Can the Debt Commission make a difference?
Right focus and membership will help the commission to make a meaningful impact
The writer is a public policy expert and an honorary Fellow of Consortium for Development Policy Research. He tweets @hasaankhawar
Will the newly-established Debt Commission be able to make any difference?
Let’s look at its scope and membership. The commission’s mandate seems to be on identifying reasons for increase in public debt and scrutinising public contracts. To perform these tasks, it has representation from law enforcement agencies like the FIA and NAB; regulators like the SBP and the SECP; military and civil intelligence agencies; and government departments like the FBR, the Accountant General, and the Ministry of Finance.
To investigate reasons behind the debt pile-up, the commission is aiming to look into quantum of infrastructure projects, overall government expenditure vis-à-vis increase in public debt and the breach of statutory debt ceiling.
We should not expect any earth-shattering findings here, as we already know the answers. The loans taken up by successive governments were not only meant for infrastructure projects, but also to finance consumption expenditure. This means that much of this money was spent on expansion in government, setting up new departments and paying for salaries and pensions of ever-increasing government workforce.
Moreover, a big part of our public borrowing went into debt servicing i.e. we had to take on more debt to pay back older debt. And the answer to why the cap on public debt was not maintained, despite the limitation set in the Fiscal Responsibility and Debt Limitation Act, is right there in the statute — clever provisions inserted by skillful bureaucrats in virtually all laws to keep the doors open for their masters to circumvent the very laws, if needed.
But let’s be honest. No individual can be held accountable for these past actions, because they were duly endorsed by parliament, year after year. At best we can look at past ten years’ data and suggest measures to avoid this in future.
Now comes the other part of the Debt Commission’s mandate: to scrutinise public contracts. This perhaps is the only area, where the commission can add some value, despite the fact that this pertains more to corruption and less to debt.
But does the commission know where to look? Interestingly, most efforts to look for corruption in public procurement remain focused on non-compliance of rules. If regulations prescribed by public procurement regulatory authorities (PPRA) are followed, most procurements are likely to pass as ‘legitimate’, even if kickbacks were taken, bids were rigged or shell companies were used.
Fortunately however, most of these dirty tricks leave behind some marks, also known as red flags.
For instance, even under PPRA regulations, emergency provisions or government-to-government procurement could sometimes be used to dodge competitive bidding. Private parties of choice are then hired either directly or through autonomous government agencies without any bidding. Such cases, where competitive tendering was avoided, should definitely raise red flags.
In many cases local partners of international bidders are front companies for those having a say in procurement decisions. Therefore any local partner or sub-contractor without credible history or an established track record should also raise a red flag.
Similarly, opaque ownership structure of the winning bidder, abnormally high volume of work going to one party, payments made to dubious companies set up in ‘secrecy jurisdictions’, and substantial post-award changes in contracts are some of the other areas that should be scrutinised closely. The commission can use these red flags to sniff for potentially corrupt transactions.
Lastly, the Commission needs to review its membership and include economists, legal and policy experts and representatives of the Auditor General Office and public procurement regulatory authorities, besides law-enforcement and intelligence agencies or regulators.
Right focus and membership will help the commission to make a meaningful impact or else it would become yet another government forum engaged in useless meetings and endless inquiries without any result.
Published in The Express Tribune, August 6th, 2019.
Let’s look at its scope and membership. The commission’s mandate seems to be on identifying reasons for increase in public debt and scrutinising public contracts. To perform these tasks, it has representation from law enforcement agencies like the FIA and NAB; regulators like the SBP and the SECP; military and civil intelligence agencies; and government departments like the FBR, the Accountant General, and the Ministry of Finance.
To investigate reasons behind the debt pile-up, the commission is aiming to look into quantum of infrastructure projects, overall government expenditure vis-à-vis increase in public debt and the breach of statutory debt ceiling.
We should not expect any earth-shattering findings here, as we already know the answers. The loans taken up by successive governments were not only meant for infrastructure projects, but also to finance consumption expenditure. This means that much of this money was spent on expansion in government, setting up new departments and paying for salaries and pensions of ever-increasing government workforce.
Moreover, a big part of our public borrowing went into debt servicing i.e. we had to take on more debt to pay back older debt. And the answer to why the cap on public debt was not maintained, despite the limitation set in the Fiscal Responsibility and Debt Limitation Act, is right there in the statute — clever provisions inserted by skillful bureaucrats in virtually all laws to keep the doors open for their masters to circumvent the very laws, if needed.
But let’s be honest. No individual can be held accountable for these past actions, because they were duly endorsed by parliament, year after year. At best we can look at past ten years’ data and suggest measures to avoid this in future.
Now comes the other part of the Debt Commission’s mandate: to scrutinise public contracts. This perhaps is the only area, where the commission can add some value, despite the fact that this pertains more to corruption and less to debt.
But does the commission know where to look? Interestingly, most efforts to look for corruption in public procurement remain focused on non-compliance of rules. If regulations prescribed by public procurement regulatory authorities (PPRA) are followed, most procurements are likely to pass as ‘legitimate’, even if kickbacks were taken, bids were rigged or shell companies were used.
Fortunately however, most of these dirty tricks leave behind some marks, also known as red flags.
For instance, even under PPRA regulations, emergency provisions or government-to-government procurement could sometimes be used to dodge competitive bidding. Private parties of choice are then hired either directly or through autonomous government agencies without any bidding. Such cases, where competitive tendering was avoided, should definitely raise red flags.
In many cases local partners of international bidders are front companies for those having a say in procurement decisions. Therefore any local partner or sub-contractor without credible history or an established track record should also raise a red flag.
Similarly, opaque ownership structure of the winning bidder, abnormally high volume of work going to one party, payments made to dubious companies set up in ‘secrecy jurisdictions’, and substantial post-award changes in contracts are some of the other areas that should be scrutinised closely. The commission can use these red flags to sniff for potentially corrupt transactions.
Lastly, the Commission needs to review its membership and include economists, legal and policy experts and representatives of the Auditor General Office and public procurement regulatory authorities, besides law-enforcement and intelligence agencies or regulators.
Right focus and membership will help the commission to make a meaningful impact or else it would become yet another government forum engaged in useless meetings and endless inquiries without any result.
Published in The Express Tribune, August 6th, 2019.