ISLAMABAD: In August 2016, the Supreme Court ruled that all decisions taken by the Economic Coordination Committee (ECC) - the most powerful sub-committee of the federal cabinet - will be placed before the federal cabinet for ratification.
As a matter of fact, the Rules of Business already stipulate this and the finance minister had obtained an exemption from the Prime Minister’s Office immediately after he took charge. Thus, the Supreme Court, in effect, only restored the Rules of Business.
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To what extent this will bring any fundamental change in economic governance is not difficult to predict.
This will only increase the frequency and length of meetings of the federal cabinet and will force the prime minister to chair these meetings. In a democratic setup, this change should be welcome. However, there is a bigger question we should deliberate upon: why the ECC was created and do we need it today?
The ECC was formed as an emergency war-time committee in 1965 following the suspension of economic and military assistance. It was needed at that time to coordinate matters of policy and regulations during the war.
Even though the war finished in 17 days, the committee has existed well over 50 years now. Over the years, the ECC has grown in its power, as would happen in the case of any government entity and it has extended its muscles everywhere. In fact, I would like to term the ECC, comprising 11 key economic ministries, the linchpin of economic governance.
Through the 1973 Constitution, the ECC is empowered to consider and take decisions on all urgent economic matters in coordination with the economic policies initiated by various divisions of the federal government. It has at least 14 explicit provisions which give it powers to literally take any measures of economic significance, from price controls to subsidies, from tariffs to industrial policy and even monetary and credit policy.
A working paper published by an independent think tank, based on analysis of 40 decisions taken by the ECC over the 2013-15 period, estimates that the quantitative impact of these decisions was a staggering Rs750 billion – almost same as last year’s federal Public Sector Development Programme.
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This paper also suggests that the ECC has acquired powers over the years without recourse to parliamentary oversight or normal bureaucratic filtration. The decision-making process itself lacks transparency and does not lend itself to accountability because of the nature of shared decision-making.
Incidentally, the provincial governments are not represented on the ECC and quite often decisions affecting the whole economy and entire country are taken without constructive consultation with the provinces. In 2015, Sindh government appealed to the Supreme Court against the ECC’s decision on gas tariff revision without consulting it, citing losses worth billions of rupees.
The decisions taken by the ECC create distortions in the market. By restricting the import of one commodity and facilitating the export of another commodity, the ECC gives this signal that local commodities may get compensation for their lack of competitiveness. It gives them artificial oxygen. It effectively allocates the limited capital resources on its own will.
The ECC has come to be known as “exemptions committee” of the cabinet. One very obvious example is its decision in the case of China-Pakistan Economic Corridor (CPEC), wherein it allowed the creation of a revolving fund for Chinese independent power producers to pay for 22% of recoverable power dues – which is typically equal to the circular debt.
Can we do without ECC?
The ECC over the years has become an integral part of economic governance, the linchpin of economic decisions in Pakistan.
Given the lengthy and archaic rules of business that define governance, the ECC is also perceived as a vehicle where efficient decision-making after quick deliberations becomes possible. This saves time and can actually help the government to overcome bureaucratic hurdles.
However, this efficiency also has a big downside as the ECC provides a short-cut platform to lobbyists to gain special decisions, exemptions and favours. It is certainly always restricted to big companies having enough political and organisational clout.
It also represents a powerful federal government which takes decisions without recourse to parliament, or even until recently to the cabinet.
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It is hard to cite a similar institution functioning in modern democracies. It is not justified in the post-18th Amendment scenario, which calls for decentralised decisions.
In the short run, the ECC should be abolished. In the long run, parliament should legislate to strip the federal government from any powers that curtail level playing field, competition and open markets.
Ultimately, citizens of Pakistan should demand a constitution that does not give powers to parliament to make laws which impede their fundamental economic, personal and political freedoms.
The writer is founder and executive director of PRIME Institute, an independent economic policy think tank in Islamabad
Published in The Express Tribune, December 5th, 2016.
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