The Nation

The reporter Javaid-ur-rehman’s column begins with the sensational headline, “New taxes to trigger tsunami of price hike” and the paragraphs on the front page of the newspaper repeat this claim.

The Federal Cabinet on Wednesday accorded approval to the flood tax and Reformed General Sales Tax (RGST) Bill and to be presented in the current session of the National Assembly. However, many economic analysts believe that it would trigger a tsunami of price hike and inflation in the country.

But nowhere in the article do there appear statements from any economic analysts who state that the bill will cause any price increases. Actually, nothing in the article supports this idea.

The article does explain that the taxes would increase for individuals who earn over Rs.300,000 and business that earns over Rs.10 Billions each year. According to World Bank data on Pakistan from December 2009, GNI per capita (average income) in Pakistan is US$950, or Rs.81,082.5

Nowhere does the reporter explain how the tax policy will create such price increases if it only affects those who earn over three times the average income.

During a time of financial crisis especially, media should not create alarm about price hikes. Reporters should stick to the facts only and not try to influence political debates also. The article by Javaid-ur-rehman is misleading to readers because it makes a serious claim that is not supported by the evidence presented.

Mian Nawaz Sharif putting the brakes on the constitutional reforms package along with Chief Justice Iftikhar Chaudhry pressing ahead on cases that have been revived following the NRO nullification has set many people on edge. It is a time when the importance of a fair and dependable media becomes obvious – people need to have the facts before them so that they can evaluate events and make informed judgments.

Rather than providing facts about developments in energy policy, economics, politics, and security – The Nation is publishing editorials designed to increase resentment and fear among the people. Consider the following lines from The Nation:

The only sections of society that seem to be blissfully ignorant of this fast approaching frightening phenomenon are, however, the ruling classes and the rich people.

…an overall moral degradation whose most glaring manifestation is the rampant greed to make illegal gains at the cost of the poor…

…the rulers keep devising ways to skilfully avoid paying taxes, but making sure to levy more and more taxes on the public…

To demonstrate how the rulers are complicit with the rich to exploit the common citizen, the government has let the ordinance of the Competition Commission of Pakistan lapse to give a free rein to the monopolist-industrialists to fix prices and apply a further squeeze on the common man’s dying resources.

This reads more like a paranoid political manifesto than a proper editorial in a respectable newspaper. What possible use is this sort of writing other than to whip up anti-government hysteria?

Today, another newspaper, Dawn reported that Moody’s Investor Service has said that the constant challenge to the the government’s authority and legitimacy is harming the national economy and preventing an increase in foreign direct investment – something The Nation has previously reported is key to economic growth.

In times of distress, people look to the media for facts and information. They read editorials to receive some helpful analysis of the facts by learned people so that they can understand what is going on and make informed opinions of their own about their society. In a proper democracy, a free and fair media is the foundation of a successful government. The Nation seems to be more intent on scoring cheap political points than proper reporting, though, and they are playing a dangerous game throwing matches at a tinderbox.

There is one shining light of hope in The Nation‘s editorial. The writers predict that things may come to an explosion in a day that “would not be too far off.” Considering The Nation‘s record of successful predictions, that day may never come.

The present case refers to an article published on March 21, 2010 with no byline titled, “Inflation swings upward.” In this article, the author quotes several statistics from the Federal Bureau of Statistics’ Sensitive Price Indicator (SPI) for the Week Ended March 18, 2010 which can be downloaded here.

All of the statistics quoted by The Nation are based on week-by-week changes. While these are certainly interesting numbers, they are too micro-focused to be able to correctly identify a trend. It is as if a batsman hit a six, and his team was declared winning even though they were behind 272 overall. Better is to look at statistics over a period of time to determine what the trends are.

Monthly, Quarterly,and Half-yearly SPI statistics are published on page 3 of the FBS report, but these statistics were not quoted by The Nation.

Looking at these statistics presents a much different picture than what The Nation tries to paint for its readers. While there has been some increase over recent months, SPI has actually been fairly stable.

Also, SPI is only one metric in measuring economic growth. The Nation appears to have latched onto this as a convenient way to attempt to paint the present government as insensitive to the most vulnerable citizens. However, financial reporting by respected business media paint a very different picture of the economy at present.

BusinessWeek reported on March 11 that “Pakistan Inflation Slows in February for First Time in 4 Months.”

Pakistan’s inflation slowed in February for the first time in four months, giving the central bank room to cut interest rates and support economic growth.

The Nation also does not mention that the statistics that it quotes are for the week ending March 18th. In the weeks prior to this, there was no Finance Minister at the helm of the economy. It was only then that Abdul Hafeez Shaikh was named Finance Minister.

Inflation in the economy is a difficult problem to solve even for nations that are not suffering near-daily attacks from terrorist militants. The media should be presenting good information to the people so that they can make informed decisions and help government leaders to create the conditions for a prosperous economy that benefits everyone. Playing games with numbers and presenting misleading statistics is not only bad journalism, it’s bad for the country.

The Nation points to a drop in the KSE100 stock exchange index as a sign that the economy is on a decline. This is an old trick used to confuse people who don’t know a lot about economics. The fact is, stock markets rise and fall each day. If you select a day with a fall, you can say the economy is bad. If you a day with an increase, you can say its good. Does the increase in the KSE100 today mean that the economy is good? Actually, it is mostly meaningless.

A better way to look at a stock market index (including the KSE100) is to evaluate a long-term trend to see what it says about how institutional investors consider the risks and rewards of that market. Does the market show a long-term trend upwards? Or does it appear flat or (worse) headed down? Below is a one year chart that tracks the KSE100 generated by www.marketwatch.com:

KSE100 Over One Year Time

As you can see, the trend is actually on the increase. This is a good sign for the long term growth of the market and probably the economy as a whole. It does not mean things are perfect, but it also does not mean things are getting worse. Actually, a 100 point drop in a day is volatility that all advanced stock markets experience. Today the index is going up.

Let us look further at what The Nation‘s own Business page reported on the same day:

Listing positive trends Pakistan registered in recent months, the Fund said the exchange rate has remained stable at Rs. 84–85 per U.S. dollar and the international reserves position has strengthened (the banking system’s gross foreign exchange reserves, including the State Bank and commercial banks, reached US$14.3 billion in mid-February, of this total the State Bank held US$10.5 billion).

The early signs of recovery in some sectors and the improved external position are encouraging, although there are risks and challenges to Pakistan’s economic program.

“Economic growth in Pakistan is starting to recover; large-scale manufacturing output has started to increase, the improvement in the global economy has helped manufacturing exports, and private sector credit growth has picked up somewhat as businesses rebuild their working capital.”

As we can see, there are positive fundamental economic indicators in the Pakistani economy. Certainly, foreign direct investment (FDI) is down over the past six months. But that is only one important indicator – not the only one. Why did The Nation ignore the positive reporting in its own newspaper? Was it politically inconvenient?

The Nation is correct that a key obstacle to attracting FDI is political uncertainty and fear of instability. But The Nation presents an interesting solution for these fears:

If the government wants to attract foreign investment, it must ensure more support for its policies by aligning them to popular wishes, rather than trying to please the USA through them. Also, it must work on the specific factors which keep away foreign investors.

This shows a lack of familiarity with attitudes among the worlds economies. Let us refer to an article in today’s Financial Times – a UK financial newspaper – about security and stability in the country.

The capture on Pakistani soil of Mullah Abdul Ghani Baradar is evidence that the message is getting through. It will bring encouragement to those in western capitals who already viewed military campaigns in Malakand and Waziristan to root out Taliban fighters as a turning point for a military with an ingrained hatred of India, the world’s largest democracy.

After decades of supporting militant activities in neighbouring India and Afghanistan this is a big step for Islamabad. After all, the Taliban was in some measure a creation of Pakistan as it sought to expand its influence into Afghanistan at the end of the cold war.

A much bigger step, however, is what happens next. First, the arrests need to move to trials and then convictions. Arrests of militants in Pakistan seldom, if ever, lead to convictions. Pakistan’s neighbours are sceptical that the security forces have the will to do much more than round up the usual suspects and then release them. They talk of “revolving door” arrests in which militants and masterminds somehow have a Houdini-like ability to escape a law ill-equipped to prosecute terror cases.

Second, Pakistan’s army and civil society need to sustain the effort against militants. It may be tempting to answer pressure from the international community with a few arrests and strikes and then ease off. Equally, a strengthening militant threat within Pakistan itself may sap the will to dismantle their networks.

Third,the leadership of militant movements in the region has a remarkable ability to regenerate. Baitullah Mehsud, a formidable leader of the Pakistan Taliban, was quickly replaced by a clansman Hakimullah Mehsud. Hakimullah, who was killed recently by a US drone strike, will no doubt be replaced by another.

Bringing these leaders under control goes to the heart of Pakistan, created six decades ago at the end of British rule of India, becoming a modern unified state. Some analysts talk about Pakistan’s internal dynamics as clan warfare. They say a Punjabi and Muhajir (Muslim exiles from India) elite is in a clash with Pashtun and Baluch in a state still partially formed decades after the British hurriedly quit India in 1947.

The short-term goal is ending the war in Afghanistan. The longer-term ambition is to bring lasting stability to Pakistan and the region.

It is not for this blog to take any position on the wisdom of national security policies. But I will say that if The Nation thinks that abandoning the fight against militants at home and refusing to cooperate with NATO in Afghanistan is the stability that will attract foreign investment, they must be reading some international economic news that I have not seen.

One thing is for certain, though: Editorial writers at The Nation are not reading their own newspaper. If they were, they would not report one thing in the Business page, and then contradict it in their editorials.