Budget 2012: ‘Fatcat bureaucrats stifling reform’

Published: May 28, 2011

Drastic civil service reforms to be called for at economic council meeting today. DESIGN: MOHSIN ALAM

ISLAMABAD: 

The government spends an average of over Rs530,000 per month in compensation for its highest-ranking bureaucrats – an amount that does not include several perks such as plots of land and membership to elite social clubs – in an entrenched system of privilege that is blamed for blocking virtually all necessary economic reforms.

At a meeting of the National Economic Council on Saturday (today), the Planning Commission, which conducted the analysis on the bureaucracy’s power as part of its growth strategy paper, is expected to recommend drastic civil service reforms that are likely to save the government at least Rs3 billion if implemented, as well as paving the way for further necessary reforms.

The NEC, headed by Prime Minister Yousaf Raza Gilani, is expected to review and approve the Rs710 billion development budget for the upcoming fiscal year, ending June 30, 2012.

The Planning Commission submitted a paper on a proposed national growth strategy, which seeks to address structural hindrances to economic growth, ahead of the NEC meeting. It makes astonishing revelations about the extent of civil service compensation and perks, identifying the bureaucracy’s entrenched privileges as the single biggest impediment to necessary economic reforms.

“When the state provides perks, it reduces productivity – and encourages rent seeking,” says the paper prepared by the Planning Commission.

The top three ranks in the civil service (grades 20, 21 and 22) cost the government Rs6 billion just in compensation expenses, a figure that does not include the cost of administering several of the privileges they are entitled to. The commission proposes changing the current structure of compensation, from mostly non-cash privileges, to an all-cash salary, a move that is likely to save the government Rs3 billion for the top three ranks alone.

The commission has also suggested that an objective performance system for civil servants should be introduced and barriers to entry in the civil servants be reduced, including allowing outsiders and technical experts to compete for top government jobs. “Reducing barriers to entry will allow well-qualified people to join government service,” said one official familiar with the document. .

‘Creating employment through growth’

Pakistan’s labour force is growing at approximately 3% per year, which would require an average 7% economic growth rate to absorb the new entrants in the workforce, according to the Planning Commission’s analysis. To reduce unemployment would require an even higher growth rate. “This strategy recognises that the country cannot jump immediately to these high rates of growth from the present growth rate of about 3% [without structural reforms],” says the paper.

The commission recommends a two-phased approach, asking the government to first focus on reaching the short-term potential economic growth rate of 5-6% before undertaking structural reforms that would take the growth rate to beyond the 7% needed to reduce unemployment.

In the first phase, one of the commission’s key recommendations is energy sector reforms, which it says would enable the economy to begin producing at higher levels.

The second phase should address deeper flaws in the country’s economy, such as poorly developed markets – hampered by inefficient taxation structures, lack of competition, burdensome regulation and high barriers to entry – and a lack of an effective government, which is unable to provide secure property rights, enforcement of contracts and competent regulation.

Published in The Express Tribune, May 28th, 2011.

Reader Comments (5)

  • May 28, 2011 - 7:49AM

    Good stuff, now are high ranking military officers not gov servants? Who will revamp their pay and benefits?Recommend

  • ishrat salim
    May 28, 2011 - 1:35PM

    I fully endorse Mr TightDhotty statement….are they scared cows…?? I mean the tops ones not the jawans…?? these tops guys hv become ” white elephan ” due to their performance for the past 3 yrs…is questionable….with 3 years unprecedented extension to Gen Kiyani….there ought to be resentment within the ranks as 24 high ranking – promotion due officers hv lost their careers…similarly giving 1 year additional extension to ISI Chief has also jeopardised officers due for promotions….such acts on the part of these people & the govt has demotivated lot many officers & the results are in front of us.Recommend

  • Zain
    May 28, 2011 - 2:28PM

    Lets hope the current government can turn the economy around in the long run. If nothing else, my hope is that this troubled period in our history will be the turning point in terms of our economic development. Given the sustained growth of our neighbors India, our government is forced to look at ways we can achieve similar growth. Factors such as low FDI & terrorism are hampering our growth. I think structural reforms will help turn the economy around & attract foreign investment. Let’s hope for the best.Recommend

  • meekal ahmed
    May 28, 2011 - 3:39PM

    @Zain:

    As Keynes said, ‘in the long-run we are all dead’.

    This ‘long-run’ business will not work anymore. Pakistan is falling behind virtually all developing countries — leave alone the high-performers.

    The Planning Commission’s “new” growth strategy seems fine on paper. But I would like to see the NUMBERS that under-pin it. Savings, investment, exports, imports, inflation, growth, employment, poverty. Stuff like that.

    Without a sound quantititive macro under-pinning, the “new” growth model is a fairy-tale. Recommend

  • adnanbinraza@hotmail.com
    Jun 8, 2011 - 9:28AM

    i really appreciate this step of government.i pray that ppp govt can implement this strategy.Recommend

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