HELP ALTERNATE SOLUTIONS INSTITUTE BUY ALSAM EFFENDI'S BOOK,
How to End All Wars Forever

Aslam Effendi, an old and unsung Libertarian of Pakistan, has written three books on free market philosophy: HOW TO END ALL WARS FOREVER, HARD FACTS OF HISTORY, and ECONOMICS FOR THE CONFUSED. When no publisher agreed to invest in the project, he spent out of his own pocket to get HOW TO END ALL WARS FOREVER printed. But, for want of a distributor, this book which has been praised as a classic remained dumped and could not find its way to the market. For details, read 'Aslam Effendi: A Free Marketeer in Pakistan' Alternate Solutions Institute, Lahore, Pakistan, intends to purchase all the copies of the book from Aslam Effendi to make it available to the right persons and to compensate the author as well. Help us buy the book and share our efforts to promote free market philosophy in Pakistan and abroad.

Contact at asinstitute@hotmail.com & khalilkf@hotmail.com

CELEBRATING AUGUST 14! WHY?

A policy of freedom for the individual is the only truly progressive policy.
F. A. Hayek

Just give a thought to it:

Freedom means freedom from something, and freedom to do something.

Is the freedom we celebrate real? Or, is it only a change of Rulers, from English or Hindu to Muslim, a change of State Apparatus only?

Is our life safer now? Are our property and earnings safer now? Are our rights and freedoms securer now? Are we freer now to pursue a life of our choice and to seek our happiness?

We know nothing is safer, securer or better now. Any person from the government or various state agencies can persecute and kill us; they are trespassing on our rights and freedoms day and night; mafia groups and governments are confiscating our property; our earnings are disappearing under heavy taxation and unjust monetary policies; government control and regulations are ruining the economy; government monopolies such as WAPDA, KESC, PTCL, SNGPL, NNGPL, Post Office, PTV, and the Great Robber, CBR, are looting our hard-earned money. Politicians both armed and unarmed are exploiting us in the name of this or that slogan; what they are up to is to grab the money we earn and are forced to pay as taxes; that is why, the taxes keep on rising with every new government. Isn't it a form of economic slavery?

What are we celebrating today, then?
Just give a thought to it!
Would you?!

PRIVATIZATION: PROVIDING BETTER SERVICES WITH LOWER TAXES
By Robert W. Poole, Jr.

[This pamphlet was originally published in 1988 by International Society for Individual Libertyas part of its educational pamphlet series.]

All around the world, government services and enterprises are being shifted into the private sector via a phenomenon known as privatization. In Britain, nationalized industries such as British Airways and Jaguar have been returned to investor-ownership via stock offerings. Similarly, in Chile, hundreds of firms nationalized by the Allende government have been returned to private ownership.

But privatization goes further than simply re-turning once-private firms to the business sector. Margaret Thatcher's government privatized over 1.5 million council houses - public housing units which were created by the public sector. It also privatized the major airports, the gas utility, and the telephone system - all of which had always been in the public sector. Likewise, the Japanese government is privatizing Nippon Telephone and Japan National Railways, which have been fixtures of the public sector.

So in a very real sense, privatization is actually dismantling big government, not merely correcting the excesses of socialist regimes.

THE MOVE TOWARD PRIVATIZATION

Privatization was first identified as a phenomenon in the mid-1970s in the United States when the trend of municipal governments to purchase service from private firms under contract was discussed in Reason magazine. This ultimately led to the creation of the Local Government Center by Mark Frazier and Robert Poole in 1976 - the first think-tank devoted to researching privatization. In the late 1970s, LGC's materials came to the attention of Ronald Reagan's speech-writers, several of whom went on to hold White House domestic policy positions and promote privatization within his administration. Also in 1977-79, LGC privatization materials began being used by British local council members John Blundell and Michael Forsythe. This lead to a wave of local-service contracting-out which began at Wandsworth. Inspired by t hese developments, Eamonn Butler and Madsen Pirie set up the Adam Smith Institute in London in 1979. They began extending privatization concepts to state-owned enterprises, and their ideas soon began to influence a newly-elected Margaret Thatcher.

Privatization can take several different forms. A government function can be partially privatized if some aspects of it are shifted away from state control. For example, if a service formerly financed by taxation is shifted onto a user-fee basis (whereby only those who use the service pay, and in proportion to their use), we can accurately say that the financing of the service has been privatized. On the other hand, if a city service such as street-sweeping was formerly offered directly by the city government (and paid for by taxes) but is now offered by a private firm, selected competitively for a two-year contract, we can say that the delivery of the service has been privatized.

Full privatization, then, involves the transfer of both the financing and production to the private sector. At the municipal level, this can mean either the withdrawal of government from the field, letting private firms take over (as in, say, ambulance service or garbage collection) or the sale of the government operation to private owners (for example, a municipal hospital, sewage-treatment plant, or transit system). At the national level, full privatization generally means the divestiture of an enterprise or asset to private owners.

WHY PRIVATIZATION?

Why did privatization develop in the late '70s and become a worldwide phenomenon in the '80s? The fundamental reason is that people began to conclude that government had simply gotten too big, bureaucratic, and inefficient. The waves of local privatization in the United States were triggered by the tax revolt at the state level, typified by citizen-initiated tax-cut measures such as Proposition 13 in California (1978) and Proposition 2½ in Massachusetts (1980). With their tax revenues limited, state and local governments were forced to look for less costly ways of delivering needed services - and privatization met that need. Although England did not have a tax revolt as such, its local government costs were so high, even compared with other European welfare states, that once privatization slashed costs in Wandsworth, people in other cities and towns demanded similar economies.

Why does privatization lead to lower costs and more efficient operations? The fundamental reason is the difference in incentives between public and private sectors. A tax-funded government agency differs profoundly from a business. The former has a legally-guaranteed monopoly on its services (e.g., picking up a city's garbage). It is guaranteed its revenues, regardless of performance. And its workers are protected both by unionization and by a civil service system which virtually guarantees continued employment and pay increases, regardless of performance. In sharp contrast, a private firm in a competitive market must win over its customers by offering them a superior combination of performance and price. If it fails to deliver adequately, its customers can go elsewhere. Like the prospect of being hanged, the prospect of losing one's customers tends to concentrate the mind. Private firms producing public services - even firms which competitively win exclusive contracts for a number of years - therefore operate far more efficiently than government monopolies.

This may sound fine in theory, but what about the evidence? After all, public-employee union critics make the charge that privatization must lead to higher costs, since a private firm will have all the same expenses as the public agency it replaces - plus the added costs of advertising and profits.

The evidence shows overwhelmingly that the theory, rather than the unions' claim, is correct. Every controlled study comparing public versus private service delivery shows lower costs (for a given level of performance) for private enterprise. This includes nationwide studies of garbage collection in the United States (1976) and Canada (1985); of fire protection (1976, Arizona); public-works services such as street sweeping, pavement patching, and traffic signal repair (1984, Southern California); transit services (1986, US); school bus transportation (1984, Indiana); airlines (1977, Australia); naval ship repair (1978, US), and many others. In these statistically valid studies, the cost of government services is typically 30-40% to as much as 100% higher than private services.

At the national level, in developed countries such as England, France, and Japan, privatization of state-owned enterprises has proceeded from a mixture of ideological and fiscal motives. Conservative political leaders in those countries concluded that the public sector had grown far too large and costly to operate (given that most state-owned industries operate at a loss). Economic analysis, much of it by libertarian Public-Choice economists, had persuaded them that political factors would usually force state enterprises to operate in wasteful, non-businesslike ways over the long run (e.g., by preserving obsolete jobs for political reasons). Thus, rather than try to reform those industries, it would be far better to get rid of them altogether.

What has made privatization far more attractive, however, even to socialists such as Spain's prime minister Felipe Gonzalez and David Lange's Labor government in New Zealand, was the realization that large one-time cash infusions would be possible from the sale of these industries. To be sure, there is little market for shares in a large loss-maker such as British Coal or Japan National Railways. But if a new management team can be brought in and given a free hand to slash costs and rationalize operations prior to privatization (as in the case of British Airways, Jaguar, and Rolls-Royce), the market value of the company can be quite significant. As of the end of 1988, the British government had realized over $40 billion in one-time revenues from privatization of council houses and state industries. The New Zealand government realized over $14 billion from its privatizations, and the Japanese government over $100 billion just from Nippon Telephone and Japan Air Lines. These are revenues which help to reduce budget deficits without tax increases.

By 1989 the idea of privatization had been embraced by many other countries. The Canadian government sold off its two aircraft firms (DeHavilland and Canadair) and Air Canada. Bangladesh has sold its textile mills and banking industry. Malaysia and Singapore sold portions of their state airlines. Turkey has privatized the Bosporus bridge and is planning to sell off its airline and other state industries. Argentina, Brazil, Chile, and Mexico have begun to sell numerous state-owned industries, as a way of coping with their foreign debt problems. Since such sales reduce government expenditures (to cover operating losses) while also bringing in one-time cash receipts, the US. Agency for International Development, the World Bank, and the various international development banks have all endorsed privatization as an important part of debt-reduction strategies. In short, the privatization revolution is sweeping the world. As production and services are shifted from inefficient state monopolies to competitive private enterprises, consumers gain greatly from more responsive providers offering lower-priced goods and services. And taxpayers win big - thanks to a shrinking of the size and cost of government.

[Robert W. Poole, Jr. is founder of the Reason Foundation, a libertarian think-tank in Los Angeles, California. He was co-founder of the Local Government Center (now a division of the Reason Foundation) and is the pioneer privatization researcher in the United States. Poole serves as publisher of Reason magazine and is editor of numerous public policy books. He is a member of ISIL's Advisory Board.]

HOW TO REDUCE HIGH ELECTRICITY TARIFF?
By Dr. Khalil Ahmad

Water and Power Development Authority (and KESC - KARACHI ELECTRIC SUPPLY CORPORATION) is one of the state monopolies which have made a hell of Pakistan. A few months back, a responsible official of WAPDA admitted that the power rates in Pakistan are very high. On another occasion, Secretary Ministry of Water and Power stated that pubic concern is increasing due to the unaffordable electricity tariff whereas life is now dependent on cheap and reliable energy. He admitted that high electricity tariff is badly affecting the general public and industrial and agricultural sectors of the country which demands an immediate need to bring the tariff down. In view of this situation, the Federal Government has constituted a Task Force to study the issue of High Electricity Tariff in full perspective and formulate concrete proposals/recommendations for possible reduction in the Tariff. The Task Force is required to submit its report within two months. As the Task Force wished to associate the experts/specialists as well as general consumers by 'soliciting public comments', an ad to this effect was published in the daily newspapers inviting members of the public to give their opinions/suggestions on the possible measures to reduce the Electricity Tariff by July 31, 2003. Taking advantage of this opportunity, the ALTERNATE SOLUTIONS INSTITUTE, LAHORE, submitted its view of the problem of High Electricity Tariff in which an end to the monopoly of WAPDA and KESC was suggested, privatization and de-regulation of power sector in Pakistan and the role of market in bringing the tariff down was highlighted. Given below is the text of the paper submitted to The Chairman Task Force, Private Power& Infrastructure Board, Islamabad.

In response to your ad in the newspapers dated July 6, 2003, Alternate Solutions Institute, Lahore, is pleased to offer the following opinions/suggestions on the issue of Electricity Tariff.

1. No economics has as yet discovered or devised a method to determine the price of a product or a service in the absence of a market where an open competition exists. Or, the monopoly determines the prices arbitrarily since it cannot know the price at which customers will willingly be purchasing its product or service. Under a monopoly, customers have to buy perforce the product or service provided by the monopoly at any price. As a monopoly exists beyond and outside of the market; the prices of its products and services are not determined by the market and in the market, rather it determines, and, thus, distorts the make-up of the market. Same is the case with WAPDA and KESC.
2. So, the question of 'suggesting possible measures to reduce Electricity Tariff' is an uneconomic one.
3. However, as far as the high electricity tariff is concerned, let us first look at the causes existing outside and within WAPDA and KESC.
1. MONOPOLY of WAPDA and KESC over generation and distribution of electricity.
2. Absence of competition.
3. Non-billing or non-payment of bills in most of the areas of the country which include especially NWFP, Azad Kashmir, and Baluchistan. 'Kundi System' (stealing of electricity) in many areas with or without the connivance of the WAPDA and KESC staff.
4. Unskilled and incompetent staff.
5. Top to bottom corruption in WAPDA and KESC.
6. Running of WAPDA and KESC unlike a business.
7. Taxes, surcharges, etc. other than the electricity tariff.
8. Unjust contracts with IPPs (Independent Power Producers) to buy electricity at a fixed non-market rate.
4. Removing these causes may result in reducing the high electricity tariff.
5. Although, it is not easy to do away with the present scenario because so many interests are vested in it, but a policy of de-regulation for power sector might be a good step to start with.
6. In view of the above considerations, it is suggested that:
   1. As a first step, the distribution of electricity be privatized at small scale. The parties that distribute electricity in their respective limited areas will ensure billing and its payment. This will extraordinarily minimize electricity theft and non-payment, and by making the staff accountable and efficient, will result in better customer services.
   2. Private parties be allowed to generate and distribute electricity independently of WAPDA and KESC. This will create an environment of competition forcing WAPDA and KESC to provide cheaper electricity and better service to the customers.
   3. Government be asked to eliminate or reduce the taxes and surcharges on the use of electricity by WAPDA and KESC customers.
   4. The contracts with IPPs be declared null and void, and WAPDA and KESC be stopped to purchase electricity from IPPs and they be asked to sell and distribute electricity on their own. Though, this will incur WAPDA an immediate loss but in the long run by creating competition will result in reduced electricity tariff.

congratulations,on initiating free pakistan newsletter, please try to reproduce views and discussions instead of news items, thanks

zahid islam
ex-national coordinator, liberal forum-pakistan
[Lahore, Pakistan]

This is an excellent newsletter.

Latest news on JG: the Bulgarian edition was serialized in a newspaper, Sedem Weekly, with economist commentaries, and drew such great response from readers that their circulation soared to second highest in the nation. The Kiswahili and Urdu editions will be completed soon and the Farsi edition has just been translated and received approval of the censors to be published. This is a great achievement in Iran!

Also the book was used by 120 students in an English language program in India and another 50 students in Lithuania. The UK Commentary edition is nearly complete for publication to the Commonwealth nations in December. The ISIL conference led to additional progress on projects in Turkey, the Ukraine, France, Greece, and new German, Russian, and Chinese editions. And the flash animation is going great guns in several languages: Link

Ken Schoolland
[Hawaii, USA]

Congratulations on your new institute! Best wishes for your important work!

Regards,
Lisa Mac Lellan
VP, Public Policy
Pacific Research Institute
San Francisco, CA USA
Web: www.pacificresearch.org

It is perhaps a right moment today that we should redefine the role of the state. Going through modern day discoursive literature on freedom, one finds a pendulum effect. We are made to think that Statism is worse than what we knew before. Freedom and liberty are given the meaning of the opportunity to exchange goods and ideas freely without the nose and hands of the state.

This is exactly an opposite pendulum of Statism where one's salvation depended on the State (socialist / colonial / stars & stripes) only a few years ago.

As substantive thought for action cannot arise out of this advertisement-like Anti - State sloganism, I think we should create ideas which would redefine the role of the state so at least there should be some modus operendi to achieve the desired target of real freedom and liberty.

It can be a good idea that the role of the state be limited and confined only to ensure the prevalence of justice of all types, civil, economic, social, societal, political, and all.

We should come up with ideas on achieving this end.

As regards the "Market" and "Globalization" concepts. These are terms of economics. Voluntary exchanges take place in the market. At this juncture it will be right to voice the concern of those who "are afraid to trade". For an example, I have to carry an exchange transaction of a wrist watch. It is imperative that there should be someone who has the intention to buy. But more imperative is the availability of Cash he is willing to spend to buy my watch. If you don't have cash you won't buy. The point is that the economists must also highlight that PURCHASING POWER is also a COMMODITY and it can and MUST be produced. If we probe into the economic history of rich countries, we may be able to find that circumstances were provided to everyone to make products and ideas which made money.

If such circumstances are not provided to the poor, there will be no even playing field and manufacturing activity will accumulate and re-double with those who are already on the higher ground.

An innovative thinking is required to work out an economic equilibrium which would enable to deliver the required goods fairly.

Thanks,
Farooq Malik
[Lahore, Pakistan]

Letters from the Press

THE HIGH POWER TARIFF
[Zakee Saadat, Lahore, Pakistan]

This refers to a new item about the reduction of per unit rate of electricity by WAPDA and KESC. This will not only lessen the burden of tariff on consumers but also reduce the cost of production and provide competitive prices of exported goods. WAPDA and KESC have failed to overcome line losses, the reason of this is that the employees of WAPDA feel it their right to use electricity free of charge. If we look at the employees of other departments with services like telephone, education, railway and other such government employees, the employees of WAPDA are better paid with handsome allowances. WAPDA must declaim it income and expenditure statement for public. This will help the public to give suggestions to reduce tariff.
[The News International August 13, 2003]

PTCL LINE RENT BONANZA
[Zahida Usman, Rawalpindi, Pakistan]

This is with reference to the comment of the minister for information technology and telecommunications in the The News of August 7. Replying to a question on reduction in fixed line rent of PTCL, the minister said, "PTCL contributes Rs.12 billion to the national kitty through line rent alone."

Now, I would suggest that this contribution to the national kitty (the bottomless pit) can be doubled easily by increasing the line rent to Rs.600 per month notwithstanding the rampant corruption in the PTCL. Fake bills based on enhance local calls which cannot be checked by the consumers can also help in this contribution. The kitty and its handlers will be very happy munching at the pile of more than 24 billion every year. This is a suggestion for the kind consideration of the minister and the PTCL.
[The News International August 12, 2003]

WHO WILL PROTECT WHOM?
[Afzal Rahim, Peshawar, Pakistan]

If the custodian of law could not be protected (referring to the Sialkot incident in which a number of civil judges were made hostages and then killed in a rescue operation), the common man should not complain of insecurity! [The News International August 5, 2003]

LET PEOPLE ENJOY WHAT THEY LIKE
[Farooq Ahmad Khan, Rawalpindi, Pakistan]

Our worthy information minister has said the other day that he would not allow Indian channels o TV till he was minister in charge. May I draw attention of the minister towards millions of Indian movies present only in Bara Market (few steps away from his Lal Haveli)? Are there ghosts in this country who are so fond of Indian music and movies? Come on Mr. Minister! Let people enjoy what they really like! [The News International August 13, 2003]

TAX PAYERS' MONEY
[Mohammad Ali Awan, Islamabad, Pakistan] If our president (who does everything under the banner of supreme national interest), our prime minister, all the generals and the ministers donate only one car each from the entourage of their motorcades, the money generated can be used to fund the relief work for the flood affected people of Sindh and Balochistan. I think the amount would even surpass the amount of funds needed for the said purpose. Aren't these cars and all the benefits our VIPs enjoy from the tax payers' money? But alas! Do we have leaders who can sacrifice even this much for anything to be in the national interest of Pakistan?
[The News International August 13, 2003]

EXPORT PROMOTION PROBLEM
[S.M.F. Hasan, Lahore, Pakistan]

Recently the finance minister urged Pakistan's ambassadors to promote export of Pakistani goods to the countries of their assignment and to persuade foreign entrepreneurs to invest in Pakistan. As a banker, financing the exports and imports in USA, the minister should know that exports are not increased by diplomatic initiatives but by the quality and competitive prices of the goods. This really was realized by China and now it rules the markets of the world.

Unfortunately, both on quality and the prices, the government has played a negative role. There is no control on quality and the prices which due to exorbitant increase in cost of inputs are patently non-competitive. Unless these basic maladies were sincerely treated, it would be naïve for the ministers to pass on the consequences of his awry policies to the diplomats.

As for luring foreign investment, it comes not through persuasion but in pursuit of potential profit. The multinationals have their intelligence sources but to assess the investment opportunities in different countries. They know that in Pakistan. In spite of very low lending rates, no local entrepreneur is investing in industry and non-performing loans stand at 260 billion, mainly because of growing poverty and decimation of demand for products following the faulty policies of the government. A people who cannot buy bread can hardly purchase consumer goods. And, the international investors, unlike the people around the minister, cannot be mesmerized by prevaricated statistics and fabricated figures to construct castles on sand.
[The News International August 12, 2003]

FreePakistan News-Briefs

A MONOPOLY SPENDS BIG
The Chairman of WAPDA, a government monopoly, has revealed that WAPDA is spending Rs.1 billion annually for the provision of quality healthcare facilities to its employees and their families.

WAPDA TO COLLECT BILLS FROM THE TRIBALS
Pakistan has promised international donors to collect Rs.2 billion from 7,000,000 tribals for electricity bills this year and would not allow the law and order consideration to stop action.

WORLD BANK LINKS LENDING WITH REFORMS
The World Bank has linked its lending size for Pakistan with the steadfast implementation of reforms. If reform process continues during the next three years 2003-2006, new financing commitments of the Bank could go up to $900 million per annum including $600 million under the concessional IDA facility and $300 million under IBRD loans. However, in case of hiccups in policy implementation, the financing level would fall to $400 million per annum, and in case of difficulties in executing major structural and institutional reforms, the Bank would only lend $200 million annually.

INSATIABLE TAX APPETITE
Governor State Bank of Pakistan says that country needs 3, 000, 000 tax payers to get rid of all kinds of surcharges (amounting to Rs.75-80 billion) the government is compelled to impose to meet budgetary requirements.

TAX OMBUDSMAN WARNS CBR
The Federal Tax Ombudsman has termed the action of the tax authorities as maladministration asking the CBR (aptly dubbed by the tax payers as Central Board of Robbers) to initiate an enquiry into the matter to find out those responsible for tempering with the records.

HEAVY TAX LEVIED ON FACTORIES & BUSINESSES
The district government of Lahore city has decided to impose heavy tax on factories, mills and other business concerns. The tax license fee has been imposed on 53 business categories. The maximum license fee has been fixed at Rs.60, 000 and minimum at Rs.400. Motor-cycle rickshaws plying in the city has also been brought into the tax-net.

WITHDRAW BANK PROFIT REPORTING
Private sector has demanded the government to withdraw the circular regarding reporting of profit by commercial banks to tax authorities.

KCCI OUT FROM WTO TASK FORCE
The President Karachi Chamber of Commerce & Industry has resented the omission of a KCCI nominee from the Special Task Force set up in the Ministry of Commerce to meet the challenges of WTO agreement which will come into force on January 1, 2003.

SERVICES TAX POSTPONED
The government has dropped the program to impose services tax on doctors, engineers, and consultants in view of the possible reaction from the professional market.

A SEVERE TAX ANOMALY
A severe anomaly that exists in the income tax laws applicable to importers and traders is causing importers end up paying more tax even though dealing with the same commodity as traders.

SEARCH WITHOUT WARRANT A 'DEATH WARRANT'
The Karachi Chamber of Commerce & Industry has termed SRO 507(1) 2003 as a 'death warrant' for the industry and demanded it be withdrawn immediately. The President KCCI has criticized the search without warrant allowed under section 40A of the Sales Tax Act 1990 and maintained that the argument of tax authorities that the powers conferred under the section are exercised exceptionally in cases of tax fraud is not tenable in a civilized society.

CONVICTED OF GRAFT
The judgment of a Swiss court reads as: "Benazir Bhutto was acting in criminally reprehensible manner by abusing her role in order to obtain for herself or her husband considerable sums in the sole private interest of her family a the cost of the Islamic Republic of Pakistan . . . by taking useful means to enrich herself or her husband by way of a contract concluded for the account of the State which she assumed the supreme direction Benazir Bhutto was guilty at least of acts relating to the unfair management of the public interests which she had the mission of defending . . . If Benazir Bhutto had acted fairly it would not be herself or her husband but rather the State of Pakistan which should have been benefited . . . Since the unfair management of public interests is a crime and that it does not matter whether this crime was committed abroad, Mr. Asif Ali Zardari may be reproached in Switzerland for having committed acts of laundering money arising from the criminal activities of Benazir Bhutto . ."

ARRESTED FOR WATCHING OBSCENE MOVIES
Lahore city police has arrested as many as 28 persons on charges of watching obscene movies.