Social Science and Policy BulletinVOLUME 1 No. 1(Summer 2009)ISSN 2073-6789

Editorial Board

Syed Turab HussainAntonio MarascoMuhammad Farooq NaseerHammad Siddiqi

Editorial Assistant

Syeda ShahBano Ijaz

Please send change of address to:Social Science and Policy BulletinDepartment of EconomicsLahore University of Management SciencesOpposite Sector U, D.H.A.Lahore-54792, PakistanEmail: sspb@lums.edu.pk

The Social Science and Policy Bulletin ispublished quarterly by the School ofHumanities, Social Sciences and Lawat LUMS. It provides a forum fordebate on the economic and socio-politicalissues pertaining to the formulationand conduct of public policy as wellas its impact. The Bulletin aims todisseminate, to a wider audience, highquality research and policy-oriented workbeing done by social scientists. The editorsof the Bulletin welcome short essays, eitheranalytical or quantitative, that are relevantas well as intellectually stimulating.

In this Issue

Editors’ Note 1

The State of the Economy 2Ijaz Nabi

Why do we need a New Stock Market? 4Hammad Siddiqi

BISP and the Issues in the Design ofSocial Protection in Pakistan 7Haris Gazdar

Pakistan’s Stable Crisis 10Rasul Bakhsh Rais

Research Notes 13

Editors’ Note

The first issue of Social Science and Policy Bulletincomes out at a time when Pakistan is faced with a myriadof problems ranging from economic instability to politicalturmoil. The democratic government which came topower in February 2008 inherited a large fiscal deficit,an impending balance of payments crisis and a high rateof inflation. Stifled by high production costs and severeshortages of power, the manufacturing and export sectorsshrunk considerably, lowering the GDP growth rate bymore than 3 percentage points in the course of oneyear. The macroeconomic problems, in particular thebourgeoning current account deficit, forced thegovernment last year to resort to IMF financing. Thestabilization package introduced at the release of thefirst tranche focused on a tight monetary and fiscalpolicy which, at least in the short run, can adverselyimpact both employment and income. A governmentwhich is sensitive to its popular mandate and is interestedin achieving long term socio-economic stability has todevise an appropriate social protection program whichprovides a safety net for the most vulnerable groups inthe society. The Benazir Income Support Program is anexample of such a scheme.

The Economic crisis which has gripped the country forthe past year was worsened by the ever increasingpolitical turmoil. The prolonged power struggle betweenthe two main political parties along with the unabatedinsurgency and militancy in Baluchistan, Swat and FATAcreated an atmosphere of uncertainty resulting in anenvironment inhospitable to most forms of investment,domestic or foreign. The country today is in the midstof a turbulent political and economic cycle and thus indire need for workable solutions at both fronts. Thisparticular issue is centered on the current state of affairsin the country. The articles reflect critically on variousfacets of public policy, from macroeconomic reform to

government programmes aimed at increasing socialwelfare.

The first article, by Ijaz Nabi, analyzes recent governmentpolicies in the light of achieving sustainable economicgrowth. Highlighting the twin structural problems ofsustained budget deficit and current account deficit,the article underscores the need for widening the taxbase of the economy and improving exportcompetitiveness to achieve macroeconomic stability inthe long run. Hammad Siddiqi's essay presents a criticalview of the Karachi Stock Exchange and its institutions,in particular the financing institution of badla. He arguesfor an institutional reform in the stock market thatproceeds both at the financing and governance levelsimultaneously. The article by Haris Gazdar, looks at theBenazir Income Support Programme, the latest initiativeof the government to extend social protection. Heanalyzes both the advantages of such a policy as well assome of the flaws in its design and claims that althoughsuch initiatives are needed, attention needs to be directedat their structure and proper implementation to ensurethat they deliver successfully. The last piece in theBulletin, by Rasul Bakhsh Rais, moves away from theeconomic realm to explore the nature of the partypolitics in Pakistan. Attributing the dynastic nature ofthe leading political parties to feudalistic roots of thePakistani rural society, he vests hope in the country'srising civil society that may, after all these years, demanda government ruled not by personalities, but by the Lawand the Constitution.

The current issue also lists short thematic descriptionsof the recent research done by the Social Science facultyat LUMS. In the forthcoming issues, in addition to theLUMS faculty research, we hope to also represent inthese pages quality work being done elsewhere.

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Six months ago, Pakistan’s macro-economic situationwas dire. The current account deficit that measures thedifference between what we owe the world and what itowes us, and therefore is a good indicator of the overallhealth of the economy, had shot up to a record 8.6percent. This was largely because of the rapid increasein public and private demand for imports compared toa much smaller increase in exports.

Private sector demand (for both locally produced as wellas imported goods) was high because several years ofloose monetary policy had promoted a culture of easyborrowing and spending. We all know that too rapid anincrease in domestic demand results in inflation. Inflationthat had been creeping up in 2006-2008, soared to 25percent in October 2008; and in the absence ofadjustment in nominal exchange rate, the real value ofthe rupee shot up relative to other currencies. Thismade imports cheap and people switched to importedgoods — as seen in the surge in demand for cars, electricalgoods and a host of other consumables.

In the public sector, our proclivity to spend (on averageabout 20 percent of GDP) far exceeded our ability tocollect tax revenues (about 10 percent of GDP). Thisdeficit was narrowed somewhat (around 5 percentagepoints) by the budget support operations of the donors.The rest was accommodated by the State Bank of Pakistanvia its loose monetary policy and by the future

generations via creation of debt. When donors do notcome to our rescue (as was the case last summer), anaccommodating monetary policy results in both inflationas well as a large current account deficit. In October2008, both of these indicators of the economy’s healthreached dangerous levels, the international reservesplummeted and a serious balance of payments crisisloomed.

Our macro-economic difficulties are rooted in the well-known structural weaknesses of the economy i.e.insufficient exports given the demand for importedgoods and insufficient revenue in relation to publicexpenditure. These two weaknesses are at the center ofthe frequent boom and bust cycles of the economy. Buttwo additional factors contributed to the problems oflast summer: the loose monetary policy mentionedearlier and a global commodity price hike (the price ofcrude oil shot up to an unprecedented high as did theprice of imported wheat).

Even in 2006, some economic observers were voicingconcerns that these underlying vulnerabilities wouldhave serious consequences for the stability of theeconomy. It was clear that the government of the daywas unwilling to tame aggregate demand so that theentire burden of adjustment would eventually fall onthe country’s foreign exchange reserves. This policystance could be sustained only if there were no majorexternal price shocks and if capital inflows (bothconcessionary as well as private) continued. As we sawin 2007-8, neither of these assumptions would hold.Commodity prices shot up and the political eventsleading to Musharraf ’s downfall and beyond choked offconcessionary and commercial capital inflows. Thesubsequent global financial crisis made matters evenmore acute.

In the summer of 2008, the government was faced with

The State of the EconomyBy Ijaz Nabi

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the following choice. Hang on to the exchange rate ofRs 60 to the dollar and continue to subsidize importedoil and watch the reserves disappear leading to hugesocial costs, or use all the instruments under itscommand to reduce aggregate demand. The lattercourse would also demonstrate to the skeptical outsideworld that the government was serious abouteconomic management and that it might step in to helpease the burden of adjustment.

The government chose wisely. It allowed the exchangerate to depreciate (the rupee shed 30 percent of itsvalue vis-à-vis the dollar), sharply curtailed public sectorexpenditure including energy subsidies and tightenedmoney supply allowing interest rates to nudge up. Thisbelt tightening was noticed by the friends of Pakistanand they rewarded the nation with much needed balanceof payment support in the form of an IMF program andbudget support operations by multilaterals such as theWorld Bank and the Asian Development Bank. We alsogot lucky: international commodity prices have fallensharply since last summer. These two factors haveconsiderably eased the burden of adjustment.

The short run economic outlook in March 2009 thus ismore favorable compared to what it was six monthsago. Inflation is coming down rapidly and is expectedto be in the single digit by the summer, allowing aneasing of interest rates. International reserves have beenbuilt up and the threat of default has receded. Theexchange rate has stabilized at a rate higher than wasexpected a few months ago (although some wouldargue that the rupee is still overvalued). However, theglobal financial crisis and what that implies for ourforeign exchange earnings (export of goods andremittances) continues to cast a shadow.

Of course, stabilization in itself is a kind of recoverycompared to the worries of last summer. But we shouldaim for a robust recovery and sustained economicgrowth. This will require restructuring the economy to

make a real difference to the lives of the citizens interms of improved quality of employment and betterincomes and living standards. That, in turn, requiresaddressing the two core structural weaknesses of theeconomy i.e. increasing tax revenue to a morerespectable 15 percent and substantially increasingmanufactured exports. One will require a visibleimprovement in the quality of public programs and thepolitical will to widen the tax net, and the other requiresteaming up with foreign investors to access bettertechnology, management practices and richer markets.Both are huge challenges but now is the time to takethem up.

The challenges facing the economy can only be met ifwe have a cost-effective program of social service delivery(education and health) and social protection for thedeserving. Such a program will help to upgrade thequality of our work force and give citizens the assets tobenefit from growth as well as to fulfill a basic tenet ofsocial justice that ensures that those who are mostneedy are looked after by the society. Both are essentialelements of a social contract that creates the space forgovernance, stability and sustained economic growth.

The author is a Professor of Economics and the Deanof the School of Humanities, Social Sciences & Law(SHSSL) at the Lahore University of ManagementSciences. He can be reached at ijaz.nabi@lums.edu.pk

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The story of attempted institutional reforms in thestock exchanges of Pakistan is a very interesting one. Iwill tell the story here with particular reference to theKarachi Stock Exchange, however, the description isequally applicable to the other two stock markets inPakistan.

There are two main institutions in the Karachi StockExchange (KSE). The term institution here means “rulesof the game”. The rules can either be formal or informal.The two primary institutions in KSE are: a financinginstitution called badla, and a governing institution thatspecifies how the directors are elected. After the March2005 crisis, policy makers came out with a plan of reformswhich was aimed at reforming both the above mentionedinstitutions. According to the plan, the financinginstitution of badla was to be replaced with marginfinancing and the governing institution was to be replacedthrough the demutualization of KSE. However, both setsof reforms have been stalled due to a crucial weaknessin the strategy of the policy makers. The policy makersadopted a model of gradual institutional reforms inwhich the badla institution was to be replaced first,followed by a change in the governing institution throughdemutualization. We will see shortly that the very ideathat institutions can be changed one by one isfundamentally flawed; such a plan is bound to fail fromthe start.

Apart from the question of why gradual institutionalreforms are bound to fail, there are two related questionsthat must also be answered. Firstly, brokers themselveshave argued for and successfully implemented certainreforms. Reforms such as the introduction of electronictrading, ‘dematerialization’ of shares through creationof CDC, switching from ‘quote driven’ trading to ‘orderdriven’ trading, and replacing periodic settlements withrolling settlements were broker-driven. Without anydoubt, all these reforms have made trading moretransparent and safer by reducing opportunities ofmanipulation by brokers and by reducing systematicrisk. Elimination of badla financing and demutualization(policy maker driven reforms which the brokers arestalling) are also aimed at reducing manipulation andsystematic risk. If all the reforms have the same objective,how come brokers forcefully argue for some and stallthe others?

It is also a common perception among participants andcommentators that most of the benefits of marketmanipulation go to big brokers who are not more thana dozen in number. However, the reputational costs areshared by the entire broker community. There are 200brokers in KSE alone. If most of the gains go to only adozen and the costs go to all, why don’t the other brokersout-vote the manipulating bloc and elect directors whowould check such manipulation?

In this short note, I will argue that all three questionsraised above have a common answer. The answer liesin understanding the interactions between announcedformal rules and historically developed informal rules.If we consider the process of reforms as a meretransplantation of formal rules from developed marketsto our markets, the questions remain unanswered. But,if we consider the interactions of these transplantedrules with existing informal rules underlying our markets,then things appear to fall into place and coherent answers

Why do we need a New Stock Market?By Hammad Siddiqi

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to the questions raised above are found. Along the way,we will see that the underlying ‘rent structure’ thatshapes the informal rules is very different from whatone typically sees in developing countries. Normally,rent-seekers aim to gain privileged positions throughfavorable government interventions. The “SRO culture”in our industrial sector is a case in point. But as far asthe stock market is concerned, the privileged positionshave arisen endogenously through market interactions.Hence, the rent-seekers of the stock market do notwant government interference in their affairs.Consequently, the politics of rent-seeking is very differentin the stock market.

Before answering the above questions, one mythperpetuated by brokers needs to be debunked. Brokersoften argue that badla has been eliminated and now wehave a new system called ‘Continuous Funding System’or CFS*. In reality, CFS is just another form of badla. Infact, it is an even stronger form of badla since it notonly makes funds available for a longer period but alsooperates in parallel with the ready market. As will becomeclear shortly, it increases the de facto power of ‘badlakings’ by strengthening the informal ties among brokers.

I will begin by addressing the third question first.Consider two games, one with formal rules and anotherwith informal rules. Initially, assume that the two gamesare not linked. The formal game has legally spelled outprocedures for election of 5 member directors. Thereare about 200 brokers who can vote. The informal gameis one in which few large brokers decide how to allocatebadla funds to other brokers. Badla is lucrative to allbrokers since it magnifies their trading volumes andconsequently their incomes. Of course, large brokerswith badla funds have complete freedom to decide whogets badla. If the two games are separate, it is optimalfor the majority of small brokers to unseat memberdirectors who favor large brokers in the formal game.But, by strategically linking the two games, that is, bymaking badla availability in the second game conditionalon cooperative voting in the first game, a few powerful

brokers can manipulate the outcome of elections.

The second question is now fairly easy to answer. Broker-driven reforms are exactly those that increase thecomponent of the informal game in the pooled incentiveconstraint across the two games. “Dematerialization ofshares”, “badla market operating in parallel with thespot market” and “rolling settlements”, all increase theefficiency with which the badla funds can be employedalong with some mitigation of systematic risk. Bothoutcomes are favorable to badla financiers. That is,broker-driven reforms are exactly those that increasethe de facto power of already powerful brokers. Incontrast, regulator-driven reforms are those that, ifimplemented, will weaken the component of theinformal game in the pooled incentive constraint acrossthe two games. No wonder such reforms are stalled.Hence, the brokers’ response to the two sets of reformsis entirely consistent.

The first question can now be answered. The institutionof badla creates microstructure rents (through strategiclinkage across the two games) as described above. Suchmicrostructure rents are exploited to control themanagement of KSE. Consequently, regulators cannotnegotiate their way to success with KSE managementbecause powerful brokers who run the show will neveraccept elimination of their source of power throughnegotiations. In short, when the institution of badla istargeted for reforms, powerful brokers strengthen theirhold on the governing institution and use their increasedpower to stall the attempted reforms. That is, theinstitutions of badla and governance are inter-dependent.Furthermore, the microstructure rent associated withthe institution of badla has arisen endogenously in themarket and no government action was involved. Hence,this type of rent is very different from the rent associatedwith the SRO culture

Also, another intriguing development is that of brokersentering into the commercial banking sector wherebysome of the brokers are now operating their owncommercial banks. Serious conflicts of interests have

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been created here along with substantial increase in thede facto power of some brokers. There must be a strongregulatory response here. The consequences of repealingthe Glass-Steagall act in the US are in front of us in theform of this global financial crisis. We need a Glass-Steagall act of our own to avoid our own localizedfinancial crises.

So, what’s the way forward? It is clear that the policymakers cannot win this battle with the brokers as longas the powerful brokers are on their own turf. Thebattlefield needs to change. I suggest that all theinstitutions (both financing and governing) should bereformed simultaneously by creating a new stockexchange called the “National Stock Exchange ofPakistan”. This approach will solve the problem ofinstitutional inter-dependence (endogenous institutions)highlighted above. The new exchange should start outwith all the reforms (new institutions) in place. Mostimportantly, the new exchange must have a totallyseparate spot and derivatives market and not anamalgamation of the two in a strange mixture of CFSand spot. Investors with speculative appetite and short-term horizons should be deflected to the derivativesmarket. The spot market should only have transactionsfor delivery. The transparency of the new market willfirst attract investors, and then firms will follow. This willcreate strong competitive pressures on the existing stockmarkets and powerful brokers will have no choice butto accept the reforms.

The author is an Assistant Professor of Economics atthe Lahore University of Management Sciences. Hisemai l addres s i s hammad@lums.edu.pk

*It is very important to realize that the planed phase-out of CFS will notend badla. Badla will continue in the form of “in-house” badla. Due to itsnaure, interest in badla is naturally lower when the market is depressed.

However, as things return to normal, badla volumes will soar again.

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BISP and the Issues in the Design of Social Protection in PakistanBy Haris Gazdar

The Benazir Income Support Programme (BISP)represents the flagship initiative of the federalgovernment for expanding social protection during aperiod of economic downturn and stabilization. Thisnote provides a critical assessment of issues in theprogramme’s design and implementation, and offersthoughts on emerging issues.

The Benazir Income Support Programme was launchedin the federal budget of 2008-2009 with an allocation of34 billion rupees. This was an unprecedented fiscalcommitment, particularly during a time of economicdownturn when there is pressure for pruninggovernment expenditures. Although delays inimplementation have led to a significant downwardrevision, the BISP with a planned outreach of over 3million beneficiary families, is one of the most ambitioussocial protection programmes to be initiated in Pakistan.By comparison, the total expenditure on existing cashtransfers (Zakat and Bait-ul-Maal) in the previous budgetwas under 10 billion rupees.

Although the manifesto of the Pakistan People’s Party(PPP) promised a workfare scheme – similar to India’sNational Rural Employment Guarantee (NREG) – itsestimated cost of around 100 billion rupees seemedinfeasible given the government’s precarious fiscalposition in 2007-2008. The BISP then emerged as analternative; a targeted cash transfer that allowed a wide

coverage within a smaller expenditure envelope.

Despite the fact that the policy decision to opt fortargeted cash grants rather than workfare was motivatedby fiscal considerations, it is useful to briefly review therelative merits of the two types of methods from thedesign point of view. The strongest point about workfareis that it is supposed to be self-targeted; willing workersare guaranteed employment whereas the non-poor willself-select out due to more remunerative opportunitieselsewhere. However, although workfare schemesdevelop infrastructure, they may involve high transactionscosts in implementation of public works projects andwill automatically exclude people unable to work dueto old age, illness, or other social norms (such aspatriarchy) governing the local labour markets.

In contrast, direct cash grants require less elaborateadministration. Potentially, targeting is more effective ifincome can be effectively measured or proxied; however,any administrative targeting is more likely to be proneto Type 1 and Type 2 errors than self-targeting (seebelow). Cash grants may involve measurement costsand once lists are drawn up, they inhibit dynamic entryand exit.

There are some general conditions that need to beaddressed in the design of a targeted social protectionmeasure. First, the targeting criteria must be transparentand consistent with policy goals. If the policy goal is toprovide cash transfers to people below a certain incomelevel, targeting criteria must credibly have a way ofselecting people with the requisite income levels.Second, there must be a clear idea of the universe fromwhich targeting is to take place. Third, an efficienttargeting method will minimize the number of intendedbeneficiaries who are left out (Type 1 error), andminimize the number of non-intended beneficiaries thatget selected (Type 2 error). In most targeting approachesthere is a trade-off between minimizing Type 1 and Type

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2 errors, and where the axe falls will be a policy decision. Fourth, the targeting method should be dynamic in thesense that it should allow entry and exit for beneficiariesas their economic situation changes.

BISP design has been through three phases. In the firstphase it was decided to use the National DatabaseRegistration Authority (NADRA) records to selectbeneficiaries, mainly to expeditiously utilize readilyavailable computerized records and to reduce thesubjective “human element” in the selection process.The latter argument was premised on an incorrectunderstanding of NADRA information, and on therequirements of targeting design. The quality of NADRAinformation like any other survey information dependson what is volunteered by respondents and therobustness of the systems of veri f icat ion.

NADRA-based targeting however, proved problematic;a high Type-1 error would be incurred since adisproportionately poor segment of the adult population(over a quarter) lacked NADRA identity cards. Also, notonly was NADRA collected information a crude proxyfor income, it is updated infrequently, rendering entryand exit virtually impossible.

Subsequently, the NADRA scheme was replaced byadministrative targeting using parliamentarians. Eachparliamentarian was provided with 8,000 BISP applicationforms and these required applicants to supplyinformation, some of which could be cross-checkedwith NADRA. This approach reduced the gravity of theType 1 error – people without NADRA cards were nowallowed to apply for a cash grant, but had to registerwith NADRA in the course of their application. Stepswere taken to facilitate the provision of NADRA cardsto applicants. There was wide concern, however, thatselection through parliamentarians might exacerbateType 2 errors – that is, leakage to the non-poor. It wasalso widely observed that parliamentarians would tendto favour their own political supporters – though thiswas not necessarily a fatal flaw if they selected only thepoor from among their supporters.

An appreciable positive that emerged from these variousexperiments was the decision to create the entitlementin the name of women members of the beneficiaryfamily. The importance of creating citizenship basedentitlements for women can play a crucial role inexpanding women’s de facto rights over resources.

For the time being, while BISP has gone into operationthrough the parliamentarians, the government has alsoreached an agreement with the World Bank for itssubstantial redesign. It has been accepted thatbeneficiary selection will be based on proxy mean testing(PMT) using a scorecard developed by the World Bank.

A PMT tries to identify intended beneficiaries – in thiscase income-poor families – through easily observableand verifiable variables that can proxy for income.Whereas household income surveys are expensive, timeconsuming and complicated due to the wide range ofvariables used, a score-card is a simple survey based oneasily observable and verifiable family or individualcharacteristics that can proxy income. Additionally, it issimpler to fill and can be used to survey the entirepopulation; problems arise however, in finding efficientproxy variables-models for PMT are derived from actualhousehold survey data.

One of the most challenging aspects of a PMT approachis the implementation of the survey. In effect, the PMTapproach requires a population census – or completeenumeration of all residents with a specific area. InPakistan the use of the PMT approach will mark a historicdeparture – as the idea of a universe is not yet fullyinternalized in social policy delivery. There are othergovernment interventions such as the Lady HealthWorker programme, and polio campaigns that aresupposed to enumerate the entire population, but theirimplementation has been uneven. If the BISP succeedsin the effective implementation of its score-card over awell-defined universe, it can have a positive externalityfor all other government social policy interventions.

Score-card implementation requires a mix oforganizational skills and capacity; from the ability to

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carry out a population census to the use of socialmobilization methodologies that may motivatemarginalized groups to participate in data collection andverification as well as to guarantee that beneficiaries andnon-beneficiaries are able to understand, accept orsatisfactorily appeal against targeting outcomes.

But there are many technical as well as policy issues thatneed to be understood better and resolved in the courseof BISP redesign and implementation. One of the mostimportant of these concerns institutionalization of socialprotection through the programme. The organizationalinfrastructure that will be required for effective targeting,implementation and monitoring could quite easily beused for a range of social policy interventions. It isimportant, therefore, to get things right in BISP. Critically,there is a need to build state capacity at the local levelfor undertaking the implementation of the scheme, asthis wil l engender a sense of entit lement.

There is a need, too, to place the BISP in a broaderperspective within social protection. Even efficientlydesigned and implemented targeted cash transfers fillonly part of the social protection gap. In Pakistan, abroader social protection agenda needs to be pursuedwith greater vigour. There are many non-budgetarysocial protection measures that could be implementedeven during a period of economic slowdown and fiscalprudence. The most promising among these isresidential security for the landless poor in rural areas,and for residents of irregular settlements in urban areas. There are existing schemes to build upon – such as theMarla scheme in Punjab, the Goth Abad scheme in Sindh,and the Katchi Abadi regularization. These schemeswere historically important in creating entitlementsamong some of the most socially marginalized groups. There is some interest in moving in this direction whichneeds to be encouraged. It has been reported, forexample, that the Sindh provincial government isconsidering grants of state land for homesteads towomen.

Workfare too needs to be brought back to the policy

agenda. This will require a considerable reworking ofthe systems of contracting public works, but such reformsare due in any case. The advantages of workfare as aself-selecting and counter-cyclical unemploymentinsurance measure are far too obvious to ignore in thePakistani context. There is much that can be done evenwithin the existing fiscal envelope to reorient existingpublic works al locations towards workfare.

Finally, there is a need and scope for direct support tothe most vulnerable segments – such as the girl child –who may face discrimination even in intra-householdallocations. Direct school nutritional and healthprogrammes can play an important role. Theimplementation experience in Pakistan thus far has beenmixed, but this is no reason for not trying again.

Haris Gazdar is Director of the Collective for SocialScience Research. He can be reached atgasht@yahoo.com

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Pakistan’s Stable CrisisBy Rasul Bakhsh Rais

A recurrent political crisis of Pakistan lies in the family-dominated political party system, which makes thepolitical system dysfunctional and imbalances thedistribution of power among different institutions ofthe state, with greatest concentration being in a singleindividual. At times, it is a major source of politicalconfrontation like the one we recently witnessed becauseit is the personal interests of the party boss or his visionof good politics and good society that determine theparty line, its policy orientation, and above all the largerquestion of democracy and rule of law in the country.

All the political parties have dynastic character. Thisincludes both the mainstream national parties, eventhose with a long history and nationwide constituenciesas well as ethnic and regional parties with an equallystrong social support base and history of politicalstruggle. Other smaller parties, religious or ethnic thatmight appear to be free of single family domination havebeen and are currently run by single individuals indictatorial fashion.

Pakistan cannot make the transition to democracywithout a competitive party system, which it fortunatelyhas developed since the colonial days. Parties areindispensable for how we translate the idea of popularsovereignty to a representative government and runsuch a government. It is true that the political partiesof Pakistan, whatever the nature of their manifestos,ideology and social support base, have a political support

without which they couldn’t survive the efforts of severalmilitary dictators to fragment and destroy them.

The political parties of Pakistan have popularconstituencies and each one of them has a separatepolitical identity as well as a recognizable ideologicalorientation, that might have faded off, but thatnevertheless links them all with a particular type ofprogramme, vision of the country or a worldview. Andthe country and society can be rightly proud of amultiparty system, which is pretty much a reflection ofthe multi-cultural character of the society and the familiarpolitical divides.

Then what is wrong with these parties and why havethey not been able to deliver the political, security andeconomic goods—the expectations that the peoplegenerally have from them? There are many reasonswhich we would like to mention in passing, but focuson the single most important weakness, the absence ofdemocratic culture within the structure of the politicalparties.

Students and analysts of Pakistani politics generallyexplain the questions of political instability,confrontations, political crises and failure of democracywith reference to feudal culture, safe family electoralconstituencies and the caste and tribal features of thesociety. Regular military interventions for individualisticand institutional interests are a further reason for thecountry’s enduring political crises because of disruptionof civilian rule; not merely for disruption of naturalpolitical balances but for causing institutional decay ofboth informal and formal spheres of political process.

However, a party system with a good degree of internaldemocracy and recruitment of leaders in the party ranksand nomination of candidates for public office, provincialand national legislatures, could repair the politicaldamage caused by the military interventions.

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Unfortunately, the periods of civilian rule in the countryunder the political parties have not been very differentin political attitudes and behaviour than the ones underthe military rule.

Both have demonstrated two common strands ofpolitics—personalised rule and hybridism. The partyleaders in power have acted within the party like thepolitical commanders, allowing others to speak buttaking arbitrary decisions, going more by their ownwhims and understanding of political interests than bythe collective wisdom of the party rank and file.

Hybridism is an important feature of Pakistani politicsand political process, which largely explains the abilityof the military and civilian rulers to stay in power andjustify their rule. This is about combining elements ofdemocracy and authoritarianism and presenting themas ‘genuine’ democracy. The democratic elements inboth the regime types are elections, freedom ofexpression, fundamental rights and open politics. Butthis kind of openness has marginal influence on decision-making, policy formulation and the general system ofgovernance.

Why this disconnection between the popularrepresentation and democratic governance? The partyleaders from the PPP, PMLN and PMLQ that have in thepast formed governments at the centre and the provincesdidn’t embrace democratic principles in running theparties or the governments. The experience of ethnicand religious parties is no different.

The political parties in Pakistan are run like a familybusiness or a private corporation with major politicalstakes of the dominant families that have captured orinherited them. The dynastic party system couldtransform itself and the political process like the Congressin India, if the leaders felt secure enough to share powerat different levels of the party structure and at differenttiers of the governments when they formed them.

Much of the incentive for not giving up authoritariancontrol over the party and the government comes from

negative factors —fear of the party being captured bythe rivals and escaping judicial and legal accountabilityof corruption.

The greater damaging effect of personalised controlover the party and the government is on governance,the rule of law and democratic culture. This has reducedPakistani politics to a dangerous clash of personalinterests of the party leaders and the forming ofgoverning coalitions out of political conveniences ratherthan because of programme or ideological compatibility;both tend to destabilise the political system.

There are two other important dimensions of theundemocratic political party culture of Pakistan whichfoment political crises: the regular reneging on politicalcommitments and the backing off on pledges made tothe electorates. The party leaders do it believing thatthey can get away with this attitude, since neither theinstitutions of the state nor the electorates can holdthem accountable for what they have failed to do orwhat they have done in violation of the law and theConstitution.

The present crisis is actually born out of this traditionalmindset of the supreme political bosses of the parties,mainly of those in power at the centre today. The self-delusion that they could keep the superior judiciarysubordinate, pack the courts with the party workers,use courts as an instrument of political manoeuvringand throw an elected government in the Punjab withimpunity, is what has created the ongoing clash betweenthe lawyers and civil society movement supported bythe opposition parties and the Zardari-dominated PPP.

The traditional leaders like Mr. Asif Ali Zardari and hisnon-political advisors now occupying influential publicoffices fail to recognise that Pakistani society has changed.There is in fact a generational change, which is reflectedin the self-image of the younger generation in Pakistanisociety and the vastly expanded professional middleclass as the real stakeholders of the state and society.

There is a big gap in the cultural orientation, belief

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system and worldview of the new Pakistani classes andthe old-fashioned leaders of the political party. Rootedin new social realities, there is an emerging democraticcoalition that cuts across ethnic, regional and party lines.It simply wants a government that adheres to the ruleof law; whosoever forms it should be constrained by theConstitution and be accountable under the law.

Victory of this non-partisan social movement may resolvethe stable crises of Pakistan politics as the leaders mightbe forced to respect law and accept constitutionalrestraints on the exercise of power. Running politicalparties like despotic oligarchs and manipulating politicalprocesses would only perpetuate confrontations. Pakistanhas entered a decisive political phase in the strugglebetween democracy and authoritarianism. The hopefulsign is that counter-authoritarian social forces are strongerthan ever before and have gathered enough momentumand power to outbalance the authoritarian party bosses.

The author is a Professor of Political Science at theLahore University of Management Sciences and canbe reached at rasul@lums.edu.pk

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Research Notes

Several faculty members at the School of Humanities,Social Sciences and Law (SHSSL) at LUMS are activelyinvolved in research in the fields of Economics andPolitical Science. The research notes collected belowthematically organize their latest work and highlight itspolicy relevance.

Macroeconomics and Economic Growth

Syed Zahid Ali

Dr. Zahid Ali wrote and published quite a few paperson issues related to exchange rate policy, taxes, andinterest rate policy. His focus throughout is on thesupply-side effects of exchange rate and interest rate.In his early work, he developed non-stochastic modelsin continuous time. He checked the proposition thatif the system is stable then currency devaluation cannotboth contract employment and worsen the balance ofpayments of the country. In a similar model, he alsoinvestigated how the supply-side effects of the exchangerate and taxes interact to complicate the effects ofdevaluation. Later on, Dr Zahid developed stochasticmodels in discrete time. Using Fisher and Taylor typemodels, he developed a two period wage contract modeland, assuming rational expectations, calibrated themodel to determine the short-run and long run effectsof currency devaluation.

In another study (with Dr. Sajid Anwar), he attemptedto test the productivity bias hypothesis by making useof data from the latest version of Penn World Tables toexamine the productivity bias hypothesis for three SouthAsian economies – India, Pakistan and Sri Lanka. Thepaper shows that purchasing power parity holds for SriLanka, evidence is mixed for India and it does not holdfor Pakistan. In addition, the productivity bias hypothesisdoes not hold for any of the three countries considered.Currently, Dr Zahid is working on models that

incorporate forward-looking variables and are backedby micro foundations. Using these models, he isattempting to analyze issues such as the correct exchangerate and interest rate policies for less developedcountries.

Antonio Marasco

Dr. Marasco’s research interests include the investigationof the implications of foreign direct investment (FDI)for the economy of the host country. One study(coauthored with Ehsan Choudhri and Farhan Hameed)uses a dynamic general equilibrium model to explorethe macroeconomic and the welfare effects of a largeincrease in FDI, such as that experienced recently by anumber of emerging economies. For an economy withfree access to the international financial market, a largeFDI capital inflow is found to lead to a surplus in thecurrent account, but not to have large effects on othermacroeconomic variables. The welfare analysis showedthat a surge in FDI leads to a net welfare loss in theabsence of technology spillovers. A second ongoingproject focuses on the effects of FDI on host country’swelfare in the context of a trade model with monopolisticcompetition and firms characterized by heterogeneityin their productivities.

Empirically, Dr. Marasco has tested the link betweenFDI and growth. In one article, he has tested therelationship in the presence of economic integration,while in another he studies the role played by technology.Both of these are ongoing projects, and he plans torerun them after collection of newer and more completedata. Separately, he has also been interested inresearching the relationship between income inequalityand growth via technological progress. To this end, hehas developed an endogenous growth model withquality ladders and income inequality and an openeconomy version of the same model. It is shown that,under monopoly, an increase in the degree of incomeinequality lowers the intensity of research activities andthe growth rate of the economy while under duopoly

Summer 2009

the opposite is true. He has empirically tested therelationship between income inequality and growth,and plans to modify this investigation on the basis ofnew developments and data.

Ijaz Nabi

Dr. Ijaz Nabi’s latest research focuses on economicgrowth, income distribution and poverty reduction.Between 1990 and 2007, South Asia, led by India, sawrapid economic growth and impressive povertyreduction. His on-going research assesses the qualityof that growth in view of the fact that it is driven in allcountries, with varying degree, by remittances and rapidincrease in consumption. The impact on the economicstructure of South Asia is being examined in order toasses whether there is a shift of labor towards higherproductivity, higher wage employment that wouldsustain growth and improved living standards over alonger period of time. The principal findings indicatethat the inflow of remittances coincides with a structuralevolution biased towards the services industry; otherthan in India where the IT services are export oriented,the services sector in South Asia comprises activitiesthat are largely non-traded and have relatively low laborproductivity. Thus, South Asia is experiencing a growthin economic activities that do not fit the description of“growth vents” as described by East Asia Renaissance(2007) and Growth Commission (2008) studies i.e.,high productivity economic activities that workersemployed in relatively less productive jobs can moveto in order to raise overall productivity of the economyand income levels.

Finally, Dr. Nabi’s research points out that ongoingglobal financial crisis and a sharp reduction in the priceof oil have impacted the economies (the US and the oilrich middle-east) where remittances to South Asiaoriginate; this could have far reaching consequencesfor South Asia and constitutes a major vulnerability thatneeds to be better understood and managed. Dr. Nabi

is currently advising the government; he is a memberof the Prime Minister’s Economic Advisory Council aswell as the Planning Commission’s Panel of Economists.

Efficiency, Agriculture and the Rural Economy

Abid Burki

Dr. Abid Burki’s recent research includes work onstochastic and DEA frontier efficiency in banking;productivity change; agricultural development; and thedairy sector. In a recent paper coauthored with Dr.Mushtaq A. Khan, he examines the effect of majordepression on the technical efficiency of dairy farms byusing data of 800 smallholder commercial dairyproducers from rural Punjab. Psychological and somaticsymptoms are recorded using WHO’s Self ReportingQuestionnaire (SRQ-20) and an index of depression isconstructed by using a random effects binary responsemodel in item response theory. The Efficiency index isconstructed by using frontier production function. Theresults of this research suggest that 12% of farmers weresuffering from major depression while 31% respondentshad mild depressive disorders. Major depression wassignificantly related to decrements in technical efficiency;dairy output of farmers suffering from major depressionsignificantly dropped due to technical inefficiency. Thepaper also calculates annual loss to Pakistan’s economydue to major depression.Dr. Burki has also carried out research regardingPakistan’s banking sector. His recent paper, coauthoredwith Shabbir Ahmad of the International IslamicUniversity, examines the impact of bank governancechanges on bank performance by taking unbalancedpanel data of Pakistan from 1991 to 2005. The findingsof this paper suggest that, in general, financial reformsimprove banking sector performance. The winners fromthe governance change are the privatized banks andprivate banks selected for M&A, whose post-governance-change efficiency levels have enabled them to exploitnew profit making opportunities. The results of the

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research predict that these banks are expected to holdon to X-efficiency gains even in the near future. Furtherconsolidation of the banking industry will eventuallydecrease profits, but this is likely to happen much moreslowly than did the present gains in efficiency.

Mushtaq A. Khan

Dr. Mushtaq Khan specializes in the field of econometrics,labour economics, regulatory economics and particularly,agricultural economics. His recent research looks at milksupply chain networks and the efficiency of smallholderdairy producers in Pakistan. The paper, coauthored withDr. Abid Burki analyzes the effects of milk supply chainson technical inefficiency of smallholder dairy producersby using cross-section survey data of 800 commercialdairy producers from rural Punjab, Pakistan. It studiesthe impact of rural milk supply chain, known as milkdistrict, on smallholder efficiency by employing stochasticproduction frontier and technical inefficiency effectsmodel. While location of dairy households in the paper’ssample is exogenously determined, building of milksupply chain indeed decreases technical inefficiency.The authors detect stronger power of milk district infurther reducing technical inefficiency if the farms arelocated in remote areas, or if their size is relatively large.The advice to policy makers from these results conformsto the standard economic view that market competitionleads to decreased levels of technical inefficiency ofsmallholder producers. Dr. Mushtaq Khan is a memberof the Working Group on Institutions for Developmentof the Panel of Economists set up to produce a MediumTerm Plan for Pakistan.

Political Economy, Governance and SocialProtection

Ali Cheema

The research work of Dr. Ali Cheema can be broadlyclassified into two themes: (a) Descriptive work onpoverty, social and income mobility and village and

district-level development outcomes; and (b) governance,institutions and political economy. His paper, "Geographyof Poverty: Evidence from the Punjab," Lahore Journalof Economics (Sept. 2008) co-authored with Ms. ManasaPatnam and Ms. Lyyla Khalid is the first paper to providerobust statistical estimates of poverty and developmentindicators across Punjab's thirty-five districts. Governmentof Punjab’s Poor District Programme uses these resultsto identify poor districts. Another paper makes use ofa unique panel data-set on development outcomes inthe district and measures the degree of convergence indevelopment outcomes across villages between 1961and 1998. The paper finds considerable divergence indevelopment outcomes across villages and analyzescorrelates that explain this divergence. Dr. Cheema hasused this work to inform the design of poverty alleviationand social protection strategies that he has worked onas part of the Planning Commission’s Panel of Economistsand as part of the Chief Minister Punjab’s EconomicAdvisory Council. His work on institutions and politicaleconomy analyzes the manner in which state institutionsand local village-institutions impact developmentoutcomes. His paper (with Shandana Mohmand andAsjad Naqvi), “Bringing Government Closer to the People:Who Gains Who Loses?,” presented at the RegionalEconometrics Society Conference, 2006 and at theInstitute of Policy Dialogue, Columbia University, 2006analyzes the extent to which decentralization at theunion-level results in elite capture of public servicedelivery. Finally, his paper (with Bilal Siddiqi) “ColonialVillage Institutions, path dependence and public goodprovision” estimates the extent to which developmentoutcomes at the village-level are affected by initial socio-economic inequality within the social structure of villages.Dr. Cheema’s research has been funded through researchgrants from University of Sussex, Government of PunjabPlanning and Development Department, US NationalAcademy of Sciences and HEC.

Miguel Loureiro

Since the 2005 earthquake Miguel Loureiro’s research

Summer 2009

has focused on community coping mechanisms andresilience to shocks (particularly in Pakistan-administeredKashmir), social protection, social exclusion,  and socialstratification. He is one of the founding membersof Research and Information Systems for Earthquakesin Pakistan (RISEPAK). Presently, Miguel is a doctoralcandidate at the University of Sussex, looking at theimpact of the 2005 earthquake on social institutionsand value systems in Pakistan-administered Kashmir. Inhis latest papers (to be submitted this month), heassesses the resilience of informal social protectionmechanisms in Pakistan, and problematises the conceptof “community” in rural Pakistan and its impacton community-based and community-drivendevelopment. He has also started revisiting notions ofsocial stratification within South Asian Muslims.

Muhammad Farooq Naseer

The focus of Dr. Naseer’s work has been on variousissues of economic development ranging from theeconomics of education and health, social capital, farmefficiency and political economy. He mostly usesanalytical tools from the modern micro-econometricmethods to research important empirical questions inthe field. One of his ongoing areas of research interestis to understand the voting behavior in Pakistan generalelections.

His latest work attempts to evaluate the impact ofgovernment policy on certain outcomes of interest. Forinstance, he and his co-authors examined the impactof recent schooling reform under a public-privatepartnership on learning outcomes. Their researchestablished that child-friendly classrooms, whichemphasized teaching innovation, via non-didacticpedagogy and exploratory learning, instead of thetraditional lecture-based rote learning, tended to improvestudent performance in languages as well asmathematics. Furthermore, in work currently in progress,he is attempting to determine the effectiveness of a

community-led sanitation program in improving ruralhygiene and health in two union councils in the period2007-08. It is anticipated that this program will beexpanded nationwide as part of the future sanitationstrategy of the Government of Pakistan. Hence, it iscrucially important to learn the lessons from this pilotthrough a rigorous impact evaluation before scaling upprogram coverage to the entire country.

Game Theory and Behavioral Finance

Hanjoon Michael Jung

Dr. Jung’s areas of research span the fields of GameTheory, Microeconomic Theory, Political Economy, andIndustrial Organization. His previous research has lookedat the general role of news media as a means ofinformation transmission. He already showed that in aconflict situation, by using news media, the sender caninfluence receivers’ decision-making process. He hasalso worked on modeling hierarchy based onendogenous power system. In this model, powerfulplayers can raise their status to publicly establish theirpower and wealth. Dr. Jung’s current research extendsthe game introduced by Crawford and Sobel (1982) andintroduces a new concept of “Complete Equilibrium”to deal with the situation in which the receiver hassystematically wrong beliefs about the sender’s signal.He situates the new concept of “complete equilibrium”in comparison to the concepts of “perfect” and “Nash”equilibria and through his research, develops a systemthat allows general games to be solved using the BayesianInference.

Hammad Siddiqi

Dr. Hammad Siddiqi’s research is interdisciplinary innature. Currently, he is looking at how analogy basedthinking or coarse thinking explains a few puzzlingresults in industrial organization. In particular, he hasshown that coarse thinking provides an alternative

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explanation for collusive outcome in a Bertrand duopolywith increasing marginal costs. He has also demonstratedthat the two main aspects of coarse thinking, that is,transference and framing, are present in an experimentaloptions market. This is probably the first ever empiricalverification of the existence of coarse thinking in assetpricing. He is also developing a framework for assetpricing in which ambiguity plays a central role. Themodel shows that ambiguity makes agents infra-marginalor price insensitive. This result has important implicationsfor market volatility and existence of market equilibrium.

On the policy side, Dr. Siddiqi has been working on twoissues. Firstly, there is the issue of Hawala. Cash collateralsare provided to our formal banking sector through theinformal institution of Hawala. The primary purpose ofsuch cash collateralized lending is to convert equity intodebt for tax advantages. However, such interactionsbetween formal banking and informal Hawala greatlydiminish the ability of the state bank to affect the quantumof credit circulating in the economy. Monetary policymay become ineffective if such interactions are not takeninto account while designing policies. Secondly, theissue of CFS or badla financing in our stock markets isa very important one. CFS or badla financing createsmicrostructure rents. Such microstructure rentsconcentrate the de facto power in the hands of a fewpowerful brokers. Due to the concentration of de factopower in the hands of a few powerful brokers, theprocess of reforms in the stock exchanges of Pakistanhas stalled. Consequently, the model of gradualinstitutional reforms is not going to work. All institutionsin the stock exchanges of Pakistan (governing as well asfinancing) must be changed simultaneously through theestablishment of a new stock exchange called the NationalStock Exchange of Pakistan.

Trade, Economic Geography and Public Economics

Syed Turab Hussain

Dr. Turab Hussain’s research interests have ranged from

migration theory and policy, poverty and ruraldevelopment to trade and development. His researchon migration employs the extended family frameworkinstead of the standard Harris-Todaro model, wherebythe family rather than the individual is treated as therelevant decision making unit for migration. This idea,developed initially in sociological and anthropologicalstudies, is corroborated in economics by analyzing thecontinued linkage between a migrant and his family,thus treating migration as a rural household’s strategyto diversify risk. The policy implications of his researchindicate that developmental policy may lead to counter-productive results; urban employment subsidies mayincrease the pull factors of migration, hence leading togreater unemployment in the long run. Similarly, ruralsubsidies or lump sum transfers to rural householdsmay, counter-intuitively, make migration more attractiveby reducing the costs of migration. In another paper,Dr. Hussain explores how the rate of migration may notbe positively related to the degree of networks presentat the destination; using an extended family framework,it is shown that a greater number of previous migrantsmay crowd out opportunities for new ones, hencereducing migration incentives.

Anjum Nasim

Dr. Nasim’s research interests include macroeconomicpolicy, international trade and public finance. His recentresearch, co-authored with Sajal Lahiri at Southern IllinoisUniversity, specifically examines the potential for thereform of sales tax and tariffs in Pakistan. The researchlooks at whether tariff revenue should be substitutedby consumption tax revenue and at whether tariffs onintermediate and final goods should be altered. Analysingwelfare effects, the research concludes that replacingtariffs on intermediate goods with increased consumptiontax would be welfare reducing. Also, optimal tax andtariff calculations indicate that Effective Rates of Protectionin Pakistan can be lowered by decreasing tariffs on finalgoods and raising them on intermediate goods.

Another recent paper by Dr. Nasim and Dr. Lahiri

Summer 2009

develops a trade-theoretic model to calculate the optimallevel of rebate provided by the Government of Pakistan;it concludes that as the Government becomes lessrevenue constrained, national welfare would be boostedby increasing the rebates given to the exporting sector.

Political Science

Aasim Sajjad Akhtar

Aasim Sajjad Akhtar holds a PhD in political economyfrom the School of Oriental and African Studies,University of London. His MA and BA degrees are inEconomics from Yale University and NorthwesternUniversity in the USA respectively. His primary researchinterests include post-colonial state formation,imperialism, the informal economy, peasant movements,and the political economy of Islamism. At present he isworking on numerous research projects, one is discussedbriefly here: the rise of Islamism in Swat in light of theseminal anthropological writings on the region. Thecurrent brand of Islamists, while invoking a historicalmandate to conduct 'jihad' must also be seen as anentirely modern political entity that is motivated primarilyby the lure of state power. Crucially the rhetoric of jihadexplains the rise of the Islamists only in part; the latteractually exploit historical grievances amongst traditionallypowerless social groups, including the landless and'non-Pakhtuns' more generally, by making landed Khansand the cumbersome judicial apparatus of the state thetarget of their polemic. The 'Islamic' solution offered isin fact an offer to these historically excluded groups todisplace the incumbent power structure.

Shandana Khan Mohmand

Shandana Mohmand’s research is focused on theempirical analysis of the impact of decentralization,colonial village land settlement histories and village-level informal institutions on voting behaviour, socio-economic inequality and the politics of public servicedelivery in rural Punjab, Pakistan. Her past work hasconcentrated on analysing Pakistan’s decentralisation

reforms in terms of accountability structures and interms of their impact on public service delivery,participation, and socio-economic inequality. Her paper(with Ali Cheema and Asjad Naqvi), “BringingGovernment Closer to the People: Who Gains WhoLoses?”, presented at the Regional Econometrics SocietyConference, 2006 and at the Institute of Policy Dialogue,Columbia University, 2006 analyzes the extent to whichdecentralization at the union-level results in elite captureof public service delivery. Another paper (with AliCheema), “Accountabi l i ty Fai lures and theDecentralisation of Service Delivery in Pakistan”,published in the IDS Bulletin ( Vol.38.1), finds that thenature of local politics, and the administrative proceduresand structure instituted by decentralisation reforms,have increased the provision of targeted services buthave not been able to improve the quality or provisionof universal services.

The bulk of her current work concentrates on informallocal governance structures and non-state political actorsat the village level in Punjab. Her paper (with Ali Cheemaand Manasa Patnam), “Colonial Proprietary Elites andInstitutions: Persistence of De Facto Political Control”finds that the historical control of de jure political andeconomic power is a precursor of de facto politicalcontrol by non-state actors in Punjabi villages today.Shandana's PhD thesis attempts to analyse votingbehaviour in rural Punjab by laying out a model forhousehold-level voting motives in unequal andclientelistic settings, and uses primary data to come upwith measures for this variable. Her research has beenfunded through research grants from University ofSussex, Government of Punjab Planning andDevelopment Department, and Social Enterprise andDevelopment Centre.

Rasul Bakhsh Rais

Dr. Rasul Bakhsh Rais is a political scientist whoseeminent research interests include political and securityissues pertaining to South Asia, Indian Ocean andAfghanistan. His current research focuses on therelationship between the tribe and the state in Pakistan's

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Western borderland. According to his research, there isa dialectical relationship between the tribe and the state.Both of them represent an authority structure,institutions, leadership and rules to govern localpopulations. While the modern notion of nationalsovereignty and territorial control would requireassimilation of the tribe into the larger nationalcommunity, the tribe and its chieftain would strive tomaintain their autonomy, traditions, and politicalarrangements. The ethos and structural needs of thetwo to survive, and for the state to expand, come intoclash. The research therefore raises the issue of how togo about assimilation or integration of tribal regionswithout provoking conflict. One of the central questionsof Dr. Rais' research is whether the Pakistani state pursueda well-designed, elaborate and consistent policy ofeffecting social change through modernization processin the western borderlands, or has it relied on the colonialframework of “separation” and indirect control? The focusis how the three international systems-British colonial, ColdWar, and American hegemonic have defined and redefineddynamics and interactive process between the tribes andPakistani state.

Mohammad Waseem

Professor Mohammad Waseem has been coordinatingresearch on Religion and Development (RaD) sponsoredby DFID-University of Birmingham. The components ofthe study include relationships between religious values,development concepts and practices; religions, politicsand governance; the role of faith communities incontemporary social movements; the role of faith-basedorganizations in development; faith-based serviceproviders and their changing relationship with the state;the development activities, values and performance offaith-based organizations and the role of faith-communities in conflict transformation and long-termdevelopment. Dr. Waseem is the team leader of one ofthe research components - dealing with the role of faithcommunities in conflict transformation and long-termdevelopment. He has conducted field research in Jhangdistrict and is planning to go to Gilgit in late March 2009.This component deals with resettlement and

rehabilitation of communities after the sectarian confictthat excerbated tensions between Shi’as and Sunnis.This project would bring out policy implications forofficial and non-official initiatives in this regard. Inaddition, Dr. Waseem is working on his new book“Political Conflict in Pakistan”. He plans to submit themanuscript by the end of 2009 / early 2010 possibly toRoutledge. This book deals with ethnic, religious,linguistic, constitutional, electoral and civil-military conficts.

Law and Policy

Asad Farooq

Asad Farooq's main areas of interest are internationallaw and emergent global forms of law, human rightsdiscourse and practice, law in development, alternativetheorizations of law, and popular reason in law andpolitics. His work is premised on the contextualapproaches to law and law-doing. Much of this work hasbeen tied to ongoing engagements with socialmovements. During his thesis work, he was engagedwith peasant communities struggling for land rights inMalawi, whilst researching on the implications ofdominant discourses of governance for the socialmajorities, and examining languages and forms ofresistance to these. It represents a study in both legalimperialism and the decolonizing of law. Similarly hehas worked on developing a jurisprudence of 'People'sLaw' whilst engaged with communities of resistance onland and water rights struggles in Pakistan. The latterhas also involved (dis)engagements with inspectionprocesses both at the World Bank and the AsianDevelopment Bank. More recently his work is developinginto the examination of 'the indigenous' as a 'new'political subjectivity.

Asad Farooq has also been working with a pioneeringcollective that aims towards developing new pedagogicalmethods of communication and communication design(both within new and old media) for use with and bysocial movements. Engagement with theories and praxisof voicing, testimony/ witnessing and the archive,underpin this process.

Summer 2009

Jawwad S. Khawaja

The research work of Professor Jawwad Khawaja, whoresigned as a Judge on the Lahore High Court in March2007, is concentrated on improving the quality of justice.This includes institutional reforms in the legal systemfor the delivery of prompt and inexpensive redress tolitigants; gathering and collating accurate data fromCourt records to ascertain causes for delay in decidingcases and based on this to (a) formulaterecommendations and (b) suggest legislation which willameliorate systemic shortcomings; researching Policeand Jail administrations to chart out practices relatingto under-trial prisoners in particular and those generallywho need to interact with these administrations; togauge the impact on economic activity, of inefficienciesin the resolution of contentious litigation. His mostrecent and ongoing academic effort consists of workingon a thematically organized book on Civil Procedure.In addition, he is developing a short course for legalorientation on corporate governance including teachingmodules for Banking sector executives. He has beennominated by the Chief Justice of Pakistan, IftikharMuhammad Chaudhry, to the Law and JusticeCommission of Pakistan (LJCP) which is a statutory bodybroadly mandated to undertake research and to makerecommendations in the field of law. Professor Khawajawas named on the four-member Technical EvaluationCommittee to scrutinize and evaluate proposals forfunding of research and other projects. Professor JawwadKhawaja has now been appointed as Justice of theSupreme Court of Pakistan ( June 2009).

Sikander Ahmed Shah

Sikander Shah's area of research relates to PublicInternational Law and is focused on state sovereigntyand territoriality, use of force, self-determination, globalterrorism, human rights, wto laws and corporategovernance. His most recent work is forthcoming in theAmerican Journal of International Law and the VermontLaw Review. He is currently a Research Scholar at theUniversity of Michigan Law School working on publicinternational law issues most relevant to Pakistan. Inparticular, his work focuses on the legality of the USDrone Attacks on Pakistan under the international law

of armed conflict and on determining the impact of theinternational law of sovereignty and statehood onclassical Islam as well as on Islamic revivalist movements.

Osama Siddique

Osama Siddique has been closely involved in researchas well as policy work. His recent research includes abook written about the Presidential power to dissolveassemblies under the Pakistani Constitution and itsdiscontents; articles exploring the use of BlasphemyLaw in Pakistan, the State liability and remedies forvictims of defective construction in Pakistan as well ason the crisis of legal education in Pakistan and key areasof reform; and various book chapters on the liberationof juvenile prisoners and on legal issues surroundingcorporate governance.

Professor Siddique has also been continuing justicesector policy consultancy work since 2004 as the 'Law& Justice Reform Specialist' for the Asian DevelopmentBank on legal education reform, through the designand formulation of the joint ADB, Ministry of Law, Justice& Parliamentary Affairs and HEC initiative for introducingCenters of Excellence in Legal Education ('CELE Project').The main aim of this initiative is to extend financial andtechnical support to the most promising public andprivate law colleges in the country in order to bringabout improvements in the areas of curricular reform,legal teaching and research. Additional law & policyreform projects in which he has participated in thisadvisory capacity have involved work on, inter alia, delayreduction in courts, legal bar reform initiatives, draftingof new laws and legal amendments in the areas ofconsumer protection laws, ombudsman laws, the civiland the criminal procedure codes, as well as institutionalcapacity building projects for provision of free legal aidand setting up of judicial training institutes. Furthermore,he is a member of the Governor of the Punjab'sCommittee for Reform of Punjab University Law College(PULC) - the largest public sector law college in Pakistan;the committee benchmarked proposals for provinciallegal education reform against the Law & Policy Programinitiative at LUMS.

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All submissions will be handled electronically and shouldbe sent to sspb@lums.edu.pk. Submitted articles, notexceeding 5000 words in length, should preferably be inthe form of plain text or as a word editor document. TheEditorial board will review all submissions to determinetheir suitability for publication. Articles should not besimultaneously submitted for publication to another journalor newspaper. If a different version of the article haspreviously been published, please provide a copy of thatversion along with the submitted article. All correspondence,including notification of the editorial decision and requestsfor revision will take place by email. In case the author(s)do not respond in a timely manner, the Editors reservethe right to make final revisions before publication.