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May 22, 2015

Date: May 22, 2015

A Friday rundown of Pakistan’s top policy headlines on JI’s radar this week

Intelligence Sharing

An agreement this week between Pakistan and Afghanistan to devise a mechanism to share intelligence is a welcome move that may turn the tide in a turbulent relationship between Kabul and Islamabad since over a decade.  The decision comes right after high-profile visits to Kabul by Prime Minister Nawaz Sharif, Army Chief Raheel Shareef and DG ISI Lt. Gen. Rizwan Akhtar, to engage with the Ghani administration on matters related to regional security.

The need for intelligence cooperation was noticeably felt in the aftermath of the Peshawar school attack, when a flurry of exchanges between Islamabad and Kabul took place aimed at apprehending the alleged perpetrators and senior TTP command believed to be hiding out in eastern Afghanistan.  Increased intelligence cooperation is a vital precursor to closer counterterrorism cooperation, as both sides step up the drive to clean their sides of the international border of violent non-state actors and reclaim ungoverned territories. Crucially, the latest MoU states that both sides will identify common enemies and carry out joint operations against anti-state militants – a reflection of President Ashraf Ghani’s desire for a change in Kabul’s relationship with Islamabad,ending the legacy of suspicion.

The sincerity of cooperation between intelligence agencies of the two states, however, will be a measure of the resolve among governments to put history behind them. President Ghani is also faced with resistance and cleavages within his domestic political coalition in Kabul, where lawmakers and media commentators have accused the government of selling out to Islamabad. Going forward, leaderships in both countries will have to demonstrate effective navigation through domestic politics to normalize relations and tackling underlying policy challenges.

Budget Preview

At a meeting of the Senate Standing Committee of the Finance and Revenue this week, the Ministry of Finance disclosed key features of the Federal Budget 2015-16 waiting to be announced early next month. Following a controversial passing of the Gas Infrastructure Development Cess– purportedly to raise revenues missing on other targets – the government is also considering FBR proposals to introduce taxes on foreign remittances and real estate, both known to be channels that legalize black money. Additionally, tax evaders and non-tax payers would be subject to higher withholding taxes, and the Computerized National Identity Card will be used as the National Tax Number for documentation of the potential tax net.

With consistent monitoring under the Extended Fund Facility of the IMF, there appears to be some concerted effort on part of the FBR to ramp up the economy’s revenue base. There has been pressure to gradually phase out tax concessions, prompting the Finance Minister to curb the FBR’s powers by withdrawing their ability to single-handedly issue tax exemptions through Statutory Regulatory Orders (SROs). Lower oil prices have reportedly affected revenue collection, but allowed the government some space to cut back on power sector subsidies, with potential savings of up to Rs.250 billion.

All the same, provincial revenue mobilization remains low, with a collective contribution of only 7 percent in overall revenues despite a large tax base. It remains unclear when the 8^th NFC Award will be announced, but growing consensus holds that mechanisms enhancing provincial tax collection be introduced, as well as rectifying taxation overlaps levied by the federation. The government must expedite work on the long-overdue population census so that fuller documentation of the formal and informal sectors can be made for tax collection, as well as allocation of resources for social sector spending.

Axact Controversy

The New York Times investigative story on Axact’s alleged fake-degree enterprise caused a furor in Pakistan this week, following which the Ministry of Interior ordered the FIA to conduct a detailed inquiry on the issue. Axact’s CEO Shoaib Sheikh has insisted that the story is an attempt to prevent the launching of Bol, a media house that the company claims will set new standards in Pakistan’s ‘seth’ dominated media culture, which many have contested. Meanwhile, NYT’s Declan Walsh has published a rejoinder to his story, shedding further details about his investigation into Axact’s operations.

Presumably, in order to counter the negative uproar the news report has generated, Bol’s test transmission was launched on Thursday. It remains to be seen how the channel will impact Pakistan’s media and IT landscape. There is little at risk for Pakistan’s thriving IT sector, asAxact has mostly functioned as a stand-alone entity. While the investigations are still underway, the Axact controversy has created several takeaways for the government and civil society to refine the Prevention of Electronic Crimes Bill.

Truck art in Rawalpindi. 

Image Courtesy: AFP

Incidents of religious extremism in Pakistan reported by the local media