Economic cost of indecisiveness

Policies, regulations are kept in limbo, often in name of consultation

ISLAMABAD:

The cost of taking no or delayed public policy decisions is higher to national exchequer than the total of reported corruption.

Yet, unfortunately, this goes on without any recognition and accountability. The accountability should not be only for the additional cost or corruption through actions “committed” but also the opportunity costs for the actions “omitted”.

Imagine the economic cost of not building the major dams, such as the Kalabagh dam. It is not only that the cost of construction of Kalabagh dam has increased manifold since the time of inception, but the real economic cost is the lost economic gains that could have been there had it been built in time.

Think about the lost economic gains for not utilising resources such as the Reko Diq fields, or the total cost of not taking appropriate actions for loss-making assets such as PIA, Roosevelt Hotel, Pakistan Railways and many other state-owned enterprises.

There are certain policies and regulations that are kept in limbo for months and years, often in the name of stakeholders’ consultations.

For example, we are still waiting to see the strategic trade policy framework, the national data privacy law and many others. There is actually a cost associated with the absence of these policies and regulations.

At a different level, if we synthesize the pending cases, mostly for private sector, in the economic miniseries such as finance and commerce, and translate the time delays into monetary terms, it would surely run into billions of rupees every year.

The number of pending files, for decisions, for foreign direct investment (FDI) is also quite telling. While we are doing our best to attract FDI, it is not proportionate with the processing of decisions for potential foreign investors.

There are many examples and anecdotes to quote; it would be easier to dig out news items and headlines for numerous foreign investors and a post-facto audit to see how many of these saw the light of the day. The reasons for such failures would largely revolve around indecisions.

Where does the responsibility lie for this? First and foremost is the absence of an accountability mechanism to check undue delays in public policy decisions.

Secondly, it is the bureaucracy, which is probably the most important player in promoting indecisiveness. It may be either the lack of comprehension of resulting costs of indecisiveness, or the willful delay to penalise or reward some stakeholders, result is the same.

The red tape costs millions and billions to national economy. The bureaucracy is not working even reactively, let alone proactively.

The prevailing principle in bureaucracy, at present, is not to touch anything either for the fear of NAB or for the lack of corresponding personal incentives. This attitude is costing the national economy a lot, and this must be quantified and the involved bureaucrats should be held responsible.

Thirdly, there is absence of awareness and recognition at wider level and the analysis of opportunity costs and resulting losses due to indecisiveness. The general public is probably not even aware of what it means if a timely decision is not taken, while the civil society is almost silent on this issue.

What could be done in order to ensure timely decisions?

First, the legal and regulatory framework should be established to check the indecisiveness in public sector. The National Accountability Bureau may be tasked with investigating such delays and quantifying the resulting loss to national exchequer so that it could be equated with corruption in form of misappropriations.

Second, the political institutions and politicians should contribute towards raising collective consciousness of recognising the cost of indecisiveness. Think tanks and knowledge houses should also focus on quantifying and reporting the losses due to delayed or no decisions in key public policy areas.

The Public Accounts Committee or a similar organ of the legislature should incorporate a mechanism to assess and evaluate the delayed decisions, quantify the costs and establish responsibilities accordingly.

Third, the private sector needs to be proactive in making collective voices and lobbies to expedite the unnecessarily pending decisions as this is their right. The practice of expediting decisions through speed money must be discouraged.

Fourth, the bureaucracy should be made responsible, through a checks and balances mechanism, for indecisiveness. On the other hand, bureaucrats should be given comfort and rewarded for taking quick decisions in the best interest of the country.

Taking time for thinking on key decisions is perfectly fine, but we should keep in mind that perfection is the enemy of good and every passing day has an economic cost for public policy decisions. A bad decision is better or rather less costly than a delayed or no decision.

The writer is an international economist

 

Published in The Express Tribune, October 24^th, 2022.

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