Pakistani economic figures fudged up

SBP report again raises issue of data credibility
By Sabihuddin Ghausi
KARACHI, Jan 23: The State Bank of Pakistan has again raised the issue of credibility of official statistics and data in its recent quarterly report, blaming the relevant agencies for under-reporting export figures, which appeared to have been covered up in November 2006 when export earnings were exceptionally up by about 24 per cent on a year-to-year basis.

According to the report, the slowdown in exports was found inconsistent with US and EU statistics on Pakistan textile imports and also with the exchange report data of the State Bank of Pakistan.

The State Bank data shows stronger export growth than being shown by the Federal Bureau of Statistics.

“This raises hopes that least a part of the strong deceleration in exports growth may be a statistical artefact due to unusual leads and lags in reporting,’’ the report says, while pointing towards an unusual 23.9 per cent rise in exports during November. There is a difference of $100 million between the FBS and SBP statistics of five-month export proceeds from July to November 2006. The SBP statistics give $5.91 billion export while FBS puts it at $5.92 billion.

As Pakistan’s export figures are at variance with the US and EU import statistics from Pakistan, the Chinese export figures also do not match with Pakistan’s imports from China.

The chairman of Central Board of Revenue, Mr Yousuf Abdullah, reported a difference of $1billion in 2003-04.

According to the CBR chairman, the Chinese customs reported $2.94 billion exports into Pakistan, the Customs in Pakistan said there were only $1.94 billion imports from China.

Some of the unscrupulous Pakistani traders enjoy bad reputation of abusing concessions and incentives. Cash rebate on export is one such incentive that has been massively abused by a nexus of traders and customs officials and that too has distorted official export figures.

A big scam of Rs20 billion was detected against leather goods and textile products’ exports to South Africa. The exports were said to be bogus, but the figures crept in the official statistics and leaders of leather industry attribute 30 per cent fall in leather exports in the current fiscal year to artificial rise shown in 2005-06 figures.

Way back in the decade of 80s and in 90s, the textile associations traded accusations of misusing cash rebates in which exporters were alleged to have drawn cash rebates that far exceeded the exports.

Official trade statistics, price indices, poverty and unemployment ratios have been a subject of controversy for long in Pakistan and of all the persons, no less than late President Ghulam Ishaq Khan had questioned the credibility of government price indices in his annual presidential address before a joint parliamentary session in 1993.

Recently, about six years ago, the first foreign minister of the military cabinet of General Musharraf, Abdul Sattar Khan, ridiculed the then federal secretary of statistics division when he made a presentation on official price indices.

“My wife purchases grocery from the market. She does not find goods being sold on prices given in your indices,’’ Mr Sattar is reported to have remarked before General Musharraf and his cabinet members.

Both the governments of Benazir and Nawaz Sharif were too accused of fudging the official figures. It is not different with Musharraf and Shaukat Aziz.

When Shaukat Aziz was the finance minister, he was blamed for suppressing a poverty survey report which was denied officially with an explanation that it has been held back for proper processing of data.

A poverty cluster survey, carried out with the support of Unicef in Sindh about two years ago, is gathering dust because “Islamabad forbids provinces to give their poverty assessments,’’ to quote a senior official.

When the federal government decided to rebase national economy on the year 2000-01, the practicing and reputed consultancies questioned the doubling of the size of national economy to almost Rs6 trillion from about Rs3 trillion. There was a demand to share information on modalities for rebasing the economy. This request was accepted.

Only recently, the International Monetary Fund (IMF) in its latest country report on Pakistan again called for revamping of Pakistan’s statistical organisation.

The IMF suggestion is for a quarterly monitoring of the Gross Domestic Product (GDP), monitoring of GDP and economic indicators at provincial levels, more effective assessment of employment ratios.

As recently as this week on Monday, the Pakistan-Japan Business Forum has set up a Study Group that among other things will recommend measures to check mis-declaration and under-invoicing in trade between the two countries.

Pakistani government cooking the economic books

Exaggerated statistics become controversy
By Sabihuddin Ghausi
KARACHI, Jan 6: Official trade statistics are set to become a focus of controversy again as a loud whisper moving in the business circles questions the credibility of $16.45 billion export achievement in the year 2005-06 on the basis of which an official export target of $18.6 billion has been fixed for the current fiscal year.“Last year’s export figures include more than $1 billion export of leather garments and other textile products to South Africa, UAE and some parts which were false and bogus,” a senior leader of leather industry disclosed.According to him no shipment was made and the fraud committed by a well-known exporter in nexus with officials of the Central Board of Revenue was detected and the case was registered. The exporter also a former employee of the CBR was arrested and he is facing a trial. His contention is that export goods were duly cleared by the Customs on rates shown in the documents and proceeds have been received. In the year 2005-06, the government introduced six per cent research and development rebate to the readymade garment and knitwear exporters against which a substantial amount was paid.A newspaper quoted State Bank of Pakistan Governor Dr Shamshad Akhtar in Faisalabad sometimes in November 2006 that 3,000 cases of false declaration have been detected. There had been no follow up statement of this disclosure from the State Bank or any official agency.“Pakistan has more than four decades long history of false and bogus rebate claims by the exporters,” alleged a textile tycoon involved in the business for last more than 40 years. Late Ghulam Ishaq Khan, when he held the charge of commerce ministry in early 1980s, exposed the exporters at an Export Promotion Council meeting in Karachi with specific examples that led a large number of exporters to hang their heads in shame. The All Pakistan Textile Mills Association too launched newspaper advertisement campaigns against exporters of value added textile to show that rebate claim amounts exceeded the actual exports.“Now that we are back in the export rebate business on a much wider scale and subsidies on bank loans and on freight, the volume of bogus and fictitious exports is bound to jump,” said a businessman. Most of the businessmen are convinced that last year’s actual exports were hardly $15 billion. They are convinced that the export target of $18.6 billion fixed for the current fiscal year is unrealistic and unachievable.The last five months export statistics (July to November 2006-07) show conspicuously negative signs before more than 30 items but show 953 million dollars export earnings against “other exports”. Total export in this five months period amounts to $6.9 billion. Almost one-seventh of this total exports beg for description. In final counts the amount of “other exports” is expected to be close to $2 billion.As the Customs or the Pakistan Revenue Authority Limited (PRAL), the private sector data collecting arm of the CBR manipulates with export figures, it does so with imports also where the value of imports in last five months is close to $1.5 billion. The CBR does not give any details of miscellaneous or other importers.None of the trade body, right from the apex trade body, the Federation of Pakistan Chambers of Commerce and Industry to regional chambers or trade associations ever tried to carry out a periodical analysis of commodities and goods and markets and link up the results with government’s taxation policies or monetary strategy to inform general public. Exporters who ask for concessions, subsidies and rebates have their own explanation. “During the first couple of years of the new millennium, exporters were getting Rs68 per one US dollar based on the then prevailing exchange rate plus a duty drawback ranging from 6 to 8 per cent,” argues one such exporter in e-mail presentation.The duty drawbacks were withdrawn at a very sensitive time after 9/11 when customers were already running away from Pakistan. At the same time strengthening or revaluation of the rupee-dollar parity brought down to Rs57 a US dollar.“This was a direct loss of 16 per cent for the exporters,” he asserts while pointing out that even today the exports are off by nearly 10 per cent over 2001 on a straight line basis without taking into consideration any other cost increase in the last five years.The exporter has complained of the four years inflation hurting the business and the export but has failed to take note of the impact of more than Rs25 billion concession package given to textile exports and impact of swapping of expensive loans with concessions rated loans and almost across the board rebates on textile exports. And then the question is who pays for the abuse of these rebates and concessions by unscrupulous traders.