Saturday, February 17, 2007

State funds disbursement should be advertised -Levy

State funds disbursement should be advertised -Levy

PRESIDENT Mwanawasa has directed the Ministry of Finance and National Planning to advertise funds disbursed to government departments to ensure accountability in the management of public funds. Deputy Minister of Finance, Jonas Shakafuswa said President Mwanawasa wanted to see that money released to government departments was spent on intended projects to benefit the people. "President Mwanawasa has directed the Ministry of Finance to advertise amounts being allocated to the ministries and institutions for accountability seek," he said.

Mr Shakafuswa said this on Thursday night during the launch of a book titled "Show me the Money " by Transparency International Zambia (TIZ). The book is a product of research and analysis of the reports of the Auditor-General in the past 20 years.

He said the efforts by TIZ were commendable as it provided the government and stakeholders of an indication of the magnitude of the problem of accountability of public funds. He said the publication was being launched at an appropriate time when Government was equally taking measures to deal with the continued loss of huge sums of public funds through unscrupulous activities of public service workers, politicians and indeed the private sector. "The loss of public funds cannot be blamed on only one sector.

As a nation, we should take collective responsibility for this loss and use this as a spring board to develop and implement stringent control and accountability measures," he said. Mr Shakafuswa said Government was aware of some of the weaknesses but people should appreciate that there were a number of initiatives in place.

He cited Parliamentary Reforms being implemented and the Public Expenditure Management and Financial Accountability being instituted. Mr Shakafuswa said Government would therefore remain open to dialogue to suggestions on how the fight against corruption could be strengthened. He urged the Anti-Corruption Commission and the office of the Auditor General to work together and take corrective action to investigate and prosecute all cases of theft of public funds.

And giving an over view of the book, Premus Media representative, Tom Thewe said K1.2 trillion was loss of expenditure in ministries between 1984 and 2004 which translated into K800 million loss of expenditure every month. Mr Thewe said the failure to maintain adequate and reliable expenditure records and returns, unjustified payments and procurements misapplication of available resources to unjustified and irrelevant areas were the major contributors to loss of expenditure.

Earlier, TIZ acting president Reuben Lifuka said it was sad that a lot of government officers, cited in the reports for misuse of public funds had not even been questioned by the law enforcement agencies to account for their deeds.

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Letters To The Post

Zambia’s economy
By Mubanga
Saturday February 17, 2007 [02:00]

President Mwanawasa has been talking about corruption for too long. The recent one being K3 trillion which he later 'corrected' to be 36 billion stolen. Is mere talking about corruption enough? Where are you learned people to help in explaining what is going on in our country?

I briefly heard finance minister Magande also saying that the ministers are not corrupt, the corrupt are those service-providers who pay bribes to ministers to help them win contracts. I feel that something is wrong here. Shakafuswa we need to see your muscle, not just blind us with hard talk just to be deflated...

In our country from the head of state to senior ministers, there are many contrasting views and pronouncements which need our learned people to take this government to task. I just wonder the purpose of this pronouncements. Are these mere threats knowing that the people involved either know too much about the other deals that everyone else in (top) government positions keeps doing at the expense of Zambians?

The Vice President also said something in Livingstone regarding workers not being used to turn against investors! All the talk is fishy! Why shouldn’t the government protect its people from cruel investors? Why shouldn’t the government take action on thieving ministers? In the recent past, we heard and we know that something has been swept under the carpet! Come on show us your integrity and simply resign! Corruption is corruption regardless who is involved!

Building Levy’s house
By Gilbert Wandi
Saturday February 17, 2007 [02:00]

It was interesting to read in The Post of Friday 16th February that the government wants to build President Mwanawasa’s retirement house before he leaves office. Now, please, I need to be educated on this issue: does our Constitution say that the government should build a retirement house for an incumbent president or one that has already retired?

I really wonder why the government is in such a hurry when president Mwanawasa still has slightly over four years before he retires. In any case, former President Kenneth Kaunda and founding father of the nation retired in 1991 but his house is yet to be completed.

The construction of his house has been progressing at a snail’s pace with the result that the man has been living like one who never did anything important for this nation. History will judge this country harshly for decisions that are made out of selfishness without consideration for others.

Is the hurry in building President Mwanawasa’s house founded on some perceived fear that he might not complete his term of office? Or is it out of sheer greed and crass selfishness? Or that he is not sure about the treatment he will get from his successor given his track record?

One of Zambia’s governance tragedies is that its institutions, including Parliament, are too weak to check wrong and senseless executive decisions.

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VJ condemns ‘vulture funds’

VJ condemns ‘vulture funds’
By Noel Sichalwe
Saturday February 17, 2007 [02:00]

CHIEF government spoke-sperson Vernon Mwaanga has said the concept of 'vulture fund' is unacceptable as it is used to exploit poor countries. Mwaanga was commenting on the London High Court case that determined the disputed Zambia's debt settlement agreement with Donegal International involving US$55 million. He said the situation called for the international community to outlaw the practice in the interest of financial equity and justice.

Mwaanga said this was the first 'vulture fund' case before the English courts in which a sovereign debtor has successfully challenged the ‘vulture funds’ claim prior to judgment. "Furthermore, the judge's findings of facts have vindicated the then Attorney General George Kunda's decision to suspend payments under the settlement agreement following concerns that had been expressed by the Task Force on Corruption," Mwaanga said. He thanked cooperating partners that have financed the corruption fight and witnesses that gave evidence in the matter. "The judge has significantly reduced the liability of the Zambian government by finding the clauses in the agreement were 'penal', that is, that they were unfair and unjustly penalising Zambia," he said. "The exact extent of liability has not yet been determined. A hearing is still to take place on March 9, 2007 at which time the liability will be established and the issue of legal costs will also be addressed. The indication that has been given by the court is that the sum will be closer to US$14 million, the original settlement, than the US$55 million being claimed by Donegal, which would represent a substantial service of just over US$40 million."

Donegal was seeking to enforce a claim against Zambia for US$55 million despite having bought it from Romania eight years ago for US$3.2 million. Donegal is alleged to have bought the debt behind the back of government representatives. Among the people that were mentioned in the judgment was then director of external resources mobilisation at the Ministry of Finance, Stella Chibanda, who rejected government recommendation to implement the debt buy back.

Judge Andrew Smith also described Donegal's action in obtaining confidential information about the debt from the Zambian government officials as unlawful and immoral. He said Donegal International witnesses that included their local representative Fisho Mwale were dishonest and unreliable having been evasive and misleading. On April 17, 1979 Romania and Zambia signed a loan agreement in respect of acquisitions of agricultural machinery. By an assignment dated January 19, 1999, Donegal acquired the rights of Romania to the debt pursuant to an assignment agreement between Romania and the Zambian government. The Zambian government then acknowledged the assignment to Donegal and the registration of Donegal as current holder of the debt on February 12, 1999. Donegal International Limited was claiming an initial amount of about US$42 million debt that later accumulated to over US$55 million from the Republic of Zambia with interest. This claim was made on April 1, 2003 and was signed by Michael Sheehan on behalf of Donegal while then finance minister Emmanuel Kasonde signed on behalf of the Zambian government. The court proceedings arose strong emotions since Zambia, being a poor country, saw itself as being vulnerable to vulture funds.

Judge Smith said the claim of more than US$55 million was an improper attempt by Donegal to exploit Zambia's vulnerability. Donegal has since responded that their purpose was to make profit and that it was legitimate to pursue the claim of more than US$55 million through the court proceedings against the Zambian government. However, the Zambian government and Donegal sought to reach an amicable settlement in relation to the debt on the terms set out in accordance with the agreement.

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‘We are all to blame’

‘We are all to blame’
By Editor
Saturday February 17, 2007 [02:00]

“We are all corrupt,” charges finance deputy minister Jonas Shakafuswa. And he goes on to say that all Zambians should share the blame for the loss of public funds.

Shakafuswa is certainly not right in saying all Zambians are corrupt. This can’t be true because not all Zambians are corrupt. There are some decent people in this country; and the great majority of our people are decent, humble and poor people who have not stolen anything from government or anyone else for that matter. But probably Shakafuswa has got a point when he says all Zambians should share the blame for the loss of public funds.

This is so because government of and by the people means that citizens of a country share in its benefits and in its burdens. By accepting the task of self-government, one generation seeks to preserve the resources of the country for the next. A free person, when he or she fails, blames nobody but himself or herself.

It is true as well for the citizens of the country who, finally, must take responsibility for the fate of the society in which they themselves have chosen to live. In the end we get the type of society we deserve. If we deserve a corruption-free nation and work tirelessly towards that, we will, in the end, get that type of society.

Self-government, whatever form it takes, by itself guarantees us nothing. It offers instead the opportunity to succeed as well as the risk of failure. In this regard, it should be seen as both a promise and a challenge.

It is a promise in the sense that if we work together and manage the affairs of our country properly, we will be able to serve the aspirations of all our people for economic opportunity and social justice. It is a challenge because the success of this whole enterprise rests upon the shoulders of all of us as citizens of this country and no one else. If we allow a few individuals to steal or abuse public resources with impunity then we have ourselves to blame for the problems this will cause.

It is very difficult to understand why we are able to see someone stealing or abusing public resources and in the process harming the interests of the masses and yet not feel indignant. We don’t even bother to make an effort to dissuade or stop that person or reason with him or her, but all we do is allow him or her to continue with their stealing or abuses.

We have allowed corruption to continue; we have let things slide for the sake of peace and friendship when a person has clearly gone wrong, and we refrain from principled argument because he or she is an old acquaintance, a fellow tribesman or townsman, a schoolmate, a close friend, a loved one, an old colleague or old subordinate; or to touch on the matter lightly instead of going into it thoroughly, so as to stay in good terms. The result is that both the nation and the individual are harmed.

We agree with Shakafuswa’s observation that corruption has become endemic and systematic in Zambia and requires efforts of all actors in fighting it.

Many things may become baggage, may become encumbrances, if we cling to them blindly and uncritically. It is not hard for one to do a bit of good. What is hard is to do good all one’s life and never do anything bad, to act consistently in the interests of the broad masses and engage in arduous struggle for decades on end. This is the hardest thing of all. And this is what fighting corruption and other vices require. It calls for permanent vigilance.

Fr Pete Henriot says Zambians are too passive to take to the streets even when their interests are being harmed by unbridled corruption. This may be true but what we need to know is why they are passive. Fr Henriot is right in his observation that misapplication and/or theft of public funds will continue even in this year’s budget if Zambians remain passive. It will take mass action to stop corruption in this country. Pronouncements or declarations by one individual, no matter how influential politically, spiritually or otherwise he may be will not do.

But with this type of passivity, such mass action will not be possible for a long time to come. But the danger, as Fr Henriot points out, is that there will be no future for Zambia if corrupt practices are permitted and accepted as a norm.

We therefore invite all our people to meditate over this problem and find ways of stopping it. We urge all Zambians to avoid corruption at all costs and condemn it whenever and wherever they see it. Corruption destroys the social structures. It should be the duty and mission of every Zambian to promote transparency, accountability and honesty in society.

And a nation like ours, which has declared itself a Christian nation, should not condone corruption because it is a sin and has drastic evil effects. Corruption is robbing our nation of scarce resources needed to lift out of poverty the millions of our brothers and sisters who every day wallow in extreme poverty.

Corruption in Zambia is doing a lot of harm to the great majority of our people and as such it cannot be left to continue. We have to do everything possible as individuals and as a collective to put an end to it and stop or reduce the suffering of the poor whose resources are being squandered or stolen everyday.

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UPND senior officials want Sikota back

UPND senior officials want Sikota back
By Bivan Saluseki and Nomusa Michelo
Saturday February 17, 2007 [02:00]

Some senior UPND officials are making manoeuvres to have United Liberal Party (ULP) president Sakwiba Sikota back into the party. UNPD deputy president Richard Kapita yesterday said although he was not aware of the manoeuvres, as a general principle, people who left the party after the UPND congress last year were being talked to with a view to getting them back to the party. He said the door was open for Sikota to return to UPND.

And when contacted for comment on the matter, Sikota smiled and said he would issue a comprehensive statement at a later date. "There has been too much of ULP in the press, let people rest. I'll issue a statement later," said Sikota. According to UPND sources, some party officials want Sikota to get back to UPND and reconcile with party president Hakainde Hichilema especially after Patrick Chisanga resigned as UPND vice-president. "In fact, even some traditional leaders from Western Province are for the idea that Mr. Sikota begins to work with Mr. Hichilema since he (Sikota) is slowly becoming solitary," sources said.

The source said Sikota had been approached by some UPND emissaries over the matter. "But so far, Mr Sikota is reluctant; he doesn't seem to be for the idea of going back to UPND," the source said. However, Kapita said Sikota was welcome to UPND if he wanted to get back. Kapita said in a big party like UPND, there could be some individuals who had taken it upon themselves to try and convince some people to get back to UPND.

"As a general principle, we are talking to anybody in different political parties and even those who went away after the congress," he said. Acting ULP Western Province chairman Simasiku Kalumiana said Sikota had a lot of support in Western Province. "The challenge before us is to double our efforts so that we can reach all these people," he said.

Kalumiana said ULP would have to consult its supporters in the province on whatever they did. He said although unity was good, it was not something the party could rush into.

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Friday, February 16, 2007

The Washington Consensus

Does any of this sound familiar in the extreme? This case is about Turkey, but you can fill in the name Zambia for Turkey at any point. THe only significant difference is that in Zambia, the IMF used HIPC to pry away even more value and businesses.

How Turkey's goose was cooked
By Henry C.K. Liu

This article appeared in AToL on September 18, 2003

I was invited to give a lecture on "The Global Economy in Transition" at the Seventh International Conference on Economics held on September 6-9 at the Economic Research Center of the Middle East Technical University in Ankara. The conference brought together from all over the world prominent economists with diverse viewpoints and special expertise, ranging from central bankers and policy specialists to academicians and scholars. The ideological range covered neo-classical to Marxist economics, as well as apolitical macroeconomics and mathematical modeling experts.

The event also gave me occasion to review the economic situation of Turkey, a country that paid dearly for playing by the rules of the International Monetary Fund (IMF) and neo-liberal market fundamentalism. The Turkish government, in its good-faith efforts to join the European Union, has managed to plunge the country's economy from the frying pan into the fire.

The financial press reported that both Turkey and Argentina, beginning in late November 2000, experienced a sudden drop in investor "confidence", whatever that is, posing the biggest challenge to the IMF and the United States since the Asian financial crisis of the 1997. Both nations were desperately seeking emergency IMF loans, the largest bailout packages since an IMF rescue of Brazil in 1998.

The precipitating troubles were linked to the sharp slowdown in the growth rate of the United States economy and the selloff in US stock markets. Export-oriented developing nations in Latin America, Asia and the Middle East had depended heavily on robust expansion in the United States to power their own tentative recoveries from a recession in the late 1990s, and to service their dollar debts. The IMF agreed on December 6, 2000, to provide US$7.5 billion in new loans and deliver about $3 billion in already promised loans early to bolster Turkey, where stocks plunged and overnight, interest rates soared on fears that the nation's banking system could collapse. The turmoil raised fears not only that Turkey's ambitious economic overhaul would fail but also that investors would lose faith in the prospect of other major emerging economies worldwide.

Unlike other situations, Turkey appears to have been the victim of sound economic management along neo-liberal lines. In Turkey, the coalition government of former prime minister Bulent Ecevit, acting with dubious IMF advice and counterproductive support, began an economic overhaul early in 2000 intended to bring the economy up to European standards, part of its bid to join the EU. Dancing to the tune of IMF doctrines, Turkey set up a strict currency-management system, imposed budgetary discipline and moved to privatize state assets, all in accordance with the Washington Consensus. The effort reduced government borrowing and sharply lowered hyper-inflation. Unlike Japan, Turkey adopted a program that forced its 81 banks to improve their operations or face terminal consequences. Turkey had a neo-classical long-term economic plan, it had the most stable government in a decade, and it had been on a self-imposed austerity program since mid-1998.

Notwithstanding that such drastic austerity will destroy any booming economy, let alone a troubled one, the IMF handed $4 billion to Turkey to back a new three-year program, matched by another $4 billion from the World Bank. The stated aim: to bring inflation, which had averaged more than 80 percent in each of the previous eight years, down to single digits by 2003. The IMF money created a brief illusion of success for a program heading for systemic disaster.

The Turkey program was implemented in January 2000, and all went well at first, thanks to the sudden injection of $8 billion from the IMF. Interest rates on government paper plummeted to 45 percent from highs of more than 140 percent in 1999. Turkish planners could make financial plans at last, thanks to exchange-rate policies that were designed to devalue the Turkish lira slowly and in an orderly manner until mid-2001. The government even started fixing up social security and agricultural subsidies, much to the delight of supply-side, neo-liberal economists. By the summer of 2000, Turkey had raised more money through privatization and the sale of mobile-phone licenses than it had in the previous 15 years, using the US formula of "air ball" financing - loans based on future cash flow rather than hard assets or current profits.

Not surprisingly, after 11 months, privatization had slowed to a crawl, with potential buyers waiting for further declining prices and pending deregulation. Lower domestic interest rates in the context of fixed exchange rates had fed a consumer-lending boom that sucked in imports, putting pressure on Turkey's foreign-currency reserves. The lower rates also constrained the easy profits once made by midsize banks that survived mostly by lending money to the government. Criminal cases were publicized to uncover decades of corrupt bank management, to lay blame on human frailty rather than policy error. The same corruption, albeit real, was not credited for the brief "success" of the flawed program. Turks at all level of wealth began to move money abroad cashing in their Turkish liras for US dollars. Foreign investors/creditors began withdrawing credit lines from Turkey at the beginning of December 2000, after fears developed that many Turkish banks, which were under heavy pressure to reorganize, had become insolvent.

Unlike Argentina, which faced a different problem - investors there were worried that Argentina's slow-growing economy might not have the wherewithal to repay its hefty foreign debt - Turkey's crisis was caused by faulty monetary and fiscal policies that even the United States would not have been able to afford. Ironically, the government's seizure of 10 troubled banks in November 2000 to clean up the banking system had the opposite effect. The move, instead of promoting "market discipline", caused foreign investors to panic about the solvency of the banking system. In reality, the foreign banks were merely upset that their hope of buying up Turkish banks on the cheap had been spoiled by the government. A $7.5 billion package of emergency IMF funding announced on December 6, 2002, brought a fragile stability to Turkish markets. With a straight face, the IMF said Turkey would not then need extra bridge loans from other international institutions, as foreign banks cut their exposure to the country with vengeance.

A full-scale financial crisis was triggered by a minor "bloodletting" among Turkish banks. The crisis had its roots in 1999. Turkey, a country of 65 million people, with a $200 billion economy that overtook Russia's gross national product in 1998, applied for its 17th standby agreement with the IMF, with a promise to adopt Fund prescriptions. Consumer lending that had helped the economy return to growth after a massive August 1999 earthquake had ground to a halt. Growth was now expected to be flat in the first quarter of 2001, causing severe economic pain.

Already overburdened Turkish taxpayers again paid the price for budgetary- and economic-stability policies at the wrong time and on a wrong schedule. It was at this critical juncture that a "blood feud", as the big newspaper Hurriyet called it, broke out in the banking sector.

One of the midsize banks, Demirbank, had been taking business from Turkey's big established banks. It had also bet big on the anti-inflation program's success in bringing interest rates down still further. At one point, Demirbank held 10 percent of Turkey's domestic debt. But it was funding its operations from Turkey's short-term money markets, which were supplied by the same big-money banks it had alienated. The funny thing was that these money-center banks, with their international network, got their funds from the short-term US repo debt market through New York international banks.

When delays hit a big Demirbank foreign-loan syndication, the bank suddenly found its lines of credit cut. Demirbank was forced to dump its Turkish treasury bills at a loss to meet margin calls and other obligations. A classic fire sale began, not much different from the situation faced by the hedge fund LTCM in the United States, except on a much smaller scale. Normally, the Turkish central bank would have stepped in to ease Demirbank over its liquidity crisis, as the New York Fed did with LTCM, and all would have been fine. But a key condition of IMF support for Turkey's anti-inflation program was a cap on the total foreign and local currency in circulation in Turkey. So when the Demirbank crisis triggered a small rush to buy dollars from the central bank, it drained Turkish lira out of circulation just when they were most needed to ease lending between banks.

Already spooked by trouble brewing in Argentina, emerging-market investors stampeded out of Turkey on November 22, 2000, before the long US Thanksgiving holiday weekend. As yields on Turkish domestic assets slid from 35 percent to 4.5 percent, many investors started selling Turkish treasury bills to cut their losses. They sought safety in dollars, sucking the central bank's currency reserves down farther. Deutsche Bank alone sold $700 million worth of Turkish treasury bills in a day, mostly on behalf of clients (read hedge funds) but also for its own proprietary trading accounts.

Briefly breaking with the IMF plan, the Turkish central bank supplied local currency to the banks. But it was too late.

Turkish markets stalled and plunged into a panicky tailspin. Within two weeks, $7 billion of Turkey's $24 billion of pre-crisis foreign-currency reserves had fled the system. Fears spread that Turkey would be forced to devalue its currency, which would wreck the Turkish economic program, shake global "confidence" in emerging markets and undermine the stability of the ruling order of Turkey, a rare secular democracy in the Muslim world.

Turkey hung tough and took over Demirbank. This helped it earn the admiration of the IMF and the promise of $7.5 billion in emergency funds. As the outcome became clear, investors poured back in more than $1.5 billion - including at least $300 million through Deutsche Bank (less than half of one day's sale earlier). On December 10, 2000, 30 Europe-based banks met in Frankfurt, Germany, and pledged to keep credit lines open. Turkish and IMF officials would seek similar commitments a few days later in a meeting with US bankers in New York convened by Citibank. No one mentioned anything about the interest rates. The Turkish central banks had no option but to accept what the international banks demanded.

Speculators with liquid assets had won big. Some foreign speculators tried to point out that as many as one-third of the customers of the international banks at the December 29 meeting in Frankfurt were actually high-net-worth Turks, who bought dollars and euros with their lira and sent their foreign currency back into Turkey as foreign capital. International hedge funds, despite their new strategy of avoiding overwhelming the small markets, also bet hundreds of millions of dollars against the Turkish lira. They could achieve 10 percent gains in dollar terms in two weeks simply by playing the market for short-term deposits during the crisis. Indeed, a dollar-based gain on Turkish treasury bills of 29 percent to the end of June could still be locked in on December 11, according to Istanbul's Bender Securities. Far greater returns were theoretically possible at the Istanbul Stock Exchange, where prices fell 50 percent during the 30 days to December 5, and then rocketed back up 40 percent in two days. Speculators were laughing all to way not to the bank, but on their way out from the bank.

Meanwhile, the economy of Turkey lost big. The legitimacy of the reform process itself had also been thrown into question. Although Turkey vowed that the aim of its IMF-backed program was to privatize the economy and financial system, Demirbank became the 11th Turkish bank to be taken under state control in the past two years. More seemed likely to follow.

When would the IMF snake oil be exposed for the quack medicine that is actually was? Western bankers had vowed (as a non-binding commitment) to continue lending money to Turkey, giving a vital boost to efforts to restore "confidence" in that nation's finances just days after the Fund agreed to provide an emergency aid package. This loss of confidence was cause by the very IMF rescue policy earlier. It seems that the IMF and the international banks were a team: the IMF arrived first as a carrier of financial virus in the name of financial health, then the international banks came as vulture investors in the name of financial rescue. Market confidence returned as one big confidence game.

Gazi Ercel, then governor of Turkey's central bank, and Stanley Fischer, the No 2 official at the IMF, conducted the meeting in Frankfurt, which was organized by Deutsche Bank and included representatives from Dresdner Bank and Commerzbank of Germany and Citigroup of the United States, among other major lenders. (Less than three years later, Fischer joined Citigroup as vice chairman.)

In hindsight, it becomes clear that the Turkish financial crisis could have been avoided if the Turkish government had rejected IMF prescriptions earlier. Once the crisis began, it could have been defused with central-bank intervention to provide a timely inter-bank liquidity rescue. Alas, neo-liberal fixation on market fundamentalism caused the Turkish government to forgo that option, and the rest was history. Liberalization of financial market under dollar hegemony had plunged the Turkish economy into a protracted abyss from which it will not be able to extract itself unless Turkish leaders summon up the necessary political courage to expel the IMF, curb the "political independence" of its central bank, which views its mandate as protecting the value of money at the expense of the national economy, and reinstitute a national banking regime that uses the banking system to support the national economy.

Turkey must take decisive steps to protect itself from predictable harm from dollar hegemony. It should recapture the authority to issue sovereign credit to put its national economy on the path to new prosperity with equality and economic justice for all.

Henry C K Liu is chairman of a New York-based private investment group. His lecture discussed the global economy in transition, focusing on the changing nature and role of money, debt, trade, markets and development. In summary, the lecture presented the view that an economy is not an abstraction. An economy is the material manifestation of a political system, which in turn is the interplay of group interests representing, among others, gender, age, religion, property, class, sector, region or nation. Click here to read more.

Henry C K Liu was invited to give a lecture at the Seventh International Conference on Economics held on September 6-9 at the Economic Research Center of the Middle East Technical University in Ankara. The conference brought together from all over the world prominent economists with diverse viewpoints and special expertise, ranging from central bankers and policy specialists to academicians and scholars. The ideological range covered neo-classical to Marxist economics, as well as apolitical macroeconomics and mathematical modeling experts.

Liu's lecture discussed the global economy in transition, focusing on the changing nature and role of money, debt, trade, markets and development. In summary, the lecture presented the view that an economy is not an abstraction. An economy is the material manifestation of a political system, which in turn is the interplay of group interests representing, among others, gender, age, religion, property, class, sector, region or nation. This is an edited version.

Individual interests are not issues of politics. Therefore, the politics of individualism is an oxymoron and, by extension, the Hayekian notion of a market of individual decisions is an ideological fantasy. Markets are phenomena of large numbers and herd instinct where unique individualism is of little consequence. The defining basis of politics is power, which takes many forms: moral, intellectual, financial, electoral and military. In an overcapacity environment, company executives lament about the loss of pricing power. The global economy is the material manifestation of the global geopolitical system, and global macroeconomics is the rationalization of that geopolitical system.

The nomenclature of economics reflects, and in turn dictates, the logic of the economic system. Terms such as money, capital, labor, debt, interest, profits, employment, market, etc, have been conceptualized to describe components of an artificial material system created by power politics. The concept of the economic man who presumably always acts in his self-interest is a gross abstraction based on the flawed assumption of market participants acting with perfect information and clear understanding of its meanings. The pervasive use of these terms over time disguises the artificial system as the product of natural laws, rather than the conceptual components of power politics. Just as monarchism was rationalized as a natural law of politics in the past, the same is true with market capitalism today.

The market is not the economy. It is only one aspect of the economy. A market economy can be viewed as an aberration of human civilization. People trade to compensate for deficiencies in their current state of development. Exploitation is slavery, not trade. Imperialism is exploitation on an international level. Neo-imperialism after the end of the Cold War takes the form of neo-liberal international trade.

Free trade cannot exist without protection from systemic coercion. To participate in free trade, a trader must have something with which to trade voluntarily in a market free of systemic coercion. That tradable something comes from development, which is a process of self-betterment. International trade is not development, although it can contribute to domestic development. Domestic development must take precedence over international trade, which is a system of external transactions supposedly to augment domestic development. But neo-liberal international trade since the end of the Cold War has increasingly preempted domestic development in both the center and the periphery. Global trade has become a vehicle for exploitation of the weak to strengthen the strong. Aside from being unjust, neo-liberal global trade as it currently exists is unsustainable, because the transfer of wealth from the poor to the rich is unsustainable. Neo-liberal claims of fair benefits of liberalized trade to the poor of the world, both in the center and the peripheral, are simply not supported by facts.

Most monetary economists view government-issued money as a sovereign debt instrument with zero maturity, historically derived from the bill of exchange in free banking. This view is valid for specie money, which is a certificate that can claim on demand a prescribed amount of gold or other specie of value. Government-issued fiat money, on the other hand, is not a sovereign debt but a sovereign credit instrument. Sovereign government bonds are sovereign debt while local government bonds are institutional debt, but not sovereign debt because local governments cannot print money. When money buys bonds, the transaction represents credit canceling debt. The relationship is rather straightforward, but of fundamental importance.

If fiat money is not sovereign debt, then the entire conceptual structure of capitalism is subject to reordering, just as physics was subject to reordering when man's world view changed with the realization that the earth is not stationary nor is it the center of the universe. For one thing, capital formation for socially useful development will be exposed as a cruel hoax. With sovereign credit, there is no need for capital formation for socially useful development. For another, private savings are not necessary to finance development, since private savings are not required for the supply of sovereign credit. With sovereign credit, labor should be in perpetual shortage, and the price of labor should constantly rise.

A vibrant economy is one in which there is labor shortage. Private savings are needed only for private investment that has no social purpose or value. Savings are deflationary without full employment, as savings reduces current consumption to provide investment to increase future supply. Say's Law of supply creating its own demand is a very special situation that is operative only under full employment. Say's Law ignores a critical time lag between supply and demand that can be fatal to a fast-moving modern economy. Savings require interest payments, the compounding of which will regressively make any financial system unsustainable. The religions forbade usury for very practical reasons.

Fiat money issued by government is now legal tender in all modern national economies since the collapse of the Bretton Woods regime of fixed exchange rates linked to a gold-backed dollar in 1971. The State Theory of Money (Chartalism) holds that the general acceptance of government-issued fiat currency rests fundamentally on government's authority to tax. Government's willingness to accept the currency it issues for payment of taxes gives the issuance currency within a national economy. That currency is sovereign credit for tax liabilities, which are dischargeable by credit instruments issued by government. When issuing fiat money, the government owes no one anything except to make good a promise to accept its money for tax payment. A central banking regime operates on the notion of government-issued fiat money as sovereign credit. That is the essential difference between central banking with government-issued fiat money, which is a sovereign credit instrument, and free banking with privately issued specie money, which is a bank IOU that allows the holder to claim the gold behind it.

US president Thomas Jefferson prophesied: "If the American people allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive people of all property until their children will wake up homeless on the continent their fathers occupied ... The issuing power of money should be taken from the banks and restored to Congress and the people to whom it belongs." It was a definitive statement against the "political independence" of central banks. This warning applies to the people of the world as well.

The Independent Treasury Act, passed in 1840, removed the federal government from involvement with the United States' banking system by establishing federal depositories for public funds instead of keeping the money in national, state, or private banks. Under the Independent Treasury Act, bank notes were to be gradually phased out for payments to and from the government; by June 30, 1843, only hard money was to be accepted.

The Whigs, led by Henry Clay and Daniel Webster, opposed the Independent Treasury, but not to favor private banking. They were committed to the re-establishment of a national bank like the one president Andrew Jackson abolished in 1832. After winning a congressional majority in the election of 1840, the Whigs succeeded in repealing the Independent Treasury Act on August 13, 1841, although they were unable to gain the support of President John Tyler for their national bank proposal. The return of the Democrats to power after the election of 1844 led to the passage in 1846 of a new Independent Treasury Act, nearly identical to that of 1840. This legislation remained substantially unchanged until passage of the Federal Reserve Act in 1913, which established central banking in the US.

When the Civil War began in 1861, the newly installed president, Abraham Lincoln, finding the Independent Treasury empty and payments in gold having to be suspended, appealed in vain to the state-chartered private banks for loans to pay for supplies needed to mobilize and equip the Union Army. At that time, there were 1,600 banks chartered by 29 different states, and altogether they were issuing 7,000 different kinds of banknotes in circulation. Lincoln immediately induced the Congress to pass the Legal Tender Act of 1862 to authorize the issuing of government notes (called greenbacks) without any reserve or specie basis, on a par with bank notes backed by specie, promising to pay "on demand" the amount shown on the face of the note with another note of same value. The greenbacks were supposed to be gradually withdrawn through payment of taxes, as specified in the Funding Act of 1866, to allow the government to redeem these greenback notes in an orderly way without interest.

Still, during the gloomiest period of the war when Union victory was in serious doubt, the greenback had a market price of only 39 cents in gold. The fall in value was related to the survival prospect of the Union, not to loss of specie basis, which was non-existent. After the war, the Supreme Court in a series of cases declared the Legal Tender Act constitutional and Congress decreed that greenbacks then outstanding would remain a permanent part of the nation's currency. Indisputably, these greenback notes helped Lincoln save the Union. Lincoln wrote: "We finally accomplished it and gave to the people of this Republic the greatest blessing they ever had - their own paper to pay their own debts." The importance of this lesson was never taught to the world's governments by neo-liberal monetarists.

Government levies taxes not to finance its operations, but to give value to its fiat money as credit instruments. If it chooses to, government can finance its operation entirely through user fees, as some fiscal conservatives suggest. Government needs never be indebted to the public. It creates a government debt component to anchor the debt market, not because it needs money. Technically, government never borrows. It issues tax credit in the form of fiat money. So when US president Ronald Reagan said the government does not make any money, only the private sector does, he was merely mouthing a political slogan, with no clear understanding of the true nature of money and credit. Fiat money is all that government makes, freely and without constraint, as Federal Reserve governor Ben S Bernanke recently warned in a speech on deflation. And only government can make fiat money as sovereign credit.

Sovereign debt is a pretend game to make private debts tradable. The relationship between assets and liabilities is expressed as credit or debt, with the designation determined by the flow of obligation. A flow from asset to liability is known as credit, the reverse is known as debt. A creditor is one who reduces his liability to increase his assets, which include the right of collection on the liabilities of his debtors.

The state, representing the people, owns all assets of a nation not assigned to the private sector. Thus the state's assets is the national wealth less that portion of private sector wealth after tax liabilities, and all other claims on the private sector by sovereign rights. Privatization generally reduces state assets. As long as a state exists, its credit is limited only by the national wealth. If sovereign credit is used to increase national wealth, then sovereign credit is limitless as long as the growth of national wealth keeps pace with the growth of sovereign credit. Even if the private sector has been assigned all of a nation's tangible assets, the state, by virtual of its existence, can still claim that portion of private sector assets allowed by the constitutional regime. Such claims include the state's power of taxation, nationalization, confiscation, condemnation by eminent domain and the power to grant and revoke monopolies, and above all, the power to issue legal tender by fiat - in other words, the inherent rights of sovereignty.

When the state issues money as legal tender, it issues a monetary instrument backed by its sovereign rights, which includes taxation. The state never owes debts except specifically so denoted voluntarily. When a state borrows in order to avoid levying or raising taxes, it is a political expedience, not a financial necessity. When a state borrows, through the selling of government bonds denominated in its own currency, it is withdrawing previously issued sovereign credit from the financial system. When a state borrows foreign currency, it forfeits its sovereign credit privilege and reduces itself to an ordinary debtor because the state cannot issue foreign currency.

Government bonds can act as absorber of credit from the private sector. Government bonds in the United States, through dollar hegemony, enjoy the highest credit rating, topping a credit risk pyramid in the international debt market. Dollar hegemony is a geopolitical phenomenon in which the US dollar, a fiat currency, assumes the status of primary reserve currency of the international finance architecture. Yet architecture is an art of esthetics in the moral-goodness sense, of which the current international finance architecture is visibly deficient. Thus dollar hegemony is objectionable not only because the dollar usurps a role it does not deserve, but also because its effect on the world community is devoid of moral goodness.

Money issued by government fiat is a sovereign monopoly, while debt is not. Anyone with an acceptable credit rating can borrow or lend, but only government can issue money as legal tender. When government issues fiat money, it issues certificates of its credit good for discharging tax liabilities imposed by government on its citizens. Privately issued money can exist only with the grace and permission of the sovereign, and is different from government-issued money in that privately issued money is an IOU from the issuer, with the issuer owing the holder the content of the money's backing.

But government-issued fiat money is not an IOU from the government because the money is backed by a potential IOU from the holder in the form of tax liabilities. Money issued by government by fiat as legal tender is good by law for settling all debts, private and public. Anyone refusing to accept dollars in the United States is in violation of US law. Instruments used for settling debts are credit instruments. Buying up government bonds with government-issued fiat money is one of the ways government releases more credit into the economy. By logic, the money supply in an economy is not government debt because, if increasing the money supply means increasing the national debt, then monetary easing would contract credit from the economy. Empirical evidence suggests otherwise: monetary ease increases the supply of credit. Thus if money creation by government increases credit, money issued by government is a credit instrument, quod erat demonstrandum.

Hyman Minsky rightly said that whenever credit is issued, money is created. The issuing of credit creates debt on the part of the counterparty, but debt is not money; credit is. If anything, debt is negative money, a form of financial antimatter. Physicists understand the relationship between matter and antimatter. Albert Einstein theorized that matter results from concentration of energy and Paul Dirac conceptualized the creation of antimatter through the creation of matter out of energy. The collision of matter and antimatter produces annihilation that returns matter and antimatter to pure energy. The same is true with credit and debt, which are related but opposite. They are created in separate forms out of financial energy to produce matter (credit) and antimatter (debt). The collision of credit and debt will produce an annihilation and return the resultant union to pure financial energy unharnessed for human benefit.

Monetary debt is repayable with money. Government does not become a debtor by issuing fiat money, which, in the United States, takes the form of a Federal Reserve note, not an ordinary banknote. The word "bank" does not appear on US dollars. Zero maturity money (ZMM) in the dollar economy, which grew from $550 billion in 1971, when president Richard Nixon took the dollar off a gold standard, to $6.333 trillion as of June 2003, is not a federal debt. It amounts to more than 60 percent of US gross domestic product (GDP), roughly equal to the national debt of $6.67 trillion at the same point in time.

A holder of fiat money is a holder of sovereign credit. The holder of fiat money is not a creditor to the state, as many monetary economists claim. Fiat money only entitles its holder a replacement of the same money from government, nothing more. The holder of fiat money is acting as a state agent, with the full faith and credit of the state behind the instrument, which is also good for paying taxes. Fiat money, like a passport, entitles the holder to the protection of the state in enforcing sovereign credit. It is a certificate of state financial power inherent in sovereignty.

Topics presented at the Seventh International Conference on Economics included the critical examination of globalization, the causes and management of financial crises, international finance architecture, growth economics, labor economics and risk management. The conference provided a venue to exchange views on the latest thinking and recent technical advances in economics in response to pressing current problems and issues. For more information, visit the conference website at

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Govt must put up controls to avoid financial misappropriation - YMCA

Govt must put up controls to avoid financial misappropriation - YMCA
By Speedwell Mupuchi
Friday February 16, 2007 [02:00]

GOVERNMENT must put up serious internal and external controls to avoid gross financial misappropriation, Young Men's Christian Association (YMCA) executive director Annie Ngwira has demanded. And Ngwira said her association was dismayed at the huge unemployment levels among youths, which stood at 50 per cent.

In a statement yesterday on the reported theft of K36 billion by public servants, Ngwira said prudent financial management was a critical area the government must address. She said that the recent revelation by President Mwanawasa that public servants had allegedly stolen K36 billion was alarming and disturbing to the country and the youths. She wondered what remedial measures the Minister of Finance was putting in place to ensure that theft of such huge sums of money does not recur.

Ngwira urged youths to demand answers to the many thefts in the public service. "The government must give a clear picture regarding this scam and other vices that have transpired in the past. Surely such retrogressive steps exhibited by some and not all civil servants is unacceptable," she said. Ngwira expressed sadness that youths, who have continued to be disadvantaged, have not risen to the challenge with utmost rage and anger over the theft of K36 billion. "We are surely not calling for national turmoil or an uprising, but our disgust must be shown to government as these funds must be replaced," she said.

Ngwira said unemployment among youths in Zambia stood at 50 per cent. She said it was disheartening to note that little had been done to look at the plight of the youths who were faced with high levels of unemployment, alcohol and substance abuse, lack of recreation facilities, dismal educational standards, poor housing for low and middle income groups of people and an ever rising number of orphans and vulnerable children and street children.

"As Zambia YMCA, we would like to say no to youth unemployment, no to starvation, no to poor housing, no to high tax obligations, no to poor health facilities, poor education and lack of adequate recreation facilities because of stealing," she said. "We implore all civil society organisations, individuals and all concerned to rise to the occasion and say no to abuse of public resources meant for national development."

By Cocerned citizen
Friday February 16, 2007 [02:00]

I am at a loss to understand the implication of the decision by the government of Mwanawasa to withhold the names of the thugs involved in the theft of the K36 billion. Going by the actions taken against these thugs as announced in Parliament by the minister of finance and national planning, does it mean that these thugs have escaped justice?

Surcharging, reprimanding, suspending or indeed dismissing these thugs is not good enough. The excuse given for withholding their names is not justifiable. Was it not the same Mwanawasa who went to Parliament and exposed his predecessor's financial misconduct?

Chiluba was not in Parliament to defend himself. So what is the difference between Chiluba's case and the case of these 326 thugs? These are double standards and this just goes to confirm that the fight against corruption is selective.

In any case, what was the purpose for Mwanawasa to announce the misappropriation of such a collossal sum of money when culprits are protected.

Mwanawasa should cross-check his facts before making public announcements. He is making too many costly mistakes.

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Govt. to launch irrigation fund

Govt. to launch irrigation fund

GOVERNMENT will early this year launch an irrigation development fund worth K37 billion after all conditions of accessing the money are finalised. Agriculture Minister, Ben Kapita said the fund would be launched early this year and that it would be implemented under the National Irrigation Plan (NIP).

Mr Kapita called on commercial and small scale farmers to utilise the irrigation fund in this year's national budget as it will contribute significantly to boosting the growth of agriculture sector. '' We are going to have an irrigation development fund as soon as modalities are finalised as to how farmers are going to access the money,'' he said in an interview in Lusaka. He said the money would cater for all categories in the agriculture sector, whether small, medium or large scale farmers.

He however advised farmers to pay back the loans once the money has been disbursed to them. '' Farmers must realise that the programme would be controlled progressively as it is the seed money, when they borrow they must pay back,'' he said . Mr Kapita said in the past some commercial farmers had formed loan institutions to lend money to fellow farmers but these institutions have become bankrupt due to non payment by farmers.

He appealed to farmers to pay back in full so that the money could increase and contribute immensely to the growth of the agriculture sector. The minister said this year, Government would focus on increased investment in agriculture particularly irrigation development, livestock disease control, farm Mechanisation and extension services. Last week Finance Minister, Ngan'du Magande proposed to spend K1,062.9 billion or 8.8 per cent of this year's national budget on agriculture and fishing sub function, out of which K37 billion is for irrigation development.

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Why Grade 9 results were poor – Civic bodies

Why Grade 9 results were poor – Civic bodies

SEVERAL civic bodies have cited lack of proper basic school infrastructure as reason for the poor results among Grade 9 pupils who sat for examinations last year. Only 66,877 pupils of the 195,243 candidates who sat for Grade 9 school examinations last year have been selected to Grade 10.

Minister of Education, Geoffrey Lungwangwa announced the results on Wednesday when he presented a ministerial statement to Parliament. The Zambia National Education Coalition (ZANEC) said in Lusaka yesterday that the low passing rate of the Grade 9 was due to lack of proper infrastructure in the education sector.

ZANEC executive director, Miriam Chonya said this was despite the government up-grading primary schools into basic schools. She said most of the basic schools lacked good infrastructure such as laboratories to adequately prepare Grade 9 pupils for examinations. "As long as the government does not attend to the issue of poor infrastructure in the education sector, especially basic schools, the country will continue to record poor results for Grade 9," said Ms Chonya.

She said the government was doing little to construct more high schools, which could accommodate pupils coming from basic schools. "Because of limited places in high schools, the Ministry of Education always comes up with artificial cut-off of points aimed at getting very few pupils into Grade 10 and this is not good. What we need is heavy investment in the education sector by building more high schools," said Ms Chonya.

The Secondary Schools Teachers Union of Zambia (SESTUZ) is also disappointed with this year's Grade 9 school results. SESTUZ director of research, Dexter Kabwidi also attributed the low passing rate to lack of heavy investment in the education sector by the government. “Lack of space in high schools has led to potential pupils being left out to proceed to Grade 10. "What is happening is that we have limited places in high schools, the number of basic schools were on the increase against a limited number of high schools, which only accommodate pupils from Grade 10 to 12 and this is worrying," said Mr Kabwidi in Lusaka yesterday.



MPs take Lungwangwa to task

MPs take Lungwangwa to task
By David Silwamba
Friday February 16, 2007 [02:00]

OPPOSITION members of parliament on Wednesday took education minister professor Geoffrey Lungwangwa to task for saying the grade nine pupils who failed the examinations can go for long distance or adult education. And the Zambia National Union of Teachers (ZNUT) observed that the high number of pupils that did not write the examinations due to lack of money contradicted the free education policy.

Responding to a question from Roan member of parliament, Chishimba Kambwili, after he presented a ministerial statement on the 2006 grade nine examinations, prof Lungwangwa said the dropouts had opportunities to advance their education through skills training, Academic Production Unit (APU), adult education and long distance education. "For the information of the honourable member, our education system has other opportunities other than the formal education. There is adult education, long distance education, skills training and APU," said prof Lungwangwa who repeatedly underplayed the small number of pupils that passed. "I wouldn't say the results are very bad but we are making improvement in the progression rate." He argued that the results were a true reflection of the performance of the pupils following the stringent measures his ministry had put in place to curb malpractices.

Kabwata member of parliament Given Lubinda expressed surprise with prof Lungwangwa for saying the children could go for distance education. Lubinda said there were less than 20,000 school places for skills training and distance education and wondered what would happen to the 'little' children. But prof Lungwangwa maintained that there were alternative ways of advancing education. "It's true the places cannot accommodate all children but the plan of the ministry is to expand these alternatives to accommodate more children," he said.

Munali member of parliament Josephine Mumbi, who said grade nine pupils were aged between 12 and 14 years, wondered why prof Lungwangwa wanted to encourage these children to go for adult education. However, prof Lungwangwa said pupils in grade nine were above 14 years. "I don't know where the honourable member is getting that statistic," said prof Lungwangwa, as Kambwili shouted, "ulakana abana."

Presenting a ministerial statement, prof Lungwangwa said 66,877 pupils were selected to grade 10 out of 176,263 candidates, giving a progression rate of 37.94 per cent compared to 36.32 per cent in 2005. He said 85,180 obtained certificates, 73,294 obtained statements, 17,789 pupils failed while 18,980 pupils were absent from the examinations countrywide. And ZNUT secretary general Roy Mwaba said the results were not good. He observed that the performance of pupils was bad because teachers were not motivated. "We want more teachers to be employed and deployed to schools," Mwaba said.

He said the planned employment of 4,000 teachers this year was a drop in the ocean. Mwaba observed that some pupils could not write the examinations because they were barred by the Examinations Council of Zambia (ECZ) as they did not have examination fees. "In this country there is free education for all, but pupils are barred from writing exams because they don't have examination fees. This is a contradiction," said Mwaba. "Free education should be there in practice."

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Local governance

Local governance
By Caroline Katotobwe-Mukuka
Friday February 16, 2007 [02:00]

Zambia faces many hurdles in the field of fiscal local governance. The decentralisation initiatives that have taken shape in Zambia have generally failed to realise the desired impact principally because the necessary fiscal resources have not been transferred from the centre at the same time that power, functions, authority and responsibilities have been devolved and/or de-concentrated, a phenomenon that has resulted in unfunded mandates.

Moreover, the central government not only determines the level of transfers to local governments but, importantly, much of what is transferred is conditional grant. Although the former government of Chiluba claimed to pursue a decentralised mode of service delivery, the state of fiscal transfers to councils consisted mainly of conditional, recurrent expenditure grants.

Although councils are, by legislation, entitled to a share of national sales tax, this is rarely disbursed. Thus, on average local governments receive meager amounts of the total central government expenditure, a very insignificant share by any standards.

Even more revealing, in a country with 72 local authorities/councils, two of them (the cities of Lusaka and Ndola) received more than 90 per cent of central government transfers to sub-national governments over the 1995-1998 period and the situation has not changed since.

And yet the neediest areas (where poverty is highest) are elsewhere in the remote rural Zambia. In addition, most of the flows from central government to councils in Zambia are effected on a case-by-case basis and in response to cash crises as they emerge. The small size of the funds made available and delays in releasing them have always led to intense frustration within the local government system in the country.

The frustration is compounded by lack of information made available to councils about funding policy, the amounts available for distribution from various sources, the criteria/formula adopted in disbursing grants, the reasons for the delay in releasing funds, and an indication of when funds expected to become available would arrive. The central government grants unpredictability regarding the timing of disbursement has rendered local governments proper planning and utilisation of the scarce fiscal resources difficult, if not impossible.

Notwithstanding the above realities, Zambia should find ways in which central and local governments can restructure or reform their institutions so as to facilitate the development of the civil society.

What factors are required for a viable, democratic, local government?

This is an important question for several reasons. In an era of continuing economic problems and structural adjustment, our central government has been forced to reduce the services it provides. While the private sector may pickup some of these, collective and non-profit-earning social goods must be delivered or funded by local governmental units if they are to be provided at all.

Highly centralised and top-down service delivery is expensive, cumbersome, adapts slowly to new information, and is prone to political abuse. Democracy, for all we know, must be rooted in functioning local, participatory self-governance institutions.

The Zambian local governance and democracy has failed in virtually every place it has been tried. The problems are mainly rooted in specific policy choices and strategies pursued by our central government.

These policies include deliberate withholding of resources, whether fiscal or juridical, from local entities for political or ideological reasons, central bureaucratic hostility and weakness, turbulent economic and policy environments which have undercut local institutions, absence of complimentary reforms needed in national administrative law and systems and underdeveloped local civil societies.

Revenue sources for local governments are not so extensive. To local officials, this is a difficult situation when they feel they are obligated to provide services (street maintenance, refuse collection), but cannot collect taxes on those persons and businesses using these services.

The reasons for this are unclear, but lack of political will and administrative weakness are both likely explanations, and overall these are in severe deficit. An important element in ensuring the sustainability of local governments would be the involvement of the various stakeholders in both the decision-making and implementation processes. Such involvement would be expected to pool together locally available resources, experiences, creativity and energies of a diversity of partners and stakeholders.

One lesson that need to be learnt is that although decentralisation should, under the right conditions, provide considerable benefits to a country through the enhancement of local governance, it can, if mismanaged, further marginalise minority groups, and make worse income inequalities.

If this inconsistency is to be better managed, it would be necessary for the central government to understand the conditions that need to prevail to facilitate successful fiscal decentralisation, and how the absence of these conditions could undermine efforts towards improved local governance. An enabling and clear constitutional, legislative and regulatory framework is important for improved local governance to the extent that it provides a fairly understood division of responsibilities between the various levels of government and civil society and clarifies the relationship between these levels.

Our government is currently faced with the tension between the desire to create autonomous local structures that are accountable to their local constituencies, on the one hand, and the wish to exercise central control on the other.

In this regard, it is imperative that the government addresses the challenge of balancing these somewhat contradictory realities in a manner that recognises both the virtue of delegation of power, authority and resources to lower levels and the importance of realising the commonplace goals of national development as defined by central authorities.

In general, local management in Zambia lacks resources, authority, and effective local political processes, hence is performing poorly.

Local management is weak and few services are being delivered.

However, local governments are in place and supposedly functioning, and if nurtured may be expected over time to improve in their performance.

Much progress is needed in the performance of our local governments. Revenues must be expanded, personnel upgraded, fiscal and personnel management systems strengthened, town councils developed, ties to communities enhanced, services rationalised and upgraded, and the like.

But a framework for local governance has to be put in place by electing local officials, outlining some limited local responsibilities, and by establishing at least a basic cadre of professional personnel.

This is the minimum framework necessary to build on for future progress.

Key investments need to be made now in developing local cadres and administrative systems in order to carry on decentralisation. Without these investments, stagnation and regression will continue prevailing.

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Politics - Zambia's circus

Politics - Zambia's circus
By Editor
Friday February 16, 2007 [02:00]

IT is increasingly becoming difficult to understand and appreciate what our political parties are really about; what they stand for. It is also increasingly becoming difficult to understand and appreciate what our politicians stand for and what they see as their mission or goal in politics. Political parties are formed with so much ease and abandoned in a similar way. One wonders if these political parties mean anything even to their founders. There appears to be no commitment to these political parties - they can be formed today with so much fun fare and abandoned soon after without any qualms. Everything about our political parties seems to be personal or personalised. They don’t seem to be institutions that are above personalities.

We saw how UNIP members abandoned their political party after their electoral defeat in 1991. We also have witnessed people jumping out of the MMD whenever they differed with each other. Many founder members of the MMD left the party in 1993 and formed the National Party. Their problem with MMD was principally Frederick Chiluba’s leadership. Many other political parties followed after this. Even Chiluba in the end had to abandon the MMD and pledge his support to the Patriotic Front - formed by a former MMD national secretary.

Earlier before this, Anderson Mazoka had left the MMD where he was a Bauleni branch official to form UPND. And now we have Sakwiba Sikota who was UPND vice president and for many months the party’s acting president abandon it to form United Liberal Party (ULP). In this endeavour he was joined by another former UPND vice president (Bob Sichinga), the party’s national chairman (Henry Mtonga) and Given Lubinda who was UPND’s information and publicity secretary, among other UPND leaders and members. Today, Mtonga and Lubinda have moved from ULP to Patriotic Front. And Sichinga says he has retired from active politics - whatever that means. We nearly forgot another senior founding member of UPND who has since quit the party for unknown destination - Patrick Chisanga.

It seems in Zambian politics we have abandoned almost completely the qualities of loyalty to political parties and the bonds of party without which party effectiveness ceases to exist. Our political parties are no longer really making much sense. They are increasingly becoming nothing but vehicles for spreading confusion and disunity in the nation. They have weakened our people by their practice of setting one humble section of our people against the others. They have divided the people into petty political parties that bring no guidance to the nation. They have divided the ignorant and misled our people into factions supporting unscrupulous, unprincipled and greedy politicians. Thus, they are weakening the people. It seems in this country people are joining politics just to fulfil personal ambitions or pleasure. They are not there to fulfil a duty to our people. They are not there in the same position and attitude of sacrifice.

They are not joined in a single purpose, which should be to serve our people. Everything about our politics seems to be a fraud, a big deception. And deception is always a pretty contemptible vice, but to deceive the whole nation in this way, a nation where more that 70 per cent of the people are wallowing in abject poverty is the meanest of all crimes. Politics shouldn’t be merely for the purpose of satisfying ambition or pleasure, for deceiving the people. This country doesn’t need this type of barren politics, it needs politics that are fertile, that will bring forth fruit - the social and economic development of our country, which is paramount in the midst of all. As we have stated before, we should all be aware that politics is an area of great importance for promoting development and community among all. And for this reason it should be taken very seriously and be regarded as a vocation, a way of building up society for the common good. Good politics will only come to this country when we have intelligent, honest and humble people who see politics as a vocation to serve the people join politics. No one deserves to be in politics unless they love their country and its people more than themselves.

This type of politics cannot continue forever. It has to be put to an end. Many things about our politics must change if our people are to stand a chance of overcoming the many problems and challenges they today face as a nation. There is need for a conversion of heart and for the transformation of the social and political structures in order to build our country. Our people must be conscious of their specific and proper role in the political community. Politics is a very important and noble undertaking, which needs people with high credibility and integrity. Politics is needed to guide the energies of all towards common good. This is because politics is the vehicle by which people cooperate together in order to achieve the common good. If our country is to move forward, honesty, dedication, credibility and integrity should be demanded from all our politicians.

Stability and vision is needed in all our political parties. The business of endlessly jumping from one political party to another does not engender confidence in our politicians and political parties. The politics of our country is increasingly becoming a big circus. No wonder most of the jokes today by our comedians are about politics, politicians and their political parties. Something is seriously wrong with our politics and it needs urgent correction.

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Govt to build Levy a house before he retires

Govt to build Levy a house before he retires
By George Chellah
Friday February 16, 2007 [02:00]

WORKS and supply minister Kapembwa Simbao yesterday said the government wants to build President Levy Mwanawasa's retirement house before he leaves office. Simbao justified the allocation of K1 billion to President Mwanawasa's retirement house by finance minister Ng'andu Magande. "It's for designing, preparations and all that goes with it," he said.

Asked whether money would continue being allocated to the project until President Mwanawasa finishes his final term, Simbao responded: “Yes! We want to build him a house. There isn’t enough time. You have seen what has happened to Dr Kaunda (first Republican president) and Dr Chiluba also. So the same might happen to him. We want to build him a house,” Simbao said. “So once the design is made and everything is agreed to, that’s when everything will be done.” He said the government also intends to construct houses for President Mwanawasa’s two predecessors. “From the scarce resources we have we want to first build Dr Kaunda’s house, then Dr Chiluba and the President’s house as well,” Simbao said. “These are just one year projects, it’s just a question of money being available.”

And Simbao said the designs for former president Frederick Chiluba’s house were ready. “The designs are ready and they were taken to him the other day. I don’t know the exact day but they were taken and he has them,” Simbao said. “He has the designs and he is just waiting for someone from here (Ministry of Works and Supply) to go and meet him since he requested. So he is just waiting for the person from here to meet him.”

In this year’s budget, Magande has allocated K1 billion towards President Mwanawasa’s retirement house. Magande further allocated K4billion towards Dr Kaunda’s incomplete retirement house, which has not been finished since the government embarked on the project several years ago. Magande has also allocated K2billion to Chiluba’s incomplete retirement house.

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Thursday, February 15, 2007

Mtonga, lubinda ditch Saki for Sata

Mtonga, lubinda ditch Saki for Sata
By Bivan Saluseki
Thursday February 15, 2007 [02:00]

UNITED Liberal Party (ULP) vice-president Henry Mtonga and spokesperson Given Lubinda have resigned their positions in the party and opted to continue with Patriotic Front (PF) membership instead. Sources yesterday disclosed that Mtonga, Lubinda and Lukashya PF member of parliament Alfrida Mwamba abandoned Sakwiba Sikota's ULP in January and opted to work with Michael Sata's PF where they pledged to even work as ordinary members.

Mtonga refused to comment, referring queries to ULP president Sakwiba Sikota. When contacted yesterday, Sikota said he could not comment because there was a point of order raised in Parliament over Lubinda concerning his dual party membership. Sikota said he might prejudice what the Speaker might say and get cited. Lubinda also said a point of order had been raised by works and supply deputy minister Benny Tetamashimba recently and would therefore comment after the ruling by the Speaker. Mwamba, when contacted and asked if she had received her letter of acceptance of resignation from Sikota, also said she could not comment due to the point of order in Parliament.

But sources said the trio opted to work with PF because that was the party on which they were elected. “They handed over their positions to Saki in January. They wrote their resignation letters but up to now Sikota has not responded,” the sources said. According to sources, Mtonga and Lubinda were of the view that the opposition needed to unite against MMD. However, the duo felt that ULP was not working towards that.

The sources said Mtonga and Lubinda had problems working with some ULP members especially those from Western Province. According to sources, now that Mtonga and Lubinda were ‘full-time PF members’, they were free to participate in the forthcoming PF convention and vie for any position. The sources said PF was working towards accommodating Mtonga, Lubinda and Mwamba in their party structures.

Mtonga, Lubinda and Mwamba stood on PF ticket in last September’s general elections. Recently, another ULP vice-president, Robert Sichinga, resigned from the party to focus on his private life.

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Nevers meets Levy for reconciliation

Nevers meets Levy for reconciliation
By Bivan Saluseki
Thursday February 15, 2007 [02:00]

Reform Party president pastor Nevers Mumba on Monday met President Levy Mwanawasa at State House for reconciliation. And pastor Mumba yesterday confirmed the meeting, saying he was against politics of hatred and revenge. State House sources disclosed that pastor Mumba had in the past been pushing for a meeting with President Mwanawasa until the President accepted to meet him last Monday.

When asked about the meeting with President Mwanawasa, pastor Mumba became silent for a few seconds before asking from where he could start from since the meeting was not for public consumption. "If the meeting was for public consumption, it would have gone that way. It was a very good meeting, it was a necessary meeting," he said.

Pastor Mumba said like his principle had always been, it was important for leaders to feel free to compare notes. "It's important that leaders put aside the thought that political leaders who differed should hate each other. We should learn to move on," he said. Pastor Mumba said it was important that leaders did not propagate hatred. He said personally he enjoyed the fact that he discussed various issues with President Mwanawasa during the meeting. Asked on who initiated the meeting, Pastor Mumba said it was not important to know the initiator. He said he was against hatred and revenge because it was the electorate that suffered at the end of the day.

Asked if he had resolved his differences with President Mwanawasa, pastor Mumba responded: "It was a cordial meeting in terms of anything that could have been explained. We even took time to pray together." Pastor Mumba said he believed in love and reconciliation and acceptance of one another. He prayed that there might be love in Zambia. Pastor Mumba said he was opposed to politics of fomenting of hatred by individuals.Pastor Mumba, a tele-evangelist cum politician lost the 2001 elections under the sponsorship of the National Citizens Coalition (NCC). As National Citizens Coalition president, Pastor Mumba was appointed Republican vice-president - a decision that almost earned President Mwanawasa an impeachment in Parliament. Later with a diplomatic tiff with DRC whom he accused of funding some opposition parties in Zambia, pastor Mumba was relieved of his duties by President Mwanawasa who even regretted having appointed him.

Later, pastor Mumba decided to have a go at the MMD presidency but was expelled and as a result formed Reform Party. He later had a loose alliance with Ben Mwila, PUDD and ZADECO and formed National Democratic Focus (NDF). NDF went for a convention in Kabwe last year where Mwila was elected president but pastor Mumba petitioned the results, and his petition was upheld by the Kora Foundation although Mwila rejected it. This development saw pastor Mumba's departure from the NDF to independently run the Reform Party.

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Reinstate suspended Senanga teachers (Editorial)

SESTUZ calls for the lifting of Senanga teachers' suspension
By Patson Chilemba
Thursday February 15, 2007 [02:00]

SECONDARY School Teachers Union of Zambia (SESTUZ) has urged the Western Province provincial education officer (PEO) to lift the suspension of 86 teachers in Senanga district. The teachers were suspended for striking over rural hardship allowances without following laid down procedures.

But Ministry of Education permanent secretary Lillian Kapulu said she would wait for an official report from the PEO before deciding on whether to fire or reinstate the teachers. Commenting on the suspension of 86 teachers in Senanga, SESTUZ president Sefulo Nyambe appealed to the government to lift the suspension because their absence from work has paralysed education in the area. "The loser in this suspension is the pupil. We don't support the sit-in by the teachers but we appeal for the suspension to be lifted," he said.

And one of the suspended teachers, who chose to remain anonymous, said they were entitled to the rural hardship allowances because there was no circular to indicate that the said allowances had been scrapped. "According to the circular of 1994, the entire Senanga District is eligible to get the rural hardship allowance but suddenly the PEO told us that we were not eligible after he read a certain portion. But our union members got access to the whole document and told us that the PEO lied," said the teacher. Senanga member of parliament Clement Sinyinda said he had received reports that the PEO and the District Education Board were working at replacing the suspended teachers. "I am told instead of working at it amicably, the District Education Board and PEO are contemplating on replacing the teachers. To replace and employ this huge number may not be easy," Sinyinda said. "The rural hardship allowance came as a circular released in 1994 that Senanga should receive the money. Since then there has never been a circular to show that the allowance has been scrapped."

Kapulu said the teachers that went on strike did not follow the laid down procedures. "They should have followed laid-down procedures instead of them going on an illegal strike... definitely we would have listened to them if they had done so," Kapulu said. "I am expecting a report from the Provincial Education Officer. According to the report, that's where we will base the judgement on whether to fire or reinstate these teachers." Kapulu said only those that operated in areas that were 20 kilometres from the district were eligible to get hardship allowance.

Nyambe said last week the District Education Board secretary Mebelo Notulu in Senanga District suspended 86 teachers for going on an illegal strike over the rural hardship allowances. Some schools that have been affected include Senanga and Matauka high schools, and Namalangu, Senanga and Litambya basic schools. Other schools include Hospital Unit, Senanga Day Centre and Senanga School for the Deaf.

Meanwhile, Nyambe has welcomed the reduction in PAYE from 30 to 25 per cent for those in the lower rate, and from 35 to 30 for those in the middle rate and 35.7 to 35 per cent for those in the top rate. "We are happy with the reduction on the tax and we hope it will make the home pay reasonable," he said.

However, Nyambe bemoaned the increase in the prices of essential goods such as fuel and transport fares, saying that the reduction in taxes would have little impact. He said negotiations for a new collective bargain were still on-going and hoped for salaries and housing allowances to be increased.

Reinstate suspended Senanga teachers
By Editor
Thursday February 15, 2007 [02:00]

Given that the grievances that teachers have been forwarding to the government are not new although they remain largely unresolved, we are surprised at the high-handedness of the education authorities in Western Province in the manner they are handling the case of the 86 teachers in Senanga district who are alleged to have been striking illegally. Administrative bureaucracies notwithstanding, the affected teachers have a genuine case before the government. Any responsible and responsive authority is not expected to react via punitive measures such as suspensions.

If the education authorities in Western Province were genuinely interested in having the teachers’ matter resolved, the immediate reaction should not have been to slap them with suspensions. Yes, the government may be quick - and it is quite convenient for them to tread on such shaky ground - to declare the strike action by the 86 teachers illegal. However, to take such a simple approach to problems that have become a perennial burden on the education sector is to miss the whole point, it is to gloss over the main issues that continue to beg for answers from those who ought to provide them.

The problem of hardship allowances for teachers working under extremely difficult conditions in rural areas is not something new. And when we talk about difficult conditions for teachers, we do not just mean that teachers are getting little pay. By difficult conditions, we also mean teachers who do not have decent accommodation. We wouldn’t be surprised to find that some of them live in grass-thatched huts. These are teachers who have no access to clean piped water. It should not surprise us if some of them share water with animals from streams, dams or some shallow wells. The government should be in a better position to understand the real problems that teachers are going through. And these problems are not only limited to teachers in rural outposts. Even some of the teachers who are based in urban centres are going through a variety of difficulties, including a lack of decent accommodation.

Nobody should blame the Senanga teachers for resorting to strike action or a sit-in protest. After all, experience has shown that workers can only get that which belongs to them, or at least that which they should be entitled to, when they have taken actions such as strikes, boycotts or sit-ins. We have seen that the government is only willing to get to the negotiation table with workers on serious terms when workers have withdrawn their labour. If such action is what makes the government move or listen, why should blame be apportioned to the workers? And we hope that reports that authorities are considering to replace the 86 teachers are not true. Apart from the fact that these teachers still deserve to be heard before taking any unilateral action against them, it is also true that the country is at the moment still battling with numbers when it comes to the teaching establishment. There are too few teachers for our too few schools around the country. It would be irresponsible for any authority to discard committed professionals just like that when nearly all government schools are operating below capacity.

Besides, we do not think that the 86 teachers have committed an offence which should even lead to separation from service. These 86 teachers are honest and humble public service workers who are only asking for what they deserve. It is unfair to condemn them in the manner that authorities in Western Province are doing. Let us also remember that as this circus is going on, pupils in the affected schools are not learning because their teachers have been suspended. This is one of the consequences that the authorities should be aware of as they continue keeping these teachers on unnecessary suspensions.

As we have stated in the past, avoidable conflicts that lead to strike action should not be allowed in the first place. We are saying this because our teachers are not asking for the impossible. Their demands are actually very humble and modest. Yes, our country does not have enough financial resources to give our teachers salaries that may be comparable to those in other countries like Botswana or South Africa. But we can surely treat them in a manner that increases their dignity, or a sense of it; we can make them feel necessary and respected. After all, we are all a product of our teachers without whom we wouldn’t be what we are today, we wouldn’t be able to do what we are doing today.

But today, the way things stand, our teachers - the true heroes of our people - have been reduced to nothing. Therefore, instead of subjecting our teachers - especially the 86 from Senanga - to unnecessary mental anguish by suspending them or threatening to replace them, let the government take the decision that is right. By saying this, we are in no way supporting or abetting wrongdoing. But we feel that there is no wrong that the 86 teachers in Senanga have committed. The only correct thing for the government to do is to admit that there is a genuine problem before them which requires their action. Furthermore, the 86 teachers’ suspensions should be lifted so that they can go about their normal duties, with the hope that in due course, the government shall do its part. Doing this is in the interests of the government, teachers, pupils and the nation at large.

We expect the government to act on its responsibilities.



Economic growth

Economic growth
By Trywell Kalusopa
Thursday February 15, 2007 [02:00]

Finance minister, Magande is an orthodox economist simply drunk with orthodox micro and macro economic statistics and so in that context he has indeed arrived! But most Zambians will agree that they haven't arrived and are a long way on the dust narrow road to basic human survival and dignity. The facts and figures as focused in the Yellow Book and the economic philosophy guiding these are flawed in as far as defeating poverty is concerned!

Sooner rather than later even those that went on anthills to praise this year's budget will be reeling in disappointment! Economic statistics-based micro economic indicators do not remove us from poverty and grime. One scholar, Ronald H. Coase, had this to say about orthodox economic orientation as a driving force to development: "Orthodox Economics, over the years, has become more and more abstract and divorced from events in the real world.

Economists, by and large, do not study the working of the actual economic system. They theorise about it." I am also tempted to quote what Jahan, Selim (2000) had to say regarding economic growth and human development at a conference hosted by the St. Mary's University, Institute for International Development, Halifax, Canada and also echoed earlier and many times more by the UNDP: Economic growth is necessary but insufficient for human development. And the quality if growth, not just its quantity is crucial for human well-being.

Growth as advocated by Magande (mine) can actually be jobless, rather than job creating, ruthless, rather that poverty reducing; voiceless, rather participatory; rootless rather culturally enshrined and futureless, rather that environmentally friendly. Thus, growth that is jobless, ruthless, voiceless, rootless and futureless is not conducive to human development. This is the growth that Magande is espousing.

This is not to say that economic growth is a bad thing but growth is worthless if based on foggy economic fundamentals and not anchored on a workable indigenous drive or vision. In effect, such statistics will simply remain "textbook" wish lists! Economic growth that does not bring social benefits such as the improvement of the welfare of society; promotion of ownership of private enterprises by nationals; creation of a property-owning middle class and decent employment in the economy is basically founded on crass capitalist ideology of exploitation. Economic growth that only enhances the greedy extraction of our mineral resources and consolidates a monolithic economic enclave, riddled with distortions represented in false statistics, while failing to produce real gains in the expansion of job opportunities, is treacherous to any political covenant with the people.

Economic growth bank-rolled on global capital that yearns to reduce social responsibility of the state, remove provision of services to the poor, deepen loss of the state leverage on social security, proliferate casualisation of employment and perpetuate the loss of collective rights of labour whilst quickening the pace of creation of private monopolies, is contemptuous to the national development needs of our people. Economic growth through foreign investment based on global injustice and driven by globalisation is not sustainable. Such growth only mutilates the national economy and its people to the core of their basic survival. It places a nation as pawns in this brutal global equation. We should thus resist this philosophy based on wholesale neo-liberalism and its naked drive to promote unfettered markets.

Instead of fervently promoting economic growth in the context of market-driven approaches, I believe there is need to promote human-centered strategies based on the prioritisation of basic human needs in our country. Instead of being limited, the role of the state should be enhanced to counter capitalist excesses. Thus, an inclusive path to development, through wealth redistribution and empowerment, is a better approach to one that narrowly focuses on growth through economic reforms such as privatisation and foreign direct investment. I also believe in an economic strategy with an increasing rather than the current diminishing returns to social labour.

It is no longer a contention world over that markets have not been known to break the vicious cycle of poverty. We should advocate a development strategy with a politically governed redistribution of the wealth and opportunities to our citizens. We need to develop a common and actionable strategy as a country so that we are able to engage strategically with other partners in development for the common good of the people. This is the way to go rather than continue to chorus about economic growth based on Chinese investment while "our" so called Fifth National Development Plan gathers dust in government offices.

As this happens, our politicians should not be allowed to continue abusing the political covenant with the people through their usual boisterous rhetoric on economic growth! It is not that we do not have a choice as a country; we do have a choice, a human-centered choice to national development! And that should have been reflected in the depth of facts and figures in our budget!

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