Power Crisis in Pakistan

Power crisis in Pakistan has taken a horrible form. In such a situation, voices are being raised from every side whether there is any solution to these problems. If yes, why is it not being implemented? The answer to this question is quite long, and terrible as well.
There are three types of natural resources available in Pakistan in such abundance that if they are exploited, the need for several coming centuries will be fulfilled. One of them is water, which is to some an extent being used in Pakistan. The other two resources are wind and coal, which have not yet been even touched.
China’s Support
Pakistan's eternal friend, China, has expertise on these two technologies. During the last one decade, it has overcome the power shortfall up to the level Pakistan is facing several times within months, not years. In Pakistan also, efforts are being made to do this, and China is also helping Pakistan in this regard. However, the World Bank is standing like an obstacle in the way. It neither implements that project, nor does it allow for it. It is a project of generating power through coal in Thar.
Until five years ago, it was not practicable to produce power through coal in Thar. However, the new technology of gasification has made the crude coal reservoir in Thar gold. Under the new technology, there is no need to dig the coal out of the earth nor is there any need to make stoves. Experts of the entire world agree that 50,000 MW power can be generated from the Thar coal in the next five centuries. Work had been commenced on the project a few years ago. The World Bank objected that if Pakistan produced power there, it would have a negative impact on India. However, India itself is a big country of producing power through coal.
Major Hurdle
In this research report, we have focused on as to why the World Bank has become a hurdle in Pakistan's way to produce the world's cheapest power. What types of plans are formed to meet the growing need of power in the world and how much time they take in implementation? We studied China as a model because it is a friend of Pakistan and also willing to help. In this report, we will also explain what is the cheapest and alternative energy in the entire world? What are the possibilities for it in Pakistan and if work is started on it in Pakistan, how time it will take? Besides talk with Pakistani scientists and experts on energy and economy, research reports carried in world journals were also consulted in preparation of the report.
If you travel along the rough road while moving from Islamkot to Seti Dera village near the Indian border Sindh's Thar desert, you will see official vehicles of the workers busy at the wells of Block 5 moving around. These people belong to the staff of Pakistan's distinguished scientist Dr Samar Mubarakmand and are striving to install 600-ft deep pipe in TP 9 well near Megi Jotar village. Digging of the well has been completed. As the work to put the pipe into the earth is completed, coal in the underground surface will be put on fire through the pipe. The coal reservoir will start burning fast, and from another pipe, gas will still start blowing out. And through this gas, Dr Mubarakmand will start producing power at a small power house established there. Hopefully, production of 100 MW power from that station will start within a few months.
Subsequently, 21 more wells will be dug in Block 5 and every well will produce gas. This would be the cheapest power produced in Pakistan. As for the per unit cost of this power, there are available reports of Planning Commission of Pakistan, Sindh Mines and Minerals Department and Dr Mubarakmand; but, these are Pakistani organizations, and we will refer to an impartial report, leaving these reports aside.
Oracle Coal Fields is a subcompany of Australia's biggest company, Regency Mines, which produces power through coal. It had expressed desire to work on the Thar coal reservoirs, and on getting permission, it got conducted a survey through its engineers. The feasibility report released by Oracle Coal Field explains that the power is generated by getting fire erupted under ground in Thar through the new technology of gasification, the project will take nearly one year in completion, and then power will be generated. It will cost four rupee per unit.
It merits a mention here that the power being used by us in Pakistan costs 10-12 rupees (PRe)per unit in average. This includes hydro power of WAPDA (Water and Power Development Authority) and Karachi Electric Supply Company (KESC) and also the power generated from gas and oil. However, the cost of the power generated through rental power houses is up to PRe 15 per unit.
The coal reservoirs in Thar Desert are 30 percent more than the gas resources in Pakistan. They had been discovered several decades ago, but it was almost impossible to bring them out. According to the report prepared by Dr Mubarakmand for the Planning Commission, the reason was that these coal reservoirs in Thar were 600-ft deep under ground. First, there is 150-ft deep sand and then sea water for another 150-ft, followed by 40-ft soil and again water for another 150 ft. Then, coal starts. Owing to the nearby Run of Kutch and the sea, water is available with so much quantity that it was not possible to dig out the coal. Five years ago, the Australian scientists introduced gasification technology to exploit such sort of reservoirs in the world, and the same technology is being used in Thar.
However, the question is whether Pakistan will succeed in producing power from these coal reservoirs. There does not seem any hurdle in the way technically. However, the World Bank is obstructing Pakistan to work on the project. It says that if Pakistan generates power from coal in Thar, it will harm India. In addition, it is compelling Pakistan to work on a long and costly project worth $6 billion. This project relates to changing of gas pipelines and upgradation of Tarbella Dam. It will not benefit considerably in power generation and Pakistan will come under the debt burden of another $6 billion. In addition to Dr Mubarakmand, the World Bank itself confirms it. We will give its detail in the coming lines.
How can the World Bank prevent a company to establish a power house in Thar? It is an interesting question, but prior to understand this, it is necessary to learn about the nature of the war being fought for power generation in Thar. A detailed information about the vast coal reservoirs in Thar had surfaced in 1990. Later, efforts were again made to dig out coal from these reservoirs, but in vain. The third and successful effort began two years ago in 2009. By that time, power generation from the coal under sea water had started in Australia. China was drilling at large scale in such neglected reservoirs, and the United States had also kicked off aggressive efforts towards this direction. This trend started in 2006, and the Pakistani scientists also became alert at that time. When the gasification technology turned mature, the Planning Commission of Pakistan also submitted its proposal about it to the Pakistani Government. It was immediately approved and work was started under the leadership of Dr Mubarakmand.
When we got information about it from the people in Islamkot and the nearby areas, they said that the government and some foreigners again started moving at the Coal Fields in late 2008 after a suspension of several years. This suggests that work on the Thar Coal Fields had been started in 2008. However, according to Sind Mines and Mineral Department's documents available to us, Thar Coal Field was divided into eight blocks and five of them were given to different companies on contract. The plan was that work will be carried out on the project at a fast pace and within a year, work will be completed on at least 400 wells. It was not very difficult. The exact location of the coal reservoirs had already been identified in a survey. Even over 700 points had also been marked to dig wells in the eight blocks.
Divided Blocks
As we said above that the Thar Coal Field had been divided into eight blocks in the early 2009. The Block No 2 was given to Sindh Coal Mining Company and Engro Chemicals Company. These two companies were to complete the drilling process there in a year and generate 1,200 MW power. These were preliminary tasks, which had to be completed in one year. And for the purpose, 10 percent wells had to be dug in every block, and the remaining wells were to be dug in the coming years. And in this way, the power production would continue increasing, as Oracle Coal Field while making a reference to Karachi has written:
On acquiring the Block 4 in Thar, Oracle signed agreements with Chinese companies so that the drilling process could be started at a fast pace. These companies are already working on such coal wells in China. Second, we have also signed an agreement with KESC, which is facing a shortfall of 500 MW in Karachi at present. According to the agreement singed with the KESC, we will provide it with 300 MW cheap power. Under this accord, it would present us a feasibility report of 300 MW power plant. This plant would be established in Thar. In order to take the power to Karachi, grid line already exists there. In the next phase, as we dig more wells, we will continue increasing power production.
By the end of 2009, everything was moving on rightly in accordance to the schedule. All the companies had started creating their respective environment to work in every block. Dr Murtaza Mughal, president of Economy Watch think tank in Pakistan, conducted a thorough research into it in order to know as to what is the significance to generate power under Thar coal project and if the government can complete this project with its resources. According to Dr Murtaza's report, as it was a mega project and it was being implemented with the foreign collaboration, the Pakistani Government and the Sind Government had allowed all companies to seek funds from foreign agencies with the Pakistani Government's guarantee. Projects of big dams, power generation and related to digging out coal or producing power from it are completed with the loan from the world loan lending agencies in the entire world including Pakistan. So on the survey for the Thar Coal project too, the companies and the Pakistan government spent their resources; however, for project production, decision was taken to acquire funds from the World Bank.
International Aid
Earlier also, the World Bank and the Asian Development Bank had been investing on big energy projects in Pakistan, or at least they give guarantee for it, on which basis, investment on these projects is made. The total required funds for power generation through gasification at the Thar Coal Field are PRe 600 billion.
To collect this amount, a conference was convened in Islamabad in late 2009. In addition to the World Bank, representatives of other world financial organizations and companies working on Thar Coal project also participated. When the conference started, the Pakistan officials got surprised, as the World Bank representatives had taken a U-turn.

Fifth China-ASEAN Forum on Social Development and Poverty Reduction

The opening ceremony of the Fifth China-Association of South East Asian Nations (ASEAN) Forum on Social Development and Poverty Reduction was held on 14 September at Borobudur Hotel in Jakarta. The forum was organized by Indonesian National Development Planning Ministry, office for poverty alleviation of Chinese State Council, and China International Center for Poverty Alleviation; and collaborated by the bureau for poverty reduction of Indonesian National Development Planning Ministry and office for poverty alleviation of China's Guangxi Zhuang Autonomous Region. The region was endorsed by ASEAN Secretariat, the United Nations Development Program (UNDP), China International Center for Economic and Technology Exchanges, Asian Development Bank (ADB), China International Exchange Association, and Australian Council for International Development.
The opening ceremony was moderated by Indonesian National Development Center. Speakers of the ceremony included Agung Laksono, Indonesian Coordinating Minister for People's Welfare; Li Jinhua, honorary president of China Association of Poverty Alleviation; Sayakane Sisouvong, vice secretary-general of ASEAN; ADB Vice President Ursula Schaefer Preuss; and Armida Alisjahbana, Indonesian Minister for National Development Planning. UNDP Administrator Helen Clark sent her congratulatory note. Agung Laksono announced the official opening of the forum.
Focus on Poverty Alleviation
Chinese Ambassador to Indonesia, Zhang Qiyue, also attended the forum. The forum recorded an attendance of more than 100 participants, including persons-in-charge of offices for national and social development and offices for poverty alleviation from ASEAN countries like Brunei, Cambodia, Laos, Malaysia, Burma, Singapore, Thailand, and Vietnam; prominent experts and scholars in the studies of poverty reduction, prominent entrepreneurs, and representatives of non-governmental organizations (NGO) and international organizations.
The theme of the forum was "The Quality of Growth and Poverty Reduction". The forum aimed at studying the analysis framework and interaction mechanism between the quality of economic growth and poverty reduction; sharing the experience of different countries in improving the quality of economic growth to facilitate poverty reduction; and assessing the attempts taken by international development organizations, NGOs, and enterprises in improving the quality of economic growth to reduce poverty.
Li Jinhua introduced to the audience the current situation of poverty reduction endeavor in China. He said that the cause of poverty reduction is now entering a new phase in China. The state has continued to boost its commitment and efforts in alleviating poverty, to improve the system of assuring adequate food and clothing for the people, to stimulate the vitality for development in poverty-stricken areas, and to consolidate the efforts of various sectors in the society in the cause of poverty reduction. China has achieved a great success in this regard. The country has achieved the target stipulated in the UN Millennium Development Goals by reducing the population living in poverty by half. China has made its contribution to the global cause for poverty reduction.
Tackling Financial Crisis
In this new century, ASEAN countries have gradually gotten over the financial crisis erupted at the end of last century and shown a trend of economic recovery and growth. For example, Indonesia achieved an average economic growth of over 5 percent in the past eight years. In addition to Singapore and Brunei, all other member states of ASEAN are still developing countries. Therefore, development remains the core issue for these countries at present. How to reduce poverty in the process of development is one of the most important challenges facing these countries. ASEAN is still one of the regions facing serious poverty problem. The lack of coordination between economic growth and social development has led to the imbalance in development in these countries or in the region. The scope of poverty is more extensive and the extent of poverty is more profound; whereas the foundation for economic development in this region is relatively feeble. A long term mechanism for sustainable development is not established yet. Likewise, China also faces the similar predicament. What need to achieve is to make sure the people's needs for adequate food and clothing, free education, basic healthcare, and shelter are catered.
Quality of Economic Growth
Armida Alisjahbana said that Indonesian Government needs to improve the quality of economic growth using different approaches. At the same time, another challenge for the government is to make more people benefit from the economic growth and make sure the poor can also enjoy the fruits of economic growth. This has also become a hot academic topic and a matter of public concern.
The pressing tasks for Indonesia and other ASEAN countries are to improve the quality of economic growth, to make sure the income of the poor grows faster than the income of the non-poor, to make sure the poor enjoy equal opportunities in employment and basic public services like healthcare and education, to speed up the poverty reduction, and to reduce the disparity between the poor and the rich. We would earnestly promote the self-independent program devised by the Indonesian government to make the poor become rich within a short period.

Deepening International Economic Crisis

The crisis of capitalist system is rapidly increasing. The US economy is the backbone of the capitalist system. The United States is feeling it difficult to maintain this system. The economic rating of the United States has declined for the first time in the history. I will not try to make difficult my point of view through statistics and terminology. It is a simple thing that now the United States as state has nothing. The national growth and state loans have become equal. The annual national growth of the United States was $14.8 trillion and loan was $14.6 trillion. It means that the United States as leader of the capitalist system of the world has become debtor. The state has nothing to provide to its masses.
Obama’s Efforts
US President Barack Obama has struck a deal with Republican Party and decided to increase volume of state loans but the growth could not protect to the extra state loans. Although China has gathered lots of dollars yet the internal differences in the Chinese economy and like capitalist countries, Chinese development benefits are limited only to the upper class.
During the past three years, there were a large numbers of strikes in the history of China. A major part of Chinese foreign exchange income has been due to trade with the United States. However, now, the United States may not be able to purchase a large number of items which put direct impact on Chinese exports.
State of Allied Countries
The condition of the allied countries of the United States, which have capitalist system, is not good. The western media has always tried to hide the demerits and weakness of the capitalist system but now it has become impossible to conceal news in this regard as the disease has worsened. The economic condition of Greece has also become worst. There is shortage of resources with allied countries to steer Greece out of this economic crisis. This situation would also affect United States to a greater extent since it is not a welfare state.
The so-called reliefs to the common people which was being provided has become just nominal after the 80s decade. The welfare states of the Europe are facing problems to provide facilities to their people. For the first time, the demonstrations were held against economic problems in the United Kingdom. The capacity of the people to pay loan of the banks is declining day by day. The source was found to boost the industries through banks loans and plastic money, which now has put greater burden on the people and now they are unable to pay it. So, the demand is increasing in Britain that the banks should share the burden of the loans as they get so much income and the people have little capacity to pay it. Italy is sinking in the economic problems and it will be the next European country to become target of the economic crisis after Greece.
Impact on India
India which was being considered a fast growing developed country has failed to introduce practicable capital distribution system although the middle class achieved opportunities of growth in capital productions which helped in the running of trade and industries there. However, the majority of Indian population is quickly going down the line of poverty and more than 800 million people are living in a very miserable condition. The ruling circles of India are involved in corruption. At the moment, not only the governments are under pressure but all the political parties are also facing crisis.
The opposition pressure is mounting on the government of Congress in India. No one could object to the honesty and character of Indian Prime Minister Manmohan Singh but now he too is facing demands of resignations on account of allegations of corruption. The opposition is not leveling any allegation against his personality and they are saying that he is responsible for the corruption committed by his cabinet ministers and thus he should resign. The Bharatiya Janata Party (BJP) has forced one of its chief ministers to step down to increase pressure on the Congress government as he was involved in a big corruption scandal. The BJP is also not different from others with regard to corruption. The BJP ministers were involved in corruption, which was unearthed after the Kargil war. But then the pressure of the masses was not so strong against the corruption.
However, now, keeping in view the pressure of the people, the BJP has sacrificed one of its chief ministers to justify launching of campaign against corruption and making preparations to put Congress under pressure. The chief ministers of Tamil Nadu and Uttar Pradesh belong to regional parties and their governments were badly involved in the corruption whereas the situation of other states is also not different.
Declining Pakistan’s Economic Resources
The Pakistani economy is depending on capitalist system and the United States, its allies and their controlled financial institutions are providing most of our economic resources. However, the United States and its allies which themselves are facing crises could not provide any more help to Pakistan. Britain itself is failing to satisfy its people and its top priority would be its own people and it is not in a position to provide loans and aid to Pakistan. The United States already is avoiding to provide two-third of the assistance allocated for Pakistan. Similarly, it would be wastage of time to expect more aid from the United States. The International Monetary Fund, World Bank and Asian Development Bank can provide loans on strict conditions and their strictness would increase for the return of the loans. The war on terror has been imposed on us. No other power of the world is ready to share with us the burden of the expenditures of the war against the terrorism. The resources would not allow if any government will want to help Pakistan in this regard. The foreign reserves which are being maintained through loans have become doubtful now after the declining rate of the dollar and this fund of reserves could not go along with us for a long time.
Moreover, there is very little chance to increase income through exports. The Pakistani staying aboard could not save more in this present circumstances as their expenditures would increase to reduce the amount which they are sending to their kith and kin in Pakistan. Recently, a delegation of Pakistani traders had warned the government to avoid holding of foreign exchange in the shape of dollars and transfer the foreign exchange in other currencies, if it is possible, as the crisis of dollars would not be affordable for Pakistan.

Is East Asia Facing Strong Economic Crisis?

The East Asian economy is believed to sustain in facing crisis in the future. Countries in east Asia have prepared joint protocol in facing crisis.
In addition, the high growth with a strong domestic consumption base becomes the stability support in the region. East Asia region has also become a new power in the middle of global imbalance and declining economy in half of developed nations.
Challenge in Developing Financial Infrastructure
Meanwhile, the swiftly capital inflow to Asia is a blessing as well as challenge in developing financial infrastructure in the region, especially bond market. The swiftly capital inflow does not need to be responded with income control, which actually might be a boomerang. This was discussed at the World Economic Forum (WEF) on East Asia, which was inaugurated by Indonesian President Susilo Bombang Yodhogono in Jakarta. The WEF showed 15 discussion panel groups with various topics, such as effort to prevent crisis in Asia, geopolitical risk, maintenance of Indonesia's growth momentum, challenge of food and energy security, infrastructure obstacles, regional disaster relief, and impact of United States-China relation on Asia, in the first day.
Stuart T. Gulliver, CEO of HSBC Holdings, and Michale Buchanan, chief economist of Asia Pacific Goldman Sachs, said that Asia has a huge economic power shown by the high economic growth, strong domestic consumption, rapid export growth, and huge number of savings.
However, this region is also facing some problems. Among of them are the need of a huge infrastructure fund, potential of inflation increase due to increase of food and energy price, and potential of asset bubble.
Minister of Finance Agus Martowardojo, Deputy Governor of Central Bank (BI) Muliaman Hadad, and Rajat Nag, managing director general of Asian Development Bank (ADB), also reminded that the problem of asset bubble potential despite the quite strong fundamental in general.
Martowardojo and Hadad admitted that Indonesia is also monitoring the potential of asset bubble in property sector and financial market, including the stock market. However, the potential is not yet been seen. Hadad said,'But we are concern with the asset bubble problem'.
Nag and Gulliver believes Asian countries are getting stronger in facing a potential crisis in the future due to the prudent macro and micro policies despite facing various risks.
Nag said: 'Asia is getting stronger because the governments join together with the principle of being prudent in managing their macro economy. Asia has proven itself to be more than predicted'. He added that Asia is ready to cooperate to mitigate risks which may emerge in the long run.
CEO of Lippo Group James T. Riady also has an opinion that Asia is far stronger because it succeeded in going through crisis in 1997-1998 and 2008. Asian countries have succeeded in consolidation. He said: 'In general, fiscal is more healthy, capital balance is stronger, and debt ratio to GDP is better, including Indonesia.'
Cooperation of ASEAN+3
This region is also believed to be able to compete with western countries' economic hegemony in which half of the nations are in recession. Funds are flowing from developed nations to Asia. The cooperation of ASEAN+3, India, or Middle East is believed to be the new global balance of power.
According to Minister of Trade Mari Elka Pangestu, Buchanan, and Hadad, Asia is ready to face crisis because there is a cross border protocol mechanism. For example, if there is a liquidity crisis, there will be Asian countries' joint action. Asia is also actively designing global financial safety net with G20.
Pangestu added that ASEAN has made a food security concept, such as preparing rice reserves. ASEAN members or ASEAN+3 members (plus Japan, South Korea, and China) agree on increasing transparency in food and energy stock to prevent speculation on the commodities. Pangestu said: 'There are many joint initiatives, which can be a defense in anticipating crisis'.
Meanwhile, Sehat Sutardja, CEO of United States' Marvell Technology Group, predicted that Asia will grow to be the world's largest economic center in the next decade. Currently, there is a transfer of economic growth machine from the West to Asia.
Sutardja said: 'The transfer is more rapid when China develops low cost manufacturing.' However, Indonesia will play an important role in providing human resources, infrastructure, and technology. Indonesia's population with 230 million people and the better education level will improve the supply of professional human resources who could become leaders of international scale companies.
He said: 'Indonesia will play an important role. I want to watch if improvement in infrastructure with high technology in Indonesia could reduce social gap.'
Capital Inflow
Panelists also discussed about the swifly capital inflow. It is triggered with the low interest rate in United States and uncertainty in Europe.
According to Buchanan and Gulliver, the capital inflow is an opportunity for Asian countries to develop its bond market. Gulliver said: 'This is a great opportunity and, therefore, Asia must develop its financial market infrastructure, especially bond.'
Moreover, Asia has the power because of its huge savings. The funds can be directed for investment in bond market. He said: 'The Western countries do not own huge savings.'
Despite the swiftly capital inflow, it still has risk of sudden reversal. The panelists reminded Asia not to implement income control. What it should do is developing financial market infrastructure, especially bond.
Martowardojo and Hadad also ensured that Indonesia will not implement income control. According to Martowardojo, the government will be focus on strengthening macro fundamental so that funds flowing to portfolio could be directed to long-term direct investment.
Other Asia's power is the huge domestic consumption base. This is called by the panelists as the pillar of power owned by Indonesia, India, and China.
Gulliver underlined that Indonesia has a very prudent policy which makes it relatively immune to global crisis. Low debt ratio and strengthening of rupiah. Strong economy makes capital inflow to Indonesia quite high.
Deglobalization
Meanwhile, Klaus Schwab, founder and chairman of WEF, and Brian A. Gallagher, CEO of United Way Worldwide, reminded nation leaders, businessmen, and civil community leaders about the risk of deglobalization or failure of global system to resolve current complex issues. Schwab said: 'The number risk is currently deglobalization.'
Regarding the need of balancing the unequal income in the world, Schwab said: 'Globalization creates many opportunities, but we do not have the mechanism to understand the causes and the effects from inclusive growth.'
He underlined that mechanism responding the risks in nations, regions, and international communities is frequently unable to resolve complex problems faced by the world. Continuous unemployment problem is one of the examples. Therefore, business model and new policy are needed.
Kishore Mahbunani, dean of Lee Kuan Yew School of Public Policy of the National University of Singapore, added that global financial crisis has shown that old approach and political decision have no effect anymore.
For Europe, crisis can be controlled as long as nations in crisis, especially Greece, succeed in debt restructurization or reprofiling, budget efficiency, and capital injection. He believes that crisis will be over and there will be no second round effect. He said: 'It is proven by the stress test on banks in Europe.'

ASEAN+3 Agrees To Form AMRO

The Association of South East Asian Nations (ASEAN)+3 countries have agreed to form financial surveillance institution, ASEAN+3 Macroeconomic Research Office (AMRO). The forming of the institution is an effort to minimize the dependency on the International Monetary Fund (IMF). The new institution which starts to operate on 1 May 2011 needs initial fund of US$ 120 billion. In the future, AMRO fund is hoped to be larger with the support from China, Japan, and South Korea which also join in the ASEAN+3 cooperation forum.

The new institution will be based on Singapore and lead by Japan and China. During the ASEAN Finance Ministers Meeting (AFMM) in Nusa Dua, Bali, Executive Director of Fiscal Policy Agency of the Ministry of Finance, Bambang PS Brodjonegoro, said: 'We hope that there will be additional members. Therefore, it will enlarge the Chiang Mai Initiative Multilateralization (CMIM) scheme. AMRO and CMIM strengthen each other. If AMRO gets stronger, CMIM also gets larger. The nations believe that CMIM can be a mechanism to maintain economic stability in Southeast Asia.'

Monitor Financial Development

According to Brodjonegoro, the agreement was a result of deputy finance ministers meeting. The institution functions as first defense if ASEAN+3 members face financial problem before involving IMF.

In the long run, AMRO will monitor financial development, especially ASEAN members. Next, this institution will give early warning if one of the members is in a condition in need of support. AMRO will issue a recommendation after receiving request from the nation in need.'

Brodjonegoro explained that there are three pillars which must be built so that financial defense of a nation can survive from pressure of global money market speculative action, which could weaken the currency exchange rate. First, regional surveillance or monitoring effort and financial risk calculation in Asia. Second, Bilateral Swap Arrangement (BSA) or exchange of foreign reserves between two nations. Thirdly, development of the financial sector.

Indonesia is currently developing one pillar, which is BSA agreement as much as $18 billion involving China as much as $ 4 billion, Japan as much as $12 billion, and South Korea as much as $2 billion.

Considering AMRO's initial capital is only US$ 120 billion, this institution can only help in a certain scale according to the CMIM scheme. If the scale of the problem is considered too big, the IMF involvement is needed. AMRO is like a first line of defense for Southeast Asia.'

Foreign Reserves Depletion

Brodjonegoro explained that the size of the case depends on each nation. In a foreign reserves depletion, for example, the size for Indonesia is different than smaller ASEAN member. A US$ 1 billion foreign reserves depletion might not affect in Indonesia, but it might have a large impact in another nation.

In facing the possibility of financial pressure, Indonesia can request for additional emergency fund as much as $31.68 billion consisting of $18 billion from the BSA and $13.68 from ASEAN+3. The emergency fund will strengthen Indonesia's foreign reserves which is currently $102 billion. Elsewhere, Deputy Governor of Central Bank (BI) Hartadi Agus Sarwono, explained that Indonesia will use its foreign reserves according to the need, including to prevent capital outflow. The BI must prepare itself considering the swiftly capital inflow to ASEAN, including Indonesia. However, he hopes that the government also prepares budget allocation as backup.

Infrastructure Fund

In the previous meeting, ASEAN finance ministers have agreed to form a special new institution to support infrastructure development (infrastructure fund). The institution which will be formed in September 2011 will involve Asian Development Bank (ADB).

In the meeting, they will finalized the concept of infrastructure fund. This institution is scheduled to be formed in September 2011. Brodjonegoro said: 'There are still several technical factors to be discussed.'

So far, infrastructure fund has collected fund about US$ 450 to 480 million. In supporting this institution, Indonesia has allocated budget as much as US$ 120 million, while Malaysia as much as $150 million, and ADB about $480 million. He said: 'This is still initial capital, but addition is still open.'

This year, Indonesia is the chairman of ASEAN Finance Ministers Meeting (AFMM). Indonesia also has three opportunities. First, chairmanship position is a mandate and also Indonesia's opportunity to increase its role in ASEAN region. Moreover, chairmanship position is an opportunity to execute a larger regional role, such as ASEAN+1, ASEAN+3, ASEAN+6, and East Asia Summit. Thirdly, the success of holding ASEAN meeting in Indonesia will give a positive impact as a media of promotion and imaging. This success will show that Indonesia is a conducive, safe, and has potential of cooperation opportunity in economy, finance, politics, social, culture, and investment.

AFMM is an annual ASEAN finance ministers' summit, which is held in the first week of April and held by each ASEAN member. In this meeting, there are also bilateral and multilateral meetings between the members. The Ministry of Finance will form cooperation including stock market development, customs, and infrastructure funding.

Catastrophic Bond

In the meeting, ASEAN members started to plan a new scheme insurance or natural disaster relief fund by issuing catastrophic bond. There are two options, which can be implemented: strengthening existing catastrophic insurance or issuing catastrophic bond. It is just the initial observation.

The catastrophic bond buyer must pay the premium just like insurance. Therefore, the collected fund becomes stronger due to involvement of other nations. The target of forming will be as soon as possible. Hopefully, it could form it this year. However, next year is the most realistic target. In the long-run, ASEAN will form a special company to issue catastrophic bond. The company can be private or state-owned. This company issues the bond, while the nations are the buyers. The money must be reinvested because it will be idle.

Greece and Iceland Financial Crisis Pose Warning for Vietnam

Vietnam should study seriously the experiences of two European countries which are Iceland and Greece although at the moment our situation is better. We have Official Development Aid (ODA), which means long term loans with low interest, and the total debit balance is not too high.
A company will go bankrupt if it can not pay off all its debts at the deadline, and so will a country. In 2009, Iceland fell into that situation. This year, Greece is also facing the possibility of bankruptcy.

If a company faced with bankruptcy is not bailed out by creditors or third parties, it can go bankrupt, be forced to sell its assets to clear its debts, and liquidate. It is hard for a country to be liquidated, but there is a high possibility of having to sell properties and selling concessions for lands and mines to clear its debts, or future generations will have to work their hands to the bone, and tighten their belts to pay off the debts.

Greek Syndrome
The Greek government had to raise taxes and reduce expenses to pay the interest and one part of the principal on its national debt of over 400 billion euros. People took to the streets to protest against the policies of tax increases and reduction in welfare programs.

Sixteen European finance ministers seemed to agree on the Greek rescue plan in a meeting in Brussels on 15 March, although the detailed plan has not been revealed.

Fell Into Bankruptcy
It is as simple as a family or a company. A government has to spend money to maintain the government apparatus, national security and defense, and development. Balancing the expenses, the government has receipts. If the expenses surpass the receipts, the government has to ask for loans inside or outside of the country. Printing money to settle will cause immeasurable inflation, which is another form of tax on everybody.

The domestic receipts of the government come from taxes, fees, sales of natural resources such as oil and coal, and other sources such as domestic loans and bond and treasury bill sales.

Foreign receipts include nonrefundable aid, which is not significant, foreign loans (ODA), and commercial loans, for example issuing bonds on the international market as Vietnam has done recently to raise $1 billion.

Ineffective use of loans, corruption leading to loss, loose tax collection and tax evasion, or insufficient taxation can cause debts to pile up and can easily lead to bankruptcy.

The press has said that Greece went bankrupt because of corruption and tax evasion. The credit rating of Greece fell from A- to BBB+, the lowest rating of European countries. A low credit rating makes it even more difficult to get new loans, and interest rates will be high.

Common Condition
Based on the experience of Iceland and Greece, the increasing debt, and the uses of the funds in Vietnam is cause for concern. The credit rating of Vietnam has just been lowered to BB- by Fitch, a global ranking organization providing data, research, and credit forecast independently for the international credit market. Vietnam's trade deficit has been continuously high for many years. Domestic and foreign debts of the government have increased rapidly, although they are reported to be at a safe level (less than 40 percent GDP is considered safe).

According to the Ministry of Finance, as of 30 June, 2009, Vietnam's foreign debt Vietnam equaled 29.8 percent of the Gross Domestic Product (GDP), $23.6 billion. After June 2009, Vietnam signed loans and loan guarantees worth nearly $4.5 billion in total - $1.205 billion with Asian Development Bank (ADB), $927 million with the World Bank, $1.33 billion with Japan, not including $290 million the Japanese loaned Vietnam at the beginning of March this year, and issued $1 billion of international bonds.

If all this money is disbursed, the foreign debt of Vietnam will increase to 35 percent of GDP, not to mention that the total domestic debt of the government is unclear. The concern is that the returns on spending and investment are not high, corruption and the thirst for investment on the part of state agencies have not been reduced, so debt will increase rapidly if there is not strict control.

Perhaps the National Assembly will discuss the bauxite projects, the high speed railroad project, the nuclear power project, and many other mega-projects. The Finance Ministry has just taken a decision on supplementing authorized capital for Agriculture and Rural Development Bank (Agribank) for an amount of more than 10.2 trillion Vietnam dong. All these mega-projects and financings of corporations and state units need huge amounts of money. The federal government is in debt, corporations are in debt, and localities are also in debt.

Diagnose and Treatment Needed
Ho Chi Minh City has just established the Ho Chi Minh City Financial Investment Company (HFIC) to mobilize capital from organizations and individuals inside and outside of the country, issue bonds, raise funds from financial and credit organizations, accept financial assistance, and managed-account funds.

Hanoi City is also developing a proposal for a foreign loan of billions of dollars. Perhaps Hanoi will also follow the example of Ho Chi Minh City to establish its own financial investment company.

Unclear About Other Provinces Activities
Not even mentioning that these state financial investment companies will prevent banks from mobilizing capital, I note that if local state financial investment companies and corporations are not under strict control, and make extensive loans for extensive investment at higher interest rates than the central government pays, it can push the country into debt and lead to the possibility of bankruptcy in the future, and our descendants will have to work hard to pay off the debts.

The thirst for investment can be the condition of any government if there is not strict control and supervision. There are many temptations and apparently good reasons for loans and expenses, but please do not put the burden on future generations.

We must identify clearly what the country must do, and invest in the army, the legislature, law enforcement, and infrastructure, for example, but the government should not do business, nor invest in business.

Pathetic Economic Situation in Pakistan

According to a report, the electricity rates are expected to be increased by 40 percent during the year. According to a report by an English journalist, this is necessary due to the agreements done with the International Monetary Fund (IMF). It has been further stated in this regard that an agreement took place between the Pakistan government and the World Bank and the Asian Development Bank (ADB) on 21 May 2009 that the electricity rates will be increased by 26 percent. While, according to the country report published by the IMF in August 2009, Pakistan Electric Power Company (PEPCO) has suggested an increase of 17.5-41.5 percent in the electricity rates.

Increase in Electricity Rates
In addition, it is being stated in this regard that because of the rental power plants, an increase of 41.5 in electricity rates is necessary instead of a 26 percent increase. In addition, a subsidy worth 55 billion will be removed and the electricity rates will be increased in three different phases. Whereas, Prime Minister Yousuf Raza Gilani has said that price determination of electricity and gas rates is the job of the National Electric Power Regulatory Authority (NEPRA) and Oil and Gas Regulatory Authority (OGRA). He further stated that the government is providing a subsidy of 55 billion rupees on electricity. In the future, will these subsidies stay or not? This decision will depend on the conditions.

According to a second report, there was fighting between the ministers on the issue of increase in electricity rates. State Minister for Finance Hina Rabanni Khar said that because of an agreement with the IMF, it is important to increase the electricity rates. Whereas, Interior Minister Rehman Malik believed that if the electricity rates are increased it would create a law and order problem.

Providing Public Service
These are the reports of the institutions which have been entrusted with the task of providing public service. The basic purpose of presenting these reports was to present the situation in front of the public regarding the state of these national institutions and the people who are at the helm of affairs in these institutions. In addition, what are these people entrusted with the responsibility of running the affairs of the company doing to resolve the problems facing their respective companies and the way in which they are handling the affairs of the company. Also, what is their vision regarding their respective companies and how have the companies changed as a result of the implementation of their policies. If we take the example of the electricity companies, we can easily see how serious our rulers are in addressing the electricity problems. In addition, what policies have they made to address the problem of electricity.

From this situation, it has become evident that the masses or the public are not the real stakeholders in this scenario, instead all these things are being decided on the recommendations and suggestions of the World Bank, ADB and IMF. In reality, these are not recommendations or suggestions, they are the orders given by these economic institutions. What are the conditions of these agreements and are these suitable for the Pakistani people and our nation. The answer to this should be given to the nation by the president and the prime minister. In addition, they should also tell the benefits that will accrue to the masses from this or is this a program to snatch all the benefits or luxuries available to the masses.

On 18 February, the public elected this present government into power so that they at least hold/cease the country in the situation that was created during the Pervez Musharraf and Shaukat Aziz regime. Lawlessness, inflation, unemployment, closure of businesses, worsening of the economic situation, and the continuous load shedding problem and as a result of all this is a continuous pattern of difficulties and problems. In addition, the news that there will be a meteoric rise in the rates of electricity and gas coupled with this news that the prices of petroleum products will be increased after an average of 15 days.

Grim Political Situation
These are certain highlights of the performance of the present government. Leave the political situation in the country aside, which includes the continuous presence of 40 NATO troops on the Pak-Afghan border and the continuous series of suicide attacks, bomb attacks and drone attacks and the general helpless of the government in this regard. This includes the preparations by India of a civil war in the country. This situation has been prevalent in the country since the Musharraf rule, which the public was expecting that the newly elected government will pay attention to these matters upfront. Now after an experiment of two years, the only change or addition that has taken place in front of the eyes of the nation is that there has been an increase in the number of foreign visits. This gives an impression that they have been elected for foreign visits and their lottery has come out in this regard. A debate on other issues is not going to be fruitful.

Various groups of people on this situation comment that the only change that has taken place in Pakistan is that instead of Musharraf and Shuakat Aziz, Asif Zardari and Gilani have taken their place. Otherwise, if the performance of the government is analyzed in the above given categories then one can easily say that no significant change has taken place even the first step towards development and progress has not been taken in these respective sectors. The only difference that has taken place is that notable people like General (retired) Aslam Beg have started saying that drones responsible for carrying out attacks in Pakistan are taking off from the Pakistani soil.

Whereas, in other matters, the pattern of "increases" is taking place whether it is an increase in the prices of daily necessity commodities, increase in the prices of petroleum products or in the rates of electricity and gas. As if the only work given to the incumbent and the past government was to increase the prices of the daily commodities for the common man. We can talk to the president in this regard when he would prefer to come back to his home country. The Prime Minister has already clearly stated that determination of rates for electricity and gas is the job of NEPRA and OGRA.

Declining Industrial Output
It should be remembered that the Prime Minister Gilani had given an indication to the public to prepare themselves about impending electricity, gas and other crisis. Is not this the job of the government to stop this meteoric rise in prices? The electricity has become so expensive that every person from an ordinary citizen to an industrialist is fed up with it. The 40 percent increase in electricity rates is done in one go or in three phases, the impact will be the same in both these cases. The Rental Power Plants (RPPs) are being purchased on rent at the same cost as if they had been formally acquired in one go. Then, why are they being purchased on rent? The Prime Minister should tell the nation about it. In addition, the electricity that will be produced from these rental power plants will be available at the rate of 30 rupees per unit, which will also be a burden to bear for the industrialists and as a result the remaining industries will also be forced to close down. In answer to this Madam Hina Rabbani Khar is saying that due to the agreements with the IMF this increase is necessary. This proves that our rulers are more concerned about IMF and ADB, while they are not even concerned about the general public.

While presenting the current budget, she criticized the previous government which she was a part of. The economic and financial policies of the current government, recently presented by her, are also in front of us. Being the state minister for finance, her statements cannot be considered to be her personal opinion; in fact her statement was a representation of the official stance on this issue.

Increase in the Inflation Rates
From this situation, it is pretty clear that no change that has taken between the past and the present government except that it is a mere change of face, increase in the inflation rates, and the surrender of the nation and the public in front of the IMF and the World Bank. In addition, those groups that say that the present government is merely a continuation of the past government, and the present government like the past one are the commission agents of the IMF and the World Bank, their point of view is quickly turning into a reality in the light of these facts. Whether it is the president, prime minister or the economic advisors of the government, all seem to act as the spokespersons of the IMF and the World Bank. This is also pretty evident that the nation and the public will be on the losing end as a result of these deals and agreements. These people are the persons assigned with the task of protecting the national interests and it is their duty of providing the public with the basic necessities of life. So, whom should we complain in this scenario?

At least, the increasing inflation in the country and the general worsening situation in the country should be addressed; otherwise, analysts say that if the government persists with such policies for another one and a half year then such a civil uprising and unrest will take place in the country which the government will be unable to control. The place in history that our current rulers shall have will be determined by their own decisions.