DAWN Editorials - 31th January 2025

[faheemustad]

Deep shock

THE AI wars have begun. For years, America sought to hold China back when it hindered access to its semiconductors, and more recently, its AI chips. The plan failed spectacularly this month when Chinese AI company DeepSeek took the tech world by storm with its own model that rivals the performance of the best that ChatGPT has to offer, developed at a fraction of the cost. Since its launch on Jan 10, the app has shot to the top spot on the Apple App Store. The real ripple it has created, however, is wiping nearly $1tr off the market capitalisation of major US tech firms as investors reassess the global AI playing field. The writing had been on the Great Firewall, for those who bothered to read it. While US officials fretted over Taiwan Semiconductor’s fabs, China’s tech giants were busy perfecting the art of algorithmic efficiency. DeepSeek’s success has shown us how constraints can breed innovation. Denied access to Nvidia’s most powerful AI chips under US sanctions, Chinese engineers optimised older, less powerful hardware to train DeepSeek. According to the Financial Times, DeepSeek developed its model in just two months with an investment of under $6m, while OpenAI reportedly spends over $5bn annually.

This technological leapfrog has profound implications. The notion that American sanctions could meaningfully delay Chinese AI development now appears naive. More concerning for Western policymakers is the possibility that China’s AI sector has evolved to be more resilient precisely because it was forced to innovate under constraints. The result is a new world order in artificial intelligence. For the West, the challenge remains in maintaining its technological edge, while engaging with a rival whose capabilities can no longer be dismissed. What might surface tomorrow is not known at this point. The only certainty is that America’s strategy of containment has failed. The dragon, it seems, is finally spreading its wings.

Published in Dawn, January 31st, 2025


Provincial AIT laws

HARMONISING the provincial agriculture income tax regimes with federal personal and corporate income tax rates is one of the key goals of the ongoing $7bn IMF funding programme. The provinces had committed to the lender and federal government, at the time of the finalisation of the loan agreement, that they would execute this condition by making the relevant legislative changes before the start of this year. The success of the first biannual performance review of the programme, beginning either late next month or in early March, will largely be determined by tangible progress on this critical issue as the failure to harmonise the provincial and federal rates could jeopardise the loan or at least delay the release of the next tranche. Apart from that, the harmonisation of the rates is also critical for a fair, transparent and equitable tax system in the country, as well as for plugging the loopholes that have contributed to tax evasion by both industry and wealthy individuals.

So far, the provinces are trying to resist the condition. For example, even though Punjab was the first province to make the required changes in its AIT law — and that too well before the IMF deadline — it has yet to notify the new, updated personal and corporate AIT rates matching the federal income tax slabs. For inexplicable reasons, the amendments to the law delegate the powers to notify the new rates to the Punjab cabinet. KP has just passed a bill after a delay of almost a month. Sindh and Balochistan have so far given no indication as to when they intend to amend their respective AIT laws. Sindh is understood to have drafted the amendments to its existing AIT law. Nevertheless, the ruling PPP in the province is believed to be stalling in order to exert pressure on Islamabad regarding the latter’s plans to construct new canals for corporate farming under the military’s green initiative. Indeed, politics is driving critical policy decisions in the case of both Punjab and Sindh, which together account for nearly 90pc of Pakistan’s farm output. With time running out, it is crucial for Punjab to notify the updated rates to address public doubts, and for Sindh to amend its law quickly in accordance with the agreement with the Fund whose support remains critical to an economy that is still in the early stages of recovery.

Published in Dawn, January 31st, 2025


Cost of control

AT some point, those currently responsible for this nation of 240m souls will be confronted with the question: what have their policies achieved?

What objective good has been accomplished by upending the foundations of the Pakistani state and enforcing a new contract on its unwilling citizenry that could not have been achieved if the democratic political process had taken its course?


Much ink has been spilt on the economic contagion resulting from the political upheaval that has destabilised this country for the last three years. And, in the elite’s quest to regain control, citizens have paid many additional costs that have yet to be properly accounted for. But things, instead of getting better, seem to be progressively worsening.

Recent amendments to Peca, disruption of the digital economy, and the crisis in the judiciary are cases in point. The concern arises: how much longer before we start to correct course?

In case our policymakers are swayed only by direct, tangible outcomes, a warning about Pakistan’s GSP-Plus status, issued by a European Union envoy, should serve as a wake-up call. Since 2014, Pakistan has enjoyed preferential access to the EU market in the form of tariff exemptions and reductions for its exports, mainly textiles. In exchange for this preferential treatment, it has made a number of commitments, including to protect human and labour rights and ensure good governance, among others.


Given the precarious condition of Pakistan’s economy and its reliance on exports to keep matters on an even keel, one would have expected that the rulers would have gone out of their way to protect such beneficial trade agreements. Instead, the EU’s Special Representative for Human Rights Olof Skoog was greeted on his ongoing visit with amendments to the Peca law, amendments which rights activists strongly believe will further restrict Pakistanis’ already limited freedom of expression.

The worrying state of affairs seems to have prompted Mr Skoog to warn that Pakistan’s GSP-Plus status should not be taken for granted. Last year, the government had attacked the main opposition party for ‘lobbying’ to get the GSP-Plus revoked; this year, it has only itself to blame for weakening Pakistan’s position by taking a number of regressive measures.

Mr Skoog has conveyed the EU’s concerns to important quarters, including the chief justice, the army chief, and the law and commerce ministers, as well as the deputy prime minister. It is strongly hoped that those concerns were received with all the seriousness they deserve.

How Pakistan runs itself may, on most occasions, be an internal matter. However, where international trade agreements are concerned, Islamabad cannot expect to get away with violating the commitments it has made to foreign partners. Those responsible must consider the consequences of their actions.

Published in Dawn, January 31st, 2025