TI report — much ado about nothing?

Transparency International recently published its 2021 Corruption Perception Index that ranked 180 countries and territories by their perceived levels of public sector corruption. The Index aggregates data on the perceptions of business people and country experts on the level of corruption. Pakistan was among the worst ranked countries — 140^th out of 180. Not only that, but it has moved downwards over the last years: it was ranked 117^th in the 2017 report when the PML was in power; it then moved down to 126^th in the 2020 report; and now stands 140^th.

As could be expected, both the government and the opposition had much to say about the findings of the report. The opposition had a field day pointing out that instead of reducing corruption, as promised, the PTI government had overseen an increase. The government naturally downplayed the report, saying it did not actually measure financial corruption but rather the weak rule of law, as well as ‘state capture’ — whatever that means when the PTI itself is in power.

Corruption, especially by government and public officials, is undeniably bad. And Pakistan’s standing — whether it is at 117^th, 126^th or 140^th — is nothing to be proud of. No doubt much needs to be done. And instead of bickering, it would be much better if the government and the opposition could agree on what are the main sources and causes of corruption; design actions to reduce it; and engage with institutions such as Transparency International to help measure and monitor progress. But most likely this is all wishful thinking.

However, a question that begs asking is: to what extent does the economic performance of a country and the wellbeing of its people depend on the level of corruption? After all Bangladesh scores worse than Pakistan (it ranked 145^th in the 2021 report and 143^rd in the 2017 report) but its economic progress is enviable. I worked in Indonesia in the 1990s when the president at the time was considered by Transparency International to be the most corrupt person in the world. But this did not stop Indonesia racking up growth rates of 6-9% per year between 1985 and 1998 when it was hit by the Asian financial crisis. Even the fast growing Asian countries, such as Vietnam and China have had plenty of corruption, some of which I have seen during my work there.

In my experience, most companies do not have any major moral problem with corruption; they simply see it as a cost of doing business in certain countries. What is far more important for an investor is the law and order situation, in particular, the safety of staff and facilities; the stability and reliability of the business environment; an efficient and impartial legal and dispute resolution system; and above all the level of trust in the society and its systems. Trust that agreements made will be adhered to, that laws and regulations will not be arbitrarily changed and wealth and property will be protected by the state machinery. Moreover, if palms have to be greased, there needs to be trust that the counterpart will deliver whatever has been promised and paid for. I would term this orderly corruption. It is morally reprehensive, but, in my experience does not place an insurmountable barrier to development.

In Pakistan, we are not able to deliver the essential prerequisites for investments. There is a chronic law and order situation where roads can be blocked, staff can be harangued and attacked, and equipment and facilities destroyed. The legal system and dispute resolution system is clogged and recourse to courts means years of delay before a settlement can be reached. Whenever there is a whiff of money, an infinite range of government staff can turn up asking to be paid — these can include regulators, tax officials, health inspectors and police persons. And worse — paying off one or more people provides no assurance that the services promised will be provided; or that other officials from yet other departments will not turn up asking for additional money. In addition, projects undertaken with public money are not only badly conceived and poorly implemented, they usually do not either meet their primary objective of catalysing and facilitating private investments.

The system is not only corrupt but also unreliable and unsafe. This disorderly corruption is certainly a major disincentive for economic growth and development. Addressing these issues is hard and time consuming and requires patience and strong political will. Instead of improving law and order situation, streamlining public regulations, making the justice system faster and improving public expenditures, the government has been obsessed with taking to task past rulers who enjoyed privileges and stole from the country.

So here we are. The luxury cars and the buffaloes kept by the previous Prime Minister at his official residence for fresh milk have been sold off; but three years on we are still chasing the chimera of getting back the country’s stolen national wealth and using this to relaunch growth.

Adding insult to injury the Prime Minster has repeatedly said that he is prepared to negotiate with anyone except those who have plundered the nation. Noble words? But if this includes negotiating with terror organisations and releasing their ‘workers’ from prison then it’s hardly a surprise that our entrepreneurs and investors, along with our best brains who are essential for economic development, will seek other countries to work in.

Published in The Express Tribune, February 17^th, 2022.

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