Taliban seek international recognition

It must be highly disappointing for Taliban that their government has neither been recognized by Muslim countries as well as non-Muslim countries. The pretext is most whimsical, education for girls.

The dichotomy of super powers is the universal truth, in the recent half century they have killed millions of people in proxy wars, used all sorts of lethal weapons and committed worst war crimes. If the heads of the states ordering killing of people can’t be trialed for war crime, why is Taliban government being punished for not providing education to girls?

One may not be wrong in inferring the conclusion that the world super powers have joined United States in punishing Taliban for defeating the self-proclaimed super power.

A Taliban-run gathering of thousands of male religious and ethnic leaders ended on Saturday by asking foreign governments to formally recognize their administration, but made no signals of changes on international demands such as the opening of girls' high schools.

The Afghan economy has plunged into crisis as Western governments have withdrawn funding and strictly enforced sanctions, saying the Taliban government needs to change course on human rights, especially those of women.

"We ask regional and international countries, especially Islamic countries … to recognize the Islamic Emirate of Afghanistan ... release all sanctions, unfreeze (central bank) funds and support in development of Afghanistan," the gathering's participants said in a statement, using the group's name for their government, which has not been formally recognized by any country.

The group's reclusive leader joined the three-day gathering of more than 4,000 men on Friday, and delivered a speech in which he congratulated the participants on the Taliban's victory and underlined the country's independence.

The Taliban went back on an announcement that all schools would open in March, leaving many girls who had turned up at their high schools in tears and drawing criticism from Western governments.

In speeches broadcast on state-run television, a small number of participants brought up girls' and women's education. The Taliban's deputy leader and Interior Minister, Sirajuddin Haqqani, said the world had demanded inclusive government and education and these issues would take time.

But the group's supreme leader, Haibatullah Akhundzada, who is normally based in the southern city of Kandahar and rarely appears in public, said foreigners should not give orders.

The gathering's final statement said defence of the Islamic Emirate was obligatory and that the Islamic State militant group, which has said it was behind several attacks in the country, was illegal.

It said it would not interfere with neighbouring countries and they should not interfere in Afghanistan.

 

United States not keen in reviving Iran nuclear deal

The chances of reviving the 2015 Iran nuclear deal are worse after indirect United States-Iranian talks in Doha that ended without progress, a senior US official told Reuters.

"The prospects for a deal after Doha are worse than they were before Doha and they will be getting worse by the day," said the official on condition of anonymity.

"You could describe Doha at best as treading water, at worst as moving backwards. But at this point treading water is for all practical purposes moving backwards," he added.

The official would not go into the details of the Doha talks, during which European Union officials shuttled between the two sides trying to revive the 2015 Joint Comprehensive Plan of Action (JCPOA) agreement under which Iran had limited its nuclear program in return for relief from economic sanctions.

Then US President Donald Trump reneged on the agreement in 2018 and restored harsh US sanctions on Iran, prompting Tehran to start violating its nuclear restrictions about a year later.

"Their vague demands, reopening of settled issues, and requests clearly unrelated to the JCPOA all suggests to us ... that the real discussion that has to take place is (not) between Iran and the US to resolve remaining differences. It is between Iran and Iran to resolve the fundamental question about whether they are interested in a mutual return to the JCPOA," the senior US official said.

"At this point, we are not sure if they (the Iranians) know what more they want. They didn’t come to Doha with many specifics," he added. "Most of what they raised they either knew - or should have known - was outside the scope of the JCPOA and thus completely unsellable to us and to the Europeans, or were issues that had been thoroughly debated and resolved in Vienna and that we were clearly not going to reopen."

Speaking at the UN Security Council, US, British and French diplomats all placed the onus on Iran for the failure to revive the agreement after more than a year of negotiations.

Iran, however, characterized the Doha talks as positive and blamed the United States for failing to provide guarantees that a new US administration would not again abandon the deal as Trump had done.

"Iran has demanded verifiable and objective guarantees from the US that JCPOA will not be torpedoed again, that the US will not violate its obligations again, and that sanctions will not be re-imposed under other pretexts or designations," Iran's UN Ambassador Majid Takht Ravanchi told the council.

The senior US official said Washington had made clear since the talks began in April 2021 that it could not give Iran legal guarantees that a future US administration would stick to the deal.

"We said there is no legal way we can bind a future administration, and so we looked for other ways to give some form of comfort to Iran and … we - along with all of the other P5+1 (nations) and the EU coordinator - thought that file had been closed," the senior US official added.

Iran struck the original deal with Britain, China, France, Russia, the United States and Germany, a group called the P5+1.

The senior US official disputed Tehran's argument that Washington was to blame for the lack of progress, saying the United States had responded positively to proposed EU changes to the draft text of an agreement reached during wider talks in March while Iran had failed to respond to those proposals.

If the deal is not revived, he said "the Iranian leadership would need to explain why it turned its back on the benefits of the deal for the sake of issues that wouldn't make a positive difference in the life of a single ordinary Iranian."

The US official did not detail those issues. Restoring the deal would allow Iran to legally export its oil - the life blood of its economy.

Americans Seeking Establishing Greater Israel

According to a report there are growing signs that support Israel has morphed into a religious extremist position. The far-right American voters within the Texas Republican Party have approved a platform that will make it illegal to create a Palestinian State in territories controlled by the apartheid state.

The platform, approved by 5,100 delegates in Houston, supports the "prohibition of a Palestinian State within the historical borders of Israel, as it would jeopardize Israel's security and it would force Israel to give up land that God gave to the Jewish people as referenced in Genesis."

Going beyond all previous anti-Palestinian positions ever adopted by an American party, the GOP platform approved the creation of what is often referred to as "Greater Israel," which will see Israel expand ethno-nationalist Jewish domination to every inch of Historic Palestine.

After decades of ethnic cleansing, artificial re-drawing of borders and population control based on who is and is not Jewish, Israel has managed to wrestle total control of the territory from the West of River Jordan to the Mediterranean Sea. Currently, as many as 12 million people reside in Historic Palestine, but full rights are granted by the occupation state to Jews only.

The remaining six million non-Jews are subjected to various forms of racial discrimination, depending on their place of residence. While non-Jews are denied full equality with Jews wherever they live, the 1.8 million Palestinian citizens of Israel, for example, have more rights than Palestinians in every other zone of Israeli control.

Though they face various forms of racial discrimination, Palestinians in occupied East Jerusalem are granted relatively better status than Palestinians in the West Bank and Gaza, where the native population has been caged into an "open air prison".

Also, a racist policy enshrined in Israeli law denies some six million Palestinian refugees the right to return to the territory from which they were expelled only a few decades ago. The same law, however, permits every Jew across the world to "return" and settle in any part of Palestine, despite not having any direct connection to the land, other than Biblical claims mentioned in the Genesis.

Such practices, including the racial fragmentation of Palestine into zones of control where half the population enjoys full rights of citizenship denied to the non-Jewish half, every major human rights group has labelled Israel an apartheid state.

As of 2019, 138 of the 193 UN member states have recognized the State of Palestine. Moreover, every UN member, including the US and European countries, are ostensibly committed to the creation of a fully sovereign Palestinian State.

Nevertheless, every major Israeli party explicitly rejects the international consensus and now have found strong support for their radical position from the Texas Republican party in foreclosing any chance of a Palestinian State from ever being established.

Though party platforms do not necessarily translate into government policy, critics cite the former US President Donald Trump and the support enjoyed by Israel amongst powerful Evangelical Christians as well as fringe elements in US society, to argue that the most extreme and rejectionist views about the apartheid state have become normalized in US politics.

Amongst the other policies adopted by the pro-Israel Texas constituency is a proposal to hold a referendum on seceding from the US; a rejection of Joe Biden's presidency; calls for the repeal of the 1965 Voting Rights Act, which guaranteed Black voters representation.

 

Iran ramps up neighborhood diplomacy

Iranian President Ayatollah Seyed Ebrahim Raisi gave a new boost to his administration’s policy of cementing ties with neighbors as part of new foreign policy agenda of the country. 

President Raisi had a busy weekend in terms of holding meetings with foreign leaders. He left Tehran on Wednesday for Ashgabat to attend an important regional summit held in Turkmenistan’s capital.

He met with a number of foreign leaders on the sidelines of the 6th summit of the Caspian Sea littoral states, which provided him with a unique opportunity to advance his “neighborhood policy”. It marked a new orientation in Iran’s foreign policy which is aimed at strengthening ties with neighbors. 

President Raisi visited Turkmenistan with a clear goal in mind to further advancing the neighborhood policy. In his meeting with the Chairman of the People's Council of Turkmenistan, Gurbanguly Berdimuhamedow, Raisi said his administration “has a special program in the field of foreign policy to develop neighborly relations, and Iran-Turkmenistan relations are expanding rapidly based on extensive cooperation and mutual trust.”

He reiterated this in his meeting with Turkmen President Serdar Berdimuhamedow, saying that his administration “attaches a special priority to develop relations and cooperation with neighbors”.
President Raisi pointed out that the relations between Tehran and Ashgabat are expanding rapidly based on the development of neighborly relations and on the basis of mutual trust and extensive cooperation.

Raisi also addressed the Caspian Sea summit, where he underlined Iran’s sincerity in its quest for building better relations with its neighbors. He described this as a strategy of Iran.

“The interaction of the Islamic Republic of Iran with its friends and neighbors is original, and this interaction and cooperation not only will lead to economic prosperity and increase the welfare of our nations, but also strengthen regional peace and stability and solve the problems of the Caspian Sea zone merely through its coastal countries. This major strategy of the Islamic Republic of Iran will continue, regardless of international developments,” Raisi said. 

This policy was initiated a year ago when President Raisi assumed office in August 2021. Back then he expressed his administration’s strong desire for fostering cooperation with neighboring countries. The Raisi administration has made great strides. In the early days of his administration, Raisi succeeded in ironing out Iran’s membership in the Shanghai Cooperation Organization (SCO). Interestingly, the SCO membership was achieved during a summit in Dushanbe, Tajikistan. 

Iran is now eyeing a similar membership in the BRICS group of emerging countries which includes Russia, China, Brazil, India, and South Africa. President Raisi was invited by China to address the recent BRICS summit. Russia and China have voiced support for Iran’s membership in the group. 

The Raisi administration is pursuing regional diplomacy simultaneously with its efforts to hammer out a deal with the West over reviving the 2015 nuclear deal. The latest round of talks in this regard was held in Doha, Qatar, on Tuesday and Wednesday. 

Pakistan: Excessive taxing is disastrous for economy

Today I have found Asad Ali Shah* one of the supporters of my propagations. I have picked up the following text from one of his posts at LinkedIn. He has talked why excessive tax in the name of super tax and poverty alleviation tax on corporate entities is disastrous for Pakistan’s economy:

1) Pakistan already has highest tax rates in the world, imposition of additional taxes will increase the rates in range of 39 – 49 percent (specified sectors and banks). Add workers welfare fund (2%), and workers profit participation fund (5% on industrial entities) and dividend 15% ‑ tax rate on shareholders goes up in range of 55 to 65 percent;

2) In most countries, corporate tax rates are significantly lower than individual rates- as large scale value addition, productivity and innovation happens in corporate sector. Further, most countries have been competing to reduce tax rates to attract investment and multinationals to locate their head quarters/operations in their country. For instance tax rates for Corporates in a developed economy like UK is 19%, while tax rates for high income individuals are 40% and 45%. Similar trend prevails in most economies. Therefore, all economies promote corporate entities- in land of pure, Pakistan does exactly the opposite.

3) Considering very large portion of Pakistan’s economy is informal, imposing excessive tax on few corporate entities that are in formal sector and transparently report higher profits tantamount to punishing them for honesty. It will naturally prove counterproductive and will promote tax evasion. As saying goes, "No good deed goes unpunished".

4) Biggest cause of Pakistan's bankruptcy is huge cost and inefficiency of public sector- the Government of Pakistan spends 22% of GDP vs. 15% in Bangladesh. Much of such spending is wasted- payments of salaries to much larger number of people than required and other costs against which service delivery remains substandard. Even the so called development expenditure (aggregating Rs2.3 trillion for federal PSDP and provincial ADPs in current budget) is poorly spent on projects that do not generate adequate economic benefits. Most projects are initiated based on political considerations without adequate economic justification; poorly executed resulting in huge cost over runs and inordinate delays. It would have been far better, if such development spending was cut by 50% for reducing fiscal deficit rather than imposing such exorbitant taxes on private sector corporates.

5) All over the world, it is through private sector that countries produce goods and services at lower cost for their citizens and become competitive to generate exports. Bulk of employment is also created in private sector. All of this happens when the governments have small role ‑ promoting efficiently and regulating private sector through competitive and adequate fiscal and monetary policies.

Unfortunately, in Pakistan the keep governments have kept growing the public sector through excessive taxation on a very small formal sector that is shrinking with time.

It is unfortunate that in Pakistan economic and social indicators continue to get worse; but the governments keep on going back to IMF every 3 years, but unwilling to learn.

*Asad Ali Shah is a Fellow Chartered Accountant, engaged in management consultancy, tax, corporate and financial advisory services for over 35 years. He has been advising large national and international organizations across a range of industries and markets in the areas of strategy development, organization design, governance and Consulting. Have advises clients to help them improve their governance, strategy, operations, internal control and risk management systems. He frequently writes on macro economy, governance and matters of public interest.

Pakistan: Painful Path to Recovery

I am pleased to share with my readers a report by IMS Research. You may not agree with all the points, but it makes a good basis for an ‘Academic Discussion’. Pakistan needs a ‘home grown plan’ to overcome its inadequacies.

According to the brokerage house, FY23 Federal Budget saw the government attempt to widen the tax net, but the brunt eventually fell on the existing narrow tax base in the shape of higher corporate and personal taxes.

The benchmark index of Pakistan Stock Exchange (PSX) shed 3.6% (6.6% in US$), with turnover thinning out even further.

Foreign institutions and local insurance companies remained aggressive sellers. Pakistan is inching closer to the IMF program, but investor confidence remains low due to a sticky current account deficit, and ugly inflation prints around the corner.

That said, we believe risks are largely in the price, with default likely be avoided as the IMF agreement draws near. 

Inching closer to the IMF program

Pakistan has significantly reduced energy subsidies and sharply raised direct taxes. The 7th and 8th IMF reviews are reportedly being combined and Pakistan could see US$2 billion program resumption.

The FY23 Budget attempted to widen the tax net on real estate and retailers, but ultimately could not avoid further burdening the narrow tax base.

Most large corporates will now face additional 10% tax in in 2022, which reduces to a permanent +4% in subsequent years.

Improved fiscal discipline reduces the load on the monetary side but the State Bank of Pakistan (SBP) could yet raise rates on July 07, 2022 monetary policy, with the next inflation print expected north of 18% and international oil prices failing to come off. We expect an increase of 100bps, which will take the Policy Rate to 14.75%. This may be the last rate hike of the cycle though.    

Improving relations with others

Chinese commercial banks have recently disbursed loans of US$2.3 billion, negotiations are underway with Saudi Arabia to enhance the deferred oil payment facility, and UAE is reportedly interested in acquiring stakes in state-owned entities listed at the PSX.

Progress includes the appointment of a new US Ambassador to Pakistan for the first time since 2018, the visit of the German Foreign Minister, and a positive outcome in the recent FATF plenary with exit from the grey list looking likely subject to on-site verification.

A European Union mission also reached Pakistan to assess GSP+ compliance, and the broader improvement in relations with the West should help Pakistan’s case in our view.

The brokerage house assigns little probability to Pakistan procuring oil from Russia, even though local refineries have been asked to assess suitability, with political considerations likely to win out over economic ones.

Key risks

The government is digging in, going by its increasing willingness to take tough decisions and secure the IMF program. While coalition partners such as MQM have expressed discontent at the results of local body elections in Sindh, and PML-N rule is vulnerable in Punjab, it is difficult to envisage the coalition fracturing at this stage.

Imran Khan is a lot quieter but remains a uniting factor for the ruling parties, no matter their disparate nature.

For the economy, stabilization measures are underway and Moody’s decision to downgrade Pakistan’s outlook to Negative has not been matched by the other major credit rating agencies.

Corporate profits will hurt in the near-term, owing to the 10% super tax for 2022, but the impact on recurring profitability is modest. On market cap to GDP, Pakistan is cheaper than its Covid low and nearly as cheap as its trough during the global financial crisis.

 

Welcome Yair Lapid, Goodbye Naftali Bennett

Yair Lapid swears in as interim Prime Minister of Israel at midnight, replacing Naftali Bennett, who announced not be running in the next elections being held on November 01, 2022.

This makes Lapid the 14th Prime Minister of Israel

Bennett, Lapid and their families participated in a small ceremony for Lapid's transition to Prime Minister. Before the ceremony, Lapid also paid a visit to Yad Vashem.

"Yair, I'm handing you the stick," Bennett told Lapid. "This country and this position do not belong to any one person. We're doing this together and now it's your time."

The Knesset dispersed a few hours earlier the same day with a 92-0 vote.

When Knesset Speaker Miki Levy announced the dissolution of the 24th Knesset, Bennett rose from his chair and signaled incoming Prime Minister Lapid that he would be replaced.

The two are expected to sit down for a long conversation in which they will discuss the overlap between them, Ynet reported.

On Tuesday, Lapid will make his first political trip abroad as Prime Minister to France, and will meet with French Prime Minister Emmanuel Macron.

He will also host US President Joe Biden in his visit to Israel.

In accordance with the coalition agreement, Naftali Bennett stepped down from the premiership, becoming alternate prime minister, a title Lapid held for the past year. Lapid will remain foreign minister, as well.

Lapid’s first stop after becoming prime minister was the Hall of Remembrance at Yad Vashem, which he said he visited “to promise my father that I will always keep Israel strong and capable of defending itself and protecting its children.” His father, former justice minister Tommy Lapid, was a Holocaust survivor.

After that, Lapid went to the Prime Minister’s Office for a handover ceremony and transition meeting with Bennett. Lapid’s wife, Lihi, and Bennett’s wife, Gilat, and their children attended, as did Prime Minister’s Office staff, but the ceremony was otherwise closed to press or guests.

Lapid made brief remarks, saying to Bennett, “I have worked under Prime Ministers. I am familiar with Prime Ministers. You are a good man and an excellent Prime Minister. You are also a good friend. This is not a farewell ceremony because there is no intention to take leave of you."

Bennett told Lapid that Israel and the premiership do not belong to any one person; they belong to the entire people of Israel.

“I hand over to you the responsibility for the State of Israel. I wish that you guard it well and may G-d watch over you,” he said.

Bennett wished Lapid luck and said to him the blessing parents traditionally say to children on Shabbat, “May G-d make you like Efraim and Menashe. May the Lord bless you and keep you. May he make His face to shine on you and be gracious to you. May He lift up His face to you and grant you peace.”

Lapid said his mother, author Shulamit Lapid, had blessed him in the same way earlier that day.

The new Prime Minister’s next stop was expected to be the residence of President Isaac Herzog. Lapid’s first trip as Prime Minister, originally planned for Bennett, is set for Tuesday.