To reform or not is the question

Pakistan’s latest crises arise from rapid food price inflation and the Covid-19 induced recession


Daud Khan January 04, 2021
Daud Khan is a retired UN staff member based in Rome. He has degrees in economics from LSE and Oxford, where he was a Rhodes scholar

Pakistan’s latest crises arise from rapid food price inflation and the Covid-19 induced recession. These have placed the government with its back to the wall in terms of economics and policymaking. Given the current situation, the PTI has to choose whether it “should suffer the slings and arrows of outrageous fortune, or take arms against a sea of troubles and by opposing, end them”.

But do they know what to do? Sure they do! There are shelf loads of policies, strategies and programmes which spell out, step by step, what needs to be done. These documents and plans have been prepared by the best thinkers in Pakistan and internationally, and draw on the positive and negative experiences of countries around the world. Often they have been officially adopted in the sense that they have gone through a consultation process, as well as official review and approval by the Economic Coordination Committee (ECC), cabinet or some other authorising body. The government just has to pick some of the most critical programmes and implement them. My personal shortlist would include opening up the economy to international trade with a competitive exchange rate; closing down or privatising the loss-making state-owned enterprising; getting rid of ineffective and inefficient subsidies; overhauling government bureaucracies; and directing government funds to the provision of essential public goods and services such as health, education, and technology generation and dissemination.

But knowing what to do is not enough. It is clear from experience around the world that there can be no reform without strong political commitment. Reforms often mean that people close to power, people with agency and influence, will lose — even if the country as a whole will gain. Driving change means facing the ire of those who will be negatively affected. And taking on these elites is hard and risky. So the key question is: Is PTI prepared to take on board a substantial reform process? Unfortunately, this remains highly uncertain! One can only hope that Kaptaan sahib has the backbone to do what he promised his voters — build a Naya Pakistan. He has not delivered so far, but there is still time.

And what if PTI does find the political courage to move ahead on a process of reform and change? Does it have the technical competence to actually deliver? The PTI team has remained weak and fragmented, and for implementation it has largely to rely on the only implementation capacity available to it — the federal and provincial bureaucracy. Unfortunately their record is poor. The bureaucracy has generally failed to implement reforms — not just for this government but over several decades. This does not in any way reflect on their competency or honesty. As a matter, they are on the whole an extremely fine team and as good, if not better, than in many other counties. Rather, their inability to deliver on reforms is a consequence of the incentive framework they face.

So let’s look at this further. Most reforms imply costs in the short term while the benefits, often uncertain, would emerge only in the medium to long term. Large and important reform programmes are usually entrusted to senior government staff that are, by definition, at the end of their careers with a maximum of say two to three years before retirement. This means that they will likely have to face the turbulence of reform and change without being around to take credit for success. Hardly a situation that encourages bold action! Moreover, they are highly exposed — open to demands and requests by politicians, complaints and obstruction by lower level staff, and always under threat of arbitrary transfer to some inconsequential position. Clearly, it makes little sense to senior bureaucrats to really attach themselves to a deep reform process.

Are there solutions to this? There are two sources to which the government can turn for the muscle power to do the heavy lifting on reforms — the private sector or development partners. There is successful experience from around the world with bringing in teams of managers and technical personnel from the private sector, with clear-cut term-of-reference and performance targets, to help the government with implementation of projects and programmes. This model has also been tried in Pakistan for engineering projects where it is now a standard practice to have consulting engineers take charge of the works. Oftentimes these firms are subsidiaries of, or are in some way linked to, large international consulting firms which provide a large measure of protection from corruption and political interference. There has also been some limited experience of bringing private sector expertise to work inside government departments to implement new programmes. However, a lot more could be done in this respect.

The other source for implementation support are the development partners. These include the financing agencies such as the World Bank, the Asian Development Bank and the International Fund for Agricultural Development, the UN family of technical agencies, and the various bilaterals. These partners have worldwide experience, access to top quality international and Pakistani experts, and the independence to work in a politically complex environment. Their assistance is there for the asking.

However, in engaging the private sector or development partners, it is important that government staff, with whom they have to work with, do not go into a defensive and obstructive mind frame. It is not that experts from private sector or development partners “know more”. It is just that they can be useful tools on getting things done.

And if it is any consolation, even governments such as China, despite its very strong implementation capacity, selectively use these modalities. In China, I personally worked on a project for classifying coastal land for commercial, recreational, agricultural or environmental uses. The process was fraught with reputational risks as designating a piece of coast for tourism, as opposed to creating a nature reserve, would have enormous financial implications for all those involved — from the local administration to property developers. Anticipating that any decision would be accompanied by accusations of corruption and nepotism, the government sought implementation support from foreign experts who would use “well accepted international best practices”.

Similarly, bringing in external consultants to help articulate and implement reforms is common in the corporate world. Big corporations around the world pay millions of dollars to management consultants to help them articulate and implement change. Again, it is not because their own senior staff do not know what needs doing. Rather it is because external experts can far more easily make the tough implementation decisions without fear of losing status or prestige.

Published in The Express Tribune, January 5th, 2021.

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