Army to surrender rather than kill a single innocent. And while I detest and condemn the death of innocents, surrender to the TTP is not something I want to see.

The final point, regarding our national brutalization, is partly valid. To begin with, it misreads my point. What I was trying to say was that the judgment of history on our rulers would be terrible – not that I would like Zardari’s bones to be disinterred and strung up. At the same time, I can see how people could have misread my column that way and perhaps I am now getting too cute with a post-facto rationalization. On that point, we’ll have to let the readership decide.

Once again, I am grateful to the author of the post for his comments and his courtesy.

There will be blood

In Uncategorized on December 26, 2012 at 7:58 am

About a week ago, a 20-year-old by the name of Adam Lanza walked into a school in Newtown, Connecticut — a small town a few hours northeast of New York City. In the next 30 minutes, Lanza shot and killed 27 people before finally killing himself. Of those 27 casualties, 20 were children aged between five and 10.

The massacre at Newtown set off a firestorm in the US, with most of the anguish and the anger aimed at America’s notoriously lax gun laws. President Barack Obama announced at the funeral of the victims that he would be pushing for legislative changes to prevent future massacres. And The New Yorker spoke for many when it asked, “What does it take for a society to be sickened by its own behaviour and to change its attitudes?

By the end of the week, The New Yorker had its answer: the vice-president of the National Rifle Association responded defiantly that the answer to massacres like Newtown was to have more guns not less, because “only a good guy with a gun can stop a bad guy with a gun.” And pundits had already started scaling back their earlier optimistic predictions that American society would now support limits on guns.

The Newtown massacre and its aftermath are instructive because they show that Pakistan’s pathological society is not unique in its pathology. As I write these words, the newspapers lying crumpled around me all carry banner headlines announcing the demise of Bashir Ahmed Bilour in a suicide attack. Page after page praises his bravery; page after page laments our inability to unite in anger against his killers. Which again begs the question: what will it take to wake us up? What does it take for a society to be sickened by its own behaviour and to change its attitudes?

The honest answer is that I don’t have the faintest clue. About a month ago, a remote controlled bomb was recovered from under the car of famed journalist Hamid Mir. The recovery of the bomb had been preceded by news reports stating that the TTP had decided to strike against journalists like Mr Mir who had condemned the attack on Malala Yousufzai. And after the fortuitous recovery of the bomb, the TTP expressly accepted responsibility, saying that it had wanted to kill Mr Mir because of his criticism of the TTP and its tactics.

Mr Mir’s response to his brush with death was instructive. On the day the TTP took responsibility, he began his show with an oddly defensive monologue in which he denied being an enemy of Islam and hinted broadly that even if the TTP were actually the ones who had carried out the attack, they were only tools being used by others upset by Mr Mir’s efforts in favour of an independent judiciary and the Muslim world.

As I watched Mr Mir’s show and waited for the defiant condemnation of the TTP that never came, I imagined a scene as surreal as the one unfolding in front of me.

Somewhere on a psychiatrist’s couch, a TTP spokesman is holding forth. “Doc, what do we gotta do to be taken seriously? We killed BB; they blamed Musharraf. We shot Malala; they blamed the US. We beheaded an SHO in Peshawar and I thought people would compare us to Grendel; we didn’t even make the front pages! We attacked the Peshawar airport andpeople worried about tattoos. We killed polio workers and even a Harvard-educated lady senator thought it could have been a conspiracy. I swear the next time this happens, I’m gonna set someone on fire outside the Islamabad Press Club! Maybe that way we’ll finally get some respect.” And then the psychiatrist leans forward and murmurs “Have you considered changing your PR agency? I have a brother who’s got lots of great experience, knows all the right people …”

Back here in the real world, I am still bemused by our national confusion. I was, for example, stunned to learn that the late Bashir Bilour was the brother of Haji Ghulam Ahmed Bilour, our railway minister. Why was I stunned? Because three months ago, Bilour the senior called the Taliban his ‘brothers’ and offered to pay a US$100,000 bounty for whoever would kill the idiot responsible for the blasphemous anti-Islam video. Note, by this time, Bashir Bilour had already survived at least two assassination attempts by the TTP. So, Haji Sahib was referring to his brother’s murderers as his brethren.

Really, how complicated is this? There are people trying to kill us. They have repeatedly announced that they would like to destroy our Constitution, kill the educated ones and subjugate the rest. Since 2007, they have killed more than 3,000 Pakistani soldiers and more than 20,000 civilians. Our options are either to fight back or be killed. But it looks like we would rather be victims.

All I can say then is to count me out of the list of idiots. Despite my Shia heritage, I have no interest in being a martyr. My sentiments instead are those of General George S Patton: “No poor bastard ever won a war by dying for his country. He won it by making other bastards die for their country.”

Let me add one thing more. These are days whose history is being written in blood. There will come a time though when the blood will stop flowing. And then there will be an accounting. The people of this country will look back and ask why their leaders were so quiet for so long.

That moment of accountability may or may not be in the lifetime of those currently in charge. But even if it happens after those currently in power have passed on, our people will be justified in digging up the bones of their current leaders and hanging them as traitors to this country. The people will have their revenge. And it will not be pretty.

Published in The Express Tribune, December 25th, 2012.

Report on Private Sector Hydel Development

In Uncategorized on December 19, 2012 at 7:47 am

This report was done by me in 2002 for a consultancy project. I don’t think much has changed since then.

Introduction:

It is universally acknowledged that the development of hydropower resources in Pakistan would make eminent sense.[1] As compared to thermal power, hydropower is not only cheaper but ecologically preferable. Furthermore, while thermal units run on imported fuel whose cost adds substantially to Pakistan’s balance of payments problems, hydropower units utilise natural resources without depleting them in any manner.  If one adds to these factors, the happy coincidence that the northern areas of Pakistan and Azad Jammu Kashmir are awash in sites offering hydropower potential,[2] the result would appear to be a perfect match of needs and resources.

Despite all the reasons favouring hydropower, the development of hydropower has lagged considerably in Pakistan. The mix between thermal and hydel power in Pakistan today stands at 28:72[3] and it has been acknowledged by Wapda in its recently released Vision 2025 document that ideally, the percentages should be reversed. It is in light of these realities that Wapda has pledged to pursue hydel power more seriously in the future.

Several problems inherent to the hydel sector have affected the development of hydel power in Pakistan. The basic issue though is that hydel projects are extremely capital intensive and that the economic advantages of hydel power only become apparent over a long term period.  Raising capital for large capital intensive projects with a payback period measured in decades is difficult for a cash strapped poor country like Pakistan, particularly so since the nuclear explosions of May 1998 resulted in the enforcement of sanctions and a freeze in economic aid from those sources most likely to finance such projects, such as the Japanese and the US governments. In any event, Pakistan is a heavily indebted country whose debt profile has not traditionally inspired Western countries and banks to give it more money.

Given that the availability of energy and the pace of economic development are considered to go hand in hand, that Pakistan has congenitally faced shortages of electricity, and that Pakistan lacks the resources to exploit its own hydel resources, the desirability of involving the private sector in developing hydropower in Pakistan would appear to be self-evident.

However, despite these very promising conditions, the involvement of the private sector in hydropower remains minimal.  At the current time, there is only one private hydel project which has reached agreement with Wapda on tariff rates. If that project achieves financial close, which is not thought likely, it will still be another four years or so before it comes on line. All other privately initiated hydel projects in Pakistan have yet to reach agreement with Wapda over tariff rates, despite years of negotiation. Furthermore, certain hydel projects were advertised for open bidding on a Build-Own-Operate-Transfer basis but the bidding was ultimately cancelled when no acceptable parties showed interest.

The basic issue then is to determine why private parties are not interested in investing in the hydel power sector in Pakistan. This question in turn breaks down into two sets of issues, one set comprises reasons unique to the hydel sector and the second set comprises general reasons as to why one might not want to invest in Pakistan. However, prior to examing these reasons, a brief history of private sector involvement in hydropower in Pakistan has also been provided for reasons of background.

1. History of hydel power policies in Pakistan

i)      1995 Policy Framework

Pakistan’s first hydel policy was announced in 1995 (the “1995 Policy”), hot on the heels of the thermal power policy announced in 1994 (the “1994 Policy”).

The 1994 Policy and the 1995 Policy shared many features. In both cases, a target tariff was declared (6.1c/kwh for thermal and 4.7 c/kwh for hydel) and effectively any company which could match that target price was allowed to work towards setting up its project.

As with the 1994 policy, the 1995 policy proved to be immensely popular with investors.  Five letters of support were signed under the 1995 policy[4] while letters of intent were signed for another 10 projects.

ii)     The fall of the Benazir government and its consequences

The 1994 Policy was controversial even during Benazir Bhutto’s tenure but the undesirability of the policy and the alleged corruption involved in the various independent power projects became a cause celebre following her removal on charges of corruption by the then president, Farooq Leghari.

In 1997, the Nawaz Sharif government took power following elections and embarked on a full scale assault on the IPPs in which they were bluntly told that the government was not willing to meet its commitments under the various power purchase agreements and that it was necessary for the IPPs to agree to lower tariffs than those which they had originally been promised.

The merits and demerits of the IPP issue are beyond our scope, but the short fact was that the Government of Pakistan did not have the money to meet its commitments under the various agreements.  There was also a great deal of evidence to suggest that the negotiations surrounding the IPP deals had not been entirely free from corruption. However, the way in which the Government of Pakistan extricated itself from its commitments was also not quite according to Marquis of Queensberry rules.

In the middle of this hullabaloo, unfortunately no distinction was made by the Government off Pakistan between thermal projects and hydel projects: all independent power projects were deemed to be tarred with the same brush and as such, equally undesirable. Thus, all the five hydel projects which had been granted Letters of Support were stopped from continuing through to financial close through various means,[5] while the Letters of Intent granted to various parties were simply cancelled outright.  Once the validity period of the Letters of Support had expired, the Government even attempted to encash the performance bonds submitted by the developers, resulting in litigation which is pending till date.

So far as the thermal IPPs were concerned, the Government eventually reached agreement with all of them on marginally reduced tariffs. The most prolonged negotiations came in the case of Hubco, a 1292 MW IPP which had actually preceded the 1994 policy, and which was eventually only settled by the military government which removed Nawaz Sharif in October 1999.

At a policy level (with respect to hydropower), two important decisions were taken by the government of Nawaz Sharif. Firstly, in February 1997, the Economic Co-ordination Committee (“ECC”) of the Cabinet decided that all decisions regarding tariffs would be decided by the Chairman WAPDA on a case by case basis. Subsequently, the 1994 Policy and the 1995 Policy were both formally replaced by a joint hydel and thermal policy announced in 1998, the details of which are discussed below.

Following the decision by the ECC to grant plenipotentiary negotiating powers to Wapda, the developers who had earlier obtained letters of support or letters of intent under the 1995 Policy approached the Chairman so as to reach agreement on tariff rates, which issue was understood by all concerned to be the main stumbling block.  With one exception, no developer has been able to reach agreement with Wapda on a tariff for hydel power, nor does it appear likely that any agreement will be reached in the  near future, given the gap in the two parties’ position. It may also be noted that the developers who had received letters of support had all sunk millions of dollars into preparing detailed feasibility studies, which cost so far has been completely wasted.  Moreover, some of the projects for which letters of support were granted are now being developed by the Federal and the NWFP governments themselves.[6]

 

iii)   The 1998 Policy

In 1998, the Nawaz Sharif government announced a new policy which was to govern both the thermal and the hydel sectors (the “1998 Policy.”)  The 1998 policy remains in effect till date but a revised policy has been circulating for many months now and it is widely expected to be replaced at any moment.

The biggest departure from the 1995 policy in the 1998 policy is the refusal to set a tariff target: instead, all projects were to be submitted to competitive bidding through which a tariff was to be established.  More specifically, with respect to hydel power, the 1998 policy sets up two different channels of consideration: one for “solicited bids” and the other for “unsolicited” bids.

The procedure with respect to “solicited bids” is meant to be applicable to a number of projects identified by the government with the assistance of a development agency of the German government.  The policy states that there are detailed feasibility studies available for these projects and that these studies are available for examination by developers, the idea being that the right to develop a site would be auctioned to the lowest bidder.  Till date, only one auction has been announced under the 1998 policy.  When no party showed interest in pre-qualifying, the date for pre-qualification was extended but to no avail. With the exception of one Turkish and one Chinese party, neither of them hydel developers of repute, no party showed any interest.

With respect to unsolicited bids, the policy states that only such parties as are not engaged in litigation with the government are entitled to submit “unsolicited bids.” This provision is clearly intended to exclude all those developers already in litigation with the government, which is to say all those developers who had received letters of support under the 1995 policy.

The procedure with respect to unsolicited bids is that developers who think that a site is economically viable are to submit this site for the consideration of the government, which would then conduct an auction for the right to develop the site. The original developer, however, has the right to match the lowest price and if he chooses not to match the lowest price, has the right to be compensated the “reasonable, audited cost” of the feasibility studies carried out by him.  Till date, no private developer has submitted a site for bidding under this provision of the 1998 policy.

While the 1998 policy remains the policy in effect, it is common knowledge amongst members of the hydel sector that there is a new draft policy on the anvil. However, this new policy has yet to be formally announced.

 

iv)   Current status of hydel power in Pakistan

In 2001, the government issued a Vision 2025 for Wapda which declares that it is in Wapda’s interest to forswear dependence on thermal projects and instead to concentrate on hydel projects as well as indigenously fueled thermal projects (i.e. coal-powered plants).

In keeping with the emphasis on hydel power in the Vision 2025 plan, the Wapda is proceeding with the construction of three hydel projects, namely those located at Allai Khwar (163 MW), Duber Khwar (130 MW) and Khan Khwar (72 MW).  All three of these projects are being constructed with the help of low interest loans from the Abu Dhabi government.  In addition to these projects, memorandums of understanding regarding the construction of three other projects – Jinnah Barrage (96 MW), Kheyal Khwar (51 MW) and Golen Gol (106 MW) – have been signed with the Chinese government.

Apart from these projects, the government of the NWFP has also been attempting to embark on the construction of the Malakand III project but is apparently hampered by the lack of funds. That project, it may be noted, is the subject of litigation currently pending in the Supreme Court which if successful would restrain the NWFP Government from proceeding.

The only “private” project currently on track is the New Bong Escape project, an 84 MW project whose sponsors, M/s Laraibe Ltd., signed an MoU with Wapda on December 15, 2001 whereby Wapda agreed to purchase electricity from the New Bong project at a levelised tariff of Rs. 3.1 c/kwh.

2. Specific Problems with Hydropower sector in Pakistan

i)                Existing hydel problems need to be resolved    

One point which has been repeatedly stressed by members of the hydel sector is that the world of parties involved in developing hydel power projects is fairly small. In other words, there are a limited number of companies involved in financing hydel projects, constructing hydel projects, examining hydel projects and preparing feasibility reports with respect to hydel projects.  Many, if not most, of those companies had become involved with private sector hydel projects in Pakistan as a consequence of the 1995 Policy, which is to say that they are unlikely to want to become involved again with hydel projects in Pakistan.

In any event, to the extent that there is any chance whatsoever of attracting any international investment in the hydel sector, no such investment is likely so long as the travails of the previous entrants in this sector remain unresolved. As one embittered developer put it, “Pakistan asking for fresh private investment in the hydel sector is like Count Dracula sticking a ‘rooms available’ sign outside his castle and expecting local villagers to drop by. It’s just not going to happen.”

It may also be noted that Pakistan’s problems in the hydel sector are not unique. Indeed, the situation is exactly equivalent to the situation three years ago when Pakistan was at loggerheads with the thermal IPPs. That situation was ultimately resolved but only after several years of bitter feuding, during which Pakistan became notorious as an investment hell.

In comparison with the row over the thermal IPPs, the disputes between Wapda and the hydel IPPs seems to have stayed under the radar of the international community.  This may be due partly to the fact that the sums involved – at least at this stage – are minuscule compared to the amounts involved with the thermal IPPs. For example, the largest loss being claimed by any hydel IPP is US$ 6 million, which while not exactly pennies, is still minor compared to the billions of dollars at stake in the thermal IPPs dispute.

Nevertheless, it is necessary that these pending disputes be resolved so that they stop “poisoning the well” because even though the actual losses may be minor, the investment being affected is greater by several orders of magnitude. For example, the same developer who claims to have sunk US$ 6 million into feasibility studies has repeatedly offered to invest upwards of US$ 1 billion if the tariff dispute with Wapda is resolved.[7]

To take another perspective, the 98 Policy states that by 2008, the shortfall in generation capacity “is expected to range between 5,000 and 8,500 MW.”  If that gap is to be bridged with the help of hydel power, then even at conservative estimates, one is looking at well over US$5 billion of fresh investment. One may also note that on average 50-60% of the cost of a hydel project is civil works, which expenditure occurs largely in local currency. This is in direct comparison to thermal IPPs where a large proportion of the cost (both initial and recurring) is spent on foreign currency inputs, i.e. fuel and machinery.

ii)               The resolvability of the tariff disputes

As noted above, the Economic Coordination Committee of the Cabinet decided in 1997 that all tariff decisions were to be made by Wapda itself. From published reports as well as from interviews and other sources, it is evident that Wapda has taken the position that any proposed tariff not in the vicinity of 3c/kwh is not acceptable to Wapda. The hydel developers, however, are adamant that it is simply not feasible for them to accept such a low tariff.

It is not feasible for this report to include an independent technical analysis of the merits of the competing positions adopted by Wapda and the hydel IPPs. Nevertheless, an number of points can be made in this regard: –

a)     Wapda has been a favourite target of multilateral institutions for much of the past decade, probably for good reason.  Under the privatisation and corporatisation program developed for Wapda, it will be unbundled into distribution companies, generation companies and a transmission company. All that will remain of the current Wapda is the water sector, which is to say, hydel power.  Not surprisingly, it is the candid opinion of a number of informed people that Wapda is simply not sincere in dealing with private hydel developers because that would dilute its control of the hydel sector. That opinion is obviously not verifiable but it would appear to be reasonable.

b)     The point that Wapda may not be the appropriate party to be making tariff decisions also seems to have occurred to the Federal Government. In this context, one may note that the various draft policies which have been circulated empower Nepra to make decisions regarding tariffs, not Wapda. Coincidentally or otherwise, the draft policy has yet to be formally enacted notwithstanding several false alarms to the contrary.

c)     Apart from the question of who should be deciding the tariff issue, the other problem complicating the resolution of the tariff debate is the perspective from which the “reasonability” of the tariff is being examined.

d)     To elaborate, Wapda is taking a “cost plus” approach to deciding hydel tariffs. In other words, Wapda examines the project details, decides what the reasonable cost of the project should be, determines what a reasonable rate of return should be, and then works backwards to come up with a tariff.

e)     The problem inherent in this approach is that Wapda’s conception of “reasonable” is – and will always remain – very different from that of the developers.[8] That divergence in perception is further exacerbated by the thermal IPP debacle as a result of which the Wapda hierarchy is convinced that all businessmen are over-invoicing thieves and the international business community is convinced that Pakistan’s state sector is economically illiterate.

f)      This gap in perceptions has also been exacerbated by the fact that one project, namely New Bong Escape, has managed to reach an agreement with Wapda at a levelised tariff of 3.103 c/kwh.  From Wapda’s perspective, the agreement with New Bong at 3.1 c/kwh (as opposed to the 4.7c/kwh under the 1995 Policy) substantiates its contention that hydel developers were being offered extortionate terms. On the other hand, the private sector parties are convinced that the project is not feasible at the agreed upon tariff, which opinion is affirmed by impartial experts.[9]  While this issue will be conclusively resolved only with the passage of time, for now the signing of the New Bong deal has only hardened attitudes on both sides of the divide.

iii)             Problems with the 1998 Policy

As noted above, the 1998 Policy divides projects into two categories, those stemming from solicited bids and those stemming from unsolicited bids.

a)     Unsolicited bids

 With respect to unsolicited bids, the procedure envisioned by the 1998 Policy is that private parties will identify promising sites, do the feasibility study themselves and then submit the site for competitive bidding on tariff rates. The developer of the site has the right to match the lowest bid price, and if he refuses to exercise that option, he is to be refunded the “audited, reasonable” costs of his feasibility study by the winning party.

The problem in this approach is that feasibility studies are expensive, often running into several millions of dollars.  Such an amount represents a major commitment of time and personnel, even for major international investors.  However, developers are unlikely to make such major investments “if the fruit thereof is uncertain.” The 1998 Policy may cheerfully say that the “audited, reasonable” costs of the developer will be refunded but such an assurance is grossly inadequate in terms of reassuring investors.

(1)  Given that only the “audited” and “reasonable” costs of the developer are to be refunded, that provision is an invitation to litigation, both as to the quantum of the alleged costs and their reasonability. However, the judicial process in Pakistan is both arbitrary and extremely lengthy.  The provision regarding the refund of “audited, reasonable” costs is not particularly reassuring therefore from the perspective of hydel developers.

(2)  Even if the developer’s entire cost was to be instantly refunded, that refund would not compensate the developer for the opportunity cost of the amounts spent on doing a particular study.

(3)  The biggest issue in an hydel project is always the identification and examination of the risk factors. Once those factors have been identified, quantified and examined, what is left is effectively only a construction problem. In this respect, what Western developers fear is they will be underbid by Chinese or other East Asian construction companies since their personnel costs would be significantly lower.

b)     Solicited bids

 With respect to solicited bids, the procedure envisioned by the 1998 Policy is that the Government of Pakistan will first identify the most attractive sites for hydel development, produce detailed “bankable” feasibility studies with respect to these sites, and then have the tariff determined through competitive bidding.

In contrast to the procedure with respect to unsolicited bids, the procedure with respect to solicited bids certainly appears to be somewhat workable.  However, the linchpin of this approach is the presence of a detailed, international quality, “bankable” and generally accepted feasibility study.  According to several sources, the feasibility studies produced by the Government of Pakistan are not international quality and certainly not “bankable.” One may also note that the Government of Pakistan has only once tried to solicit bids under the 1998 Policy, which effort failed miserably when not a single international developer sought pre-qualification.

c)     Non binding tariff determination procedures

As noted above, the prime focus in the 1998 Policy is on competitive bidding through which a tariff is to be determined. One obvious problem with the 98 Policy though is that the Government of Pakistan is not required to accept the lowest bid. Instead, the 98 Policy explicitly states “The Government will reserve the right to reject any bid without assigning any reason and assuming any liabilities.”

While there are understandable policy reasons for reserving such a power, this clause effectively conditions the value and credibility of the bidding process on the sole whim and desire of the Government of Pakistan, which currently means Wapda. As discussed above, Wapda is not seen as either sincere or realistic by private sector hydel developers at this moment.

Finally, one may note that even after a particular bid has been accepted by the Government, the tariff level is subject to approval by Nepra. Once again, this additional stage robs the bidding process of credibility and adds an additional level of negotiation and delay to the system.

3. General Reasons obstructing investment in Pakistan

A comprehensive analysis regarding the problems facing private investment in Pakistan is beyond the scope of this paper. However, there are certain fairly obvious and basic points which are discussed briefly below.

i)                Lack of credibility and creditworthiness

If Pakistan today is a pariah in the world of international investors, that is a status which has been hard won by various Pakistani regimes. Simply put, Pakistan’s economic history (particularly recent history) is replete with instances in which various regimes have abused the confidence of investors, both local and foreign.  That history is reflected many ways, but more specifically, in the political risk rankings by economic analysts, which place Pakistan below countries like Vietnam, Nigeria and Bulgaria.

 ii)               Lack of independent dispute resolution mechanisms

The lack of institutional credibility is a problem which affects not only Pakistan’s executive branch, but which also affects the judiciary. This is particularly important because foreign and domestic investors obviously rely upon the judiciary to enforce the terms of contracts with respect to the government. The performance of Pakistan’s judiciary in protecting economic and contractual rights, however, has been as dismal as its performance in protecting other rights. One may, in particular, note the way in which the IPP disputes (particularly the cases relating to Hubco and Kapco) were adjudicated by Pakistan’s judiciary and the manner in which soveriegn guarantees were stayed.

 iii)             Lack of a proper arbitration law

The lack of an independent judiciary in Pakistan is further compounded by the fact that the arbitration law in Pakistan has been gutted of much of its value, at least from an international investor’s perspective.

To begin with, Pakistan’s Arbitration Act of 1940 is an anachronism, preceding as it does the New York Convention of 1958. Secondly, the 1940 Arbitration Act allows far too much scope for judicial interference. Thirdly, there are several Supreme Court cases which have rendered arbitration clauses of questionable value and enforcement. For example, the Uzin Export case allowed a Pakistani party to avoid international arbitration on the grounds of “convenience.” Similarly, in the Rupali case it was held that a civil court judge in Pakistan could have some degree of control over arbitration proceedings in London, merely because the law of the contract was Pakistani law. Finally, in the Hubco case, the Supreme Court stayed ICC arbitration proceedings in London on the basis that allegations of fraud are not arbitrable.

It should also be noted that a draft Arbitration Act was being examined by the Senate in 1996 but that with the dismissal of the Benazir government, that measure disappeared and has not surfaced ever since.

 iv)             The value of customs and tax exemptions

The 1998 Policy does not grant any tax exemptions for the import of machinery. That policy is reversed in the Draft Policy which, as per the 1995 Policy, grants extensive exemptions, inter alia, from customs duties.

Under Pakistani law, if a customs exemption is withdrawn, an importer will have to pay the duty due on the day that the bill of lading is filed for the goods in question, even if the customs exemption was withdrawn after the purchaser of the goods opened an irrevocable letter of credit for those goods. The same holds true for sales tax exemptions.

It may be noted that under the Supreme Court’s decision in Al-Samrez, parties who had opened an irrevocable letter of credit were protected from any subsequent changes in tariff or withdrawals of exemption. However, the Al Samrez case was overruled through the induction of Section 31-A into the Customs Act, 1969 which remains the law till today.

Specific Recommendations

i)      Resolve existing hydel disputes

As long as the existing disputes with hydel developers linger on, the chances of new private investment in Pakistan’s hydel sector will remain remote. The first priority therefore must be to resolve these disputes.

One possible way to resolve the dispute is for the Government to examine the dispute from a different perspective than that currently being utilised by Wapda. Wapda’s current focus is on ensuring that it is not being ripped off by the hydel developers, hence the debate over rates of returns and project costs. However, the real issue from a societal perspective is not what rate of profit hydel developers should receive. Instead, the point here is that society has certain electrical demands – if those demands are not fulfilled through hydel generation then those demands will be filled through thermal generation.  The real choice therefore is between buying electricity from a hydel developer and buying electricity from a thermal IPP. So long as the hydel generation is cheaper than the thermally generated electricity, the government and Wapda should buy hydel: the rate of profit accruing to the hydel developer is immaterial.

In a perfect world, Wapda would be able to produce electricity itself in the most economically efficient manner. However, Wapda does not have the capital to invest in hydel generation and therefore it does not have the option of producing electricity in the optimally efficient manner. Instead, its only economic choices are to either purchase additional electricity from a thermal IPP or a hydel IPP.[10] Assuming that the hydel electricity is cheaper than the marginal cost of buying more thermal energy, Wapda has no other economically rational choice than to purchase hydel electricity.  Any other choice is the equivalent of cutting off one’s nose to spite one’s face.

In defense of Wapda, it may be noted that we are dealing with very large quantities of money. For example, over a thirty year period, every .1 cent increase in tariff means an additional payment of $40 million, for every 100 MW of generation. Clearly, Wapda and the government have a very large incentive to make sure that the tariff for hydel power is reduced as much as possible.  However, at the same time, basic economic facts do not change no matter how large the amounts involved. And the fact remains that Wapda is preferring to purchase more expensive energy than that available simply because it is convinced that the people selling cheaper energy are making too much money.

The other point to be made here is that there is a cycle at work, which works both in a vicious as well as in a virtuous manner. The more Pakistan delays the resolution of these cases, the greater the perception of risk, the higher the cost of capital, and the higher the resulting tariff. On the other hand, if the disputes were resolved, if Pakistan was in a position to show some private sector success stories to hydel developers, the perception of risk would come down, the cost of capital would come down and the end tariff would come down as well.

 ii)     Update and Review feasibility studies for high priority projects

The 98 Policy itself acknowledges “without a proper feasibility study for a particular site specific hydel or indigenous coal based project, it will not be possible to invite competitive bids and receive firm offers.” Despite this fact, private developers do not appear to have any faith in the quality of the feasibility studies being offered by Wapda. It is therefore necessary to have the feasibility studies for priority hydel projects reviewed by internationally respected consultants so that the international investing community is satisfied with the “bankability” of these studies.

 iii)   Authorise Nepra to determine tariffs on a marginal cost basis

The realisation that Wapda is not the appropriate entity to be making tariff decisions with regard to private sector hydel bids also seems to have dawned upon the Federal Government as shown by the amendments to the 98 Policy proposed in the Draft Policy.  It is the consensus of private parties that Wapda is simply not sincere in dealing with private hydel developers because it has a vested interested in retaining its monopoly over hydel power.

The perception of the private developers may or may not be accurate but that fact is not relevant. In marketing terms, perception is reality and Pakistan does not have the time to convince developers of Wapda’s bona fides. A simpler solution therefore is to authorise Nepra to make determinations regarding hydel tariffs, which in any event is what Nepra is meant to be doing. Nepra’s track record – particularly its decision to issue licenses to small and captive power producers – has been well received by the business community and it is therefore much more likely to be accepted as a neutral authority.

Merely authorising Nepra to decide tariffs will, however, not resolve anything if the basis for deciding tariffs is not specified. In other words, if Nepra adopts the same “cost plus” approach adopted by Wapda then disputes will continue to flourish. It is therefore necessary to work out an alternate methodology which is predictable from a developer’s perspective so that private sector parties have a target in mind when deciding whether or not to examine the possibility of investment.

It is not being suggested here that Nepra should override the results of competitive bidding. Instead, what is being suggest is that Nepra should examine the tariff resulting from a competitive bidding process and examine that tariff only to see if its is economically rational, for example by seeing if the quoted cost of a particular project is less than the equivalent cost of thermal power or the long run marginal cost. In this context, it will be necessary to update the 1994-95 study done by Coopers & Lybrand with respect to Wapda’s Long Run Marginal Cost.  Such an approach preserves not only the benefit of competitive bidding but also provides developers with a stable target tariff which would serve as a ceiling for all bids.

 iv)   Allow customs/tax exemptions on import of machinery for power projects

Under the 98 policy, imports of machinery are not exempted from import/customs duties. This change from the 95 Policy is justified in the 98 Policy on the grounds that the previous exemption had rendered uncompetitive Pakistan’s “fledgling engineering industry.”

The Draft Policy proposes reinstituting the tax exemptions for IPPs which is economically correct. The benefit to the state exchequer from the imposition of tax duties is more than made up for by the fact that the state itself will pay for those benefits, and probably several times over.  In any event, tax exemptions should certainly be allowed for such inputs as are not produced locally, e.g. turbines.

 v)     General measures to improve the investment climate

1)     Repeal Section 31-A of the Customs Act, 1969

2)     Introduce an updated and modern arbitration act

3)     Take comprehensive steps to strengthen the independence of the judiciary

4)     Set up commercial benches in all high courts, having original jurisdiction in high value disputes

Conclusion

Pakistan today enjoys a surplus of electrical generating capacity. However, even as per conservative projections, that surplus will disappear by 2005 and by 2008, Pakistan will require an additional 5,000 to 8,500 MW of electrical energy. Pakistan does not have the resources to fund that increase in generation capacity. It is equally evident that Pakistan cannot afford not to have that additional generation capacity.  The development of hydel power takes time. If Pakistan does not take appropriate steps now to develop hydel power, then within a few years it will have no option but to turn to thermal power once again. That fact, combined with Pakistan’s recent experience with thermal IPPs, makes it all the more imperative that the currently dismal state of private investment in the hydel sector be rectified speedily.


[1] As succinctly stated in the Policy Framework and Package of Incentives for Private Sector Hydel Power Generation Projects” released in May 1995 (hereinafter, the “1995 Policy”), “Hydel power being cheaper will provide tariff relief to the consumers, utilize indigenous resources, involve Pakistani entrepreneurs and provide benefits of economic growth to the relatively backward parts of Pakistan.”

[2] Pakistan’s untapped hydropower potential is regularly estimated at 40-50,000 MW by newspaper columnists. GTZ, a technical development agency associated with the German government which is assisting Wapda, however estimates untapped potential at approximately 30,000 MW.

[3] Pakistan’s current power generation capacity of 17710 megawatts includes 5067 MW of hydropower, 150 MW coal, 9676 MW thermal (steam), 2380 MW thermal (combined cycle) and 462 MW (nuclear).

[4] The projects which received letters of support under the 1995 Policy were Matiltan (85 MW), Malakand III ( 81 MW), Ranolia (11 MW), New Bong Escape (79 MW) and Neelum Jhelum (969 MW). Rajdhani (132 MW); Jinnah Barrage (96 MW)

[5] In one case, for example, the Government of the NWFP refused to grant a water use license to a hydel developer.

[6] Malakand III, an 81 MW project originally proposed by a consortium including BC Hydro and SNC Lavalin, both of Canada, is now supposedly being developed by the NWFP Government, while Wapda has signed an MoU with Chinese companies regarding the Jinnah Barrage project.

[7] Dawn, Dec. 8, 2001 “Synergics’ terms for feasibility: Kohala project”.

[8] To take one example, the 98 Policy states that the Government of Pakistan will provide guarantees against “political risk.” However, experience has shown that the Government of Pakistan itself is the “political risk” and the Government cannot obviously guarantee its own good behaviour when it has already demonstrated an aptitude for rewriting the rules in its favor. Thus, while Wapda may discount political risk, that risk is probably the pre-eminent factor in the minds of potential investors.

[9] Lt. Gen. (Retd.) Zahid Ali Akbar, former Chairman of Wapda, stated bluntly with respect to the developers of the New Bong Project that “they will never achieve financial close.”  Similarly, Mr. Javed Rashid, the Chief Economist at GTZ, a German government technical agency assisting Wapda in the hydel field agreed that the New Bong Project was “not doable” at the agreed upon tariff. One may also note that the public announcement on 15.12.01 of the agreement between Laraibe and Wapda on tariff rates had been preceded by a newspaper report on 6.12.01 in New International (“Musharraf to sign MoUs during China visit”) that Wapda had taken the New Bong project away from Laraibe and given it to a Chinese company. In addition, as per a news report in the Nation on 11.10.01, Laraibe had offered a tariff of 3.66 c/kwh as a “last ditch effort.” The determination of the final tariff therefore would seem to have taken place in a somewhat coercive environment.

[10] It has been assumed for the purposes of this study that the government of Pakistan does not have access to the capital necessary to construct hydel projects. The question as to whether Wapda is actually capable of constructing and operating hydel projects more cheaply than private developers has not been examined but there is certainly evidence to suggest that Wapda’s calculations as to the cost of hydel power produced by it are not accurate. For example, the summary produced for ECNEC with respect to the Neelum Jhelum Project calculates the average cost of energy production as 3.03 c/kwh. The same project costs when analysed by an independent economist familiar with the power sector returned an average cost of 5.9c/kwh. One may note that over a thirty year period, the total difference in cost will be approximately US$ 11 billion.

Limited Partnership (Amendment) Act

In Uncategorized on December 18, 2012 at 7:59 am

Partnership Act (Amendment) Bill 20[**]

A

Bill

to amend the Partnership Act, 1932

WHEREAS it is desirable and expedient to amend the Partnership Act, 1932, in order to provide for the formation of limited partnerships and for matters connected therewith or ancillary thereto.

It is hereby enacted as follows:

1.       Short title, extent and commencement. (1) This Act may be called the Limited Partnership (Amendment) Act, 2011.

(2)      It extends to the whole of [NAME OF PROVINCE].

(3)      It shall, unless otherwise provided, come into force at once.

2.       Amendments to the Partnership Act, 1932.—In the Partnership Act, 1932 the following further amendments shall be made, namely:-

 (1)      in section 58, —

 (a)     in sub-section (1), in clause (e), the word “and” after the comma shall be omitted;

 (b)      in sub-section (1), in clause (f), for the fullstop at the end, a comma shall be substituted, the word “and” shall be inserted, and thereafter the following new clause shall  be inserted, namely:-

                “(g)    in the case of a limited partnership:

(i)              that the partnership is limited,

(ii)            the full names, description and permanent addresses of every  limited partner;

(iii)          the sum(s) contributed by each limited partner, and whether paid in cash or in some other form;

(iv)          the general nature of its business; and

(v)            the term, if any, for which the partnership is entered into, and the date of its commencement.”

2.       Addition of a new chapter in the Partnership Act, 1932. In the Partnership Act, 1932 a new Chapter, namely Chapter VII-A shall be incorporated after Chapter VII containing sections 71A to 71M, namely:-

                                                    “Chapter VII-A

 Limited partnerships

 71A.  Definitions. For the purposes of this Chapter, unless the context otherwise requires:

(a)      “general partner” means a partner who is liable for all debts and obligations of the firm.

(b)        “limited partner” means a partner who

(i)         at the time of entering into the partnership contributes thereto a sum or sums as capital or property valued at a stated amount; and

(ii)        who is not liable for the debts or obligations of the firm beyond the amount so contributed.

(c)      “limited partnership” means a partnership consisting of not more than fifty (50) persons including at least at least one or more general partner(s) and one or more limited partner(s).

71B.   Constitution of limited partnership.- (1) Limited partnerships may be formed in the manner and subject to the conditions provided by this Chapter.

(2)      A limited partner shall not during the continuance of the partnership, either directly or indirectly, draw out or receive back any part of his contribution, and if he does so draw out or receive back any such part, he shall be liable for the debts and obligations of the firm up to the amount so drawn out or received back.

(3)      The return on contribution and any other sums or allowances payable to a limited partner in addition or in lieu of such return shall be subject to contract between the partners.

(4)      A body corporate may be a limited partner.

71C.   Registration of limited partnership.- (1) Every limited partnership shall file a statement with the Registrar in accordance with the provisions of this Act.

(2)      In the event of failure to register, in addition to the consequences enumerated in section 69 of the Act, the limited partnership shall be deemed to be a general partnership, and every limited partner shall be deemed to be a general partner.

71D.   Name of the firm.- (1) Every limited partnership shall state the firm name with the words ‘Limited Partnership’ or ‘LP’ as the last words of the name.

(2) Every limited partnership shall mention the firm name as provided in sub-section (1) in legible characters in all its documents, including but not limited to the letterhead, correspondence, notices, invoices, cheques,  advertisements and other publications of the firm.

71E. Contributions of limited partners.- Subject to contract between the partners, a limited partner may, during the continuance of the limited partnership, with the prior written approval of all the general partners —

(a) increase or reduce the amount of his contribution; and

(b) draw out or receive the amount of his contribution, or part thereof.

71F.   Modifications of general law in case of limited partnerships.- (1) A limited partner shall not take part in the management of the partnership business, and shall have no power to bind the firm:

Provided that a limited partner may, either himself or through his agent, at any time inspect the books of the firm and examine the state and prospects of the partnership business, and may advise with the partners thereon.

(2)      A limited partnership shall not be dissolved by the death or bankruptcy of a limited partner.

(3)      Lunacy of a limited partner shall not be a ground for dissolution of the partnership by a court unless the lunatic’s share cannot be otherwise ascertained and realised.

(4)      Where there are no general partners in the limited partnership, the partnership shall stand dissolved.

(5)      In the event of the dissolution of a limited partnership its affairs shall be wound up by the general partners unless the Court otherwise orders.

(6)      Subject to any agreement, express or implied, between the partners:–

(a)      any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the general partners.

(b)      a limited partner may, with the prior written consent of the majority of the general partners, assign his share in the partnership, and upon such assignment the assignee shall become a limited partner with all the rights and liabilities of the assignor.

(c)      The other partners shall not be entitled to dissolve the partnership by reason of any limited partner suffering his share to be charged for his separate debt.

(d)      Any person may be inducted as a partner without the consent of the existing limited partners.

(e)      A limited partner shall not be entitled to dissolve the partnership by notice.

71G.   Registration of changes in partnership.- (1) If during the continuance of a limited partnership any change is made or occurs in

(a) the firm name;

(b) the general nature of the business;

(c) the principal place of business;

(d) the partners or the name of any partner;

(e) the term or character of the partnership;

(f) the sum contributed by any limited partner;

(g) the liability of any partner by reason of his becoming a limited instead of a general partner or a general instead of a limited partner;

a statement specifying the nature of the change shall be sent to the Registrar within seven days of such change in the manner provided in section 60.

(2) If any default is made in compliance with sub-section (1) each of the general partners shall be punishable with imprisonment which may extend to three months or with fine, or with both.

71H.   Advertisement of statement of general partner becoming a limited partner and of assignment of share of limited partner.- Notice of any arrangement or transaction under which any person will cease to be a general partner in any firm, and will become a limited partner in that firm, or under which the share of a limited partner in a firm will be assigned to any person, shall be forthwith advertised in the manner provided in section 72, and until notice of the arrangement or transaction is so advertised, the arrangement or transaction shall be deemed to be of no effect.

71I.    Penalty for furnishing false particulars.- Any person who signs any statement, amending statement, notice or intimation under this Chapter containing any particular which he knows to be false or does not believe to be true, or containing particulars which he knows to be incomplete or does not believe to be complete, shall be punishable with imprisonment which may extend to three months or with fine, or with both.

71J.    Registrar to file statement and issue certificate of registration.– (1) On receiving any statement made in pursuance of this Chapter the Registrar shall cause the same to be filed, and he shall send by post to the firm from whom such statement shall have been received a certificate of the registration thereof.

(2)      The certificate of registration will be conclusive evidence of the facts stated therein and shall be effective as of the date shown on the certificate.

(3)      A limited partnership shall be deemed to have been formed on the date mentioned in the certificate of registration issued by the Registrar upon the statement filed by the limited partnership under section 71C.

71K.  Register to be kept.- The Registrar shall keep, in proper books to be provided for the purpose, a register of all the limited partnerships registered as aforesaid, and of all the statements registered in relation to such partnerships.

71L. Third parties dealing with limited partnerships.- If a third party had previously dealt with a general partnership which then becomes a limited partnership, he is entitled to treat the firm as a general partnership until he has notice of its registration; furthermore, he is entitled to treat any partner of the firm as a general partner of the limited partnership until he has notice that the partner is a limited partner.

(2) Similarly, if a person deals with a limited partnership after a particular general partner has become a limited partner, he is entitled to treat that partner as a general partner until he has notice that the partner is a limited partner.

 71M.  Overriding effect of this Chapter.- Except as provided otherwise in this Chapter, the provisions of this Act applicable to partnerships shall also apply to limited partnerships. In case of any inconsistency, the provisions of this Chapter shall have overriding effect.”

Why the HEC matters

In Uncategorized on December 11, 2012 at 3:27 am

The HEC matters to me – repeat, me – because Sohail Naqvi is my elder brother. However, the papers have already published a paean to his character and I don’t intent to write another one. My job today is to persuade you that the HEC matters even if you don’t give a damn about Sohail Naqvi.

In case you don’t know what’s going on, here’s a quick summary: the Higher Education Commission (HEC) was set up in 2002 as an autonomous, independent body in charge of higher education in Pakistan.  The Federal Government has now decided that it no longer wants HEC to be independent and autonomous. Instead, it has decided that HEC should be run like most other parts of the Federal Government, which is to say under the control of a Federal Secretary who, in turn, reports to a Federal Minister. It has therefore attempted to substitute the current Executive Director of the HEC (Sohail Naqvi) with the gentleman occupying the office of the Secretary, Ministry of Education. Since the ED is the guy who actually runs the HEC on a day to day basis, this means that the Ministry of Education wants to run the HEC.

Let me leave the legalities aside for the courts and jump straight to the more important question: is it a bad idea for the Federal Government to directly run higher education? If so, why?

Let’s begin with the practical answer: (1) with an annual budget of more than Rs. 48 billion, the HEC controls a very large amount of money; and, (2) the current regime features a number of exceptionally sticky-fingered people.  Putting the Federal Government in charge of the HEC is therefore likely to result in the HEC suffering the same bankrupt fate as PIA, the Steel Mills and Pakistan Railways (to name but a few state institutions).

The problem with the practical answer is that it proves too much. In other words, if taken to its logical end, the conclusion is that our elected representatives should not be allowed any fiscal responsibility whatsoever. That conclusion, in turn, is but a short step away from “guided democracy” and other euphemisms for technocractic rule.

The better answer is that every system of government tries to set up a balance between representative democracy and the ability of elected representatives to go crazy in the manner of alcoholics suddenly provided with an open bar-tab. The original safeguards on which our constitutional structure was based have now been destroyed (and, in any event, were not very good). That is why the current democratic regime faces few obstacles in its quest to enrich itself. The entrustment of functions to specialized autonomous institutions (like the HEC) thus represents the best hope we have of mixing democracy with some basic competence in government.

The original scheme of government in Pakistan (as contained in the 1956 and 1962 constitutions) mixed an elected cabinet of ministers with extremely well-paid bureaucrats who had constitutional protection against arbitrary removal. This meant that if and when ministers wanted to go crazy, they would be stopped by the bureaucrats who were protected from arbitrary reprisals (by the then constitutions) and who were paid more than enough to ensure their honesty. That system of protection never made it into the 1973 constitution. Instead, the right of bureaucrats to approach the High Courts was replaced with access to the Federal Service Tribunal. At the same time, the salaries of bureaucrats were deliberately stifled so that over time, the famed mandarins of the CSS became a shadow of themselves.

You may ask then why we don’t simply reintroduce that model and those protections. The answer is that the whole concept of a non-specialist, all-knowing government bureaucrat flitting from post to post, leaving nothing but order and harmony in his wake, is a bad joke. The standard argument in favour of this sort of bureaucracy is the Indian Civil Service, normally thought to have achieved wonders in colonizing India.

The problem with the myth of the ICS is just that: it’s a myth. Yes, the British did some good things in India. However, at the same time, colonial rule was marked by a plethora of lousy decisions (of which the famous Bengal Famine of 1943 is but one example) and sustained economic stagnation. I don’t have the space here to beat that particular horse to death but readers would be well-served by reading William Easterly’s “What Man’s Burden” which does a masterful job of demolishing the “colonialism was all a bed of roses” theory.

The rise of specialized institutions like the HEC – and also like PEMRA, the PTA, NADRA, NEPRA and others – is a deliberate and considered response to this conundrum. It is, in effect, an attempt to revive the ICS of yore via well-paid specialists who have institutional autonomy, reasonable salaries and professional protection. The HEC Ordinance, for example, states that the ED can only be removed for cause (such as proven charges of corruption or inefficiency).  By comparison, the Secretary Education answers on a day to day and minute to minute basis to the Education Minister and can be transferred or made OSD at a moment’s notice.

As the saying goes, no good deed goes unpunished. For every reformer seeking to set up an independent institution, there is a disgruntled representative of the ancient regime trying to ensure that power remains where it has always been. And in this fight, both the bureaucrats and the ministers who normally control them have ample reason to try to ensure that independent institutions are brought to heel.

The current flap over the HEC is therefore not about my brother’s job. Instead, it is but the latest battle in an ongoing fight and the most recent attempt to stifle change.  Ultimately, it’s about a model of governance which offers a realistic hope for progress. The only question is whether that model will be allowed to stay or be gutted like so many other good ideas.