Catching the fish — small and big — in Pakistan
How do we tell apart the fish when all accountability body has done is to sit by riverbank without catching anything?
A recent statement by the chairman of the National Accountability Bureau on the amount of corruption in Pakistan per day has generated a lot of interest in the media and in discussion circles. Although nothing more than a notional figure, the estimate of Rs12 billion for the worth of corruption per day is believable for most people. The political leadership has to acknowledge the fact that an allegation of corruption is not just a figment of someone’s imagination but is a fact of life that has a direct impact on the cost of living.
But it is also a fact that the anti-corruption drive in itself is a highly politicised debate which is used against the perceived enemy or the ‘other’ rather than against oneself or in cleaning up the system of malpractices. In South Asia in general, and Pakistan in particular, it is not just the politicians who are corrupt but the state system has been programmed in a manner that anyone in a position of authority tries to influence the resource distribution system to their advantage. While some can legalise it in the form of creating entitlements, others who cannot do so loot and plunder without legal cover. Then there is also the issue of which stakeholder gets more exposed than the other. For instance, there is no doubt about the fact that the political leadership engages in corrupt practices. However, there are others who are equally involved in similar practices. The argument here is not that because everyone else is corrupt, the corruption of politicians should be ignored, but that selective approach never works and is not even sustainable.
It would have been of immense benefit had the NAB chairman also specified the institutions and specific sectors where he found greater incidence of corruption. His calculation was based on adding together some available information regarding wastage of resources such as tax evasion, money lost due to land mafia, wastage pointed out by the Auditor General’s department and a few others. However, some leakages and wastages are inbuilt for the existing system. For instance, tax evasion requires a better definition especially in a system that allows for specific exemptions. For instance, agricultural income is exempt from taxation. Similarly, military personnel are not liable to any property tax, especially in cantonments and military-controlled housing authorities. There are many other categories as well which need to be looked into. But without considering the skewed taxation system, no one can announce a definitive figure regarding the size of the black economy.
However, as mentioned earlier, the corruption debate is highly politicised and the Rs12 billion figure just adds to the politics. Such a heart-wrenching announcement will not help until there is a mechanism to eradicate corruption. The fact of the matter is that all anti-corruption establishments (federal and provincial) are highly politicised and inefficient. These organisations are not independent of external influence and have no capacity to deal with the problem. The National Accountability Bureau itself has had to play an intense game of balancing all sides starting from the day of its inception in 1999. People remember how the first chairman of NAB, Lt Gen Amjad Shoaib, who was committed to his objective, had to cool his heels when business and industry rebelled against him. The present chairman has also, on several occasions, spoken about not ‘rocking the boat’ or scaring away business, perhaps, by not going after what he considers the proverbial small fish. His notion is that the actual big fish are those who waste or loot Rs12 billion per day. But the question is that in this murky pond, how does one distinguish between small and big fish since they are all quite similar? Moreover, how does the public tell the difference between the different categories of fish when all that the accountability body has done thus far is to sit by the riverbank with a fishing rod that does not seem to catch anything or indicate any movement?
The present-day NAB is top heavy, full of all sorts of retired civil but mostly military bureaucrats and lacks expertise to address the grave issue. As a result, it runs into problems even during investigation. For instance, the Supreme Court rejected the organisation’s assessment in the rental power projects case, especially in calculating the money owed by the Turkish company Karkey.
The organisation’s preferred methodology under the current management is to prevent corruption. It is believed that corruption can be stopped by cancelling contracts in their final stage which in itself wastes money because the rebidding process takes time and results in cost escalation that is not factored in while presenting the claim that money was actually saved. Moreover, the Bureau should also keep away from intervening in the bidding process primarily because the cost of stopping corruption has to be efficient as well. Efficiency comes in through strengthening the numerous regulators and strengthening the regulatory framework in general. For example, it is an inherent flaw in the regulatory mechanism of the Securities and Exchange Commission of Pakistan that allows for weak accountability of chartered accountancy firms. Today, it is easy to get a certificate by paying some money to a private auditor. Similarly, there is a need to eradicate problems in the regulatory framework dealing with financial management, especially functioning of the Federal Board of Revenue that allows for tax evasion or other wastages. More important, there is a problem in the NAB’s own regulatory framework that results in the organisation’s inability to catch thieves. Indubitably, the Rs12 billion figure would come down if there were performance audit of all accountability institutions.
Now that everyone in Pakistan is sufficiently scared of huge resources feeding the black economy, it is necessary for the government, accountability institutions and civil society to engage in a dialogue on how to strengthen the mechanism of finding cost-effective methods to stop corruption. While we may all want the thieves to be caught and put behind bars, the fact is that this is not likely to happen any time soon as someone in the system would hate to ‘rock the boat’. Meanwhile, this should not stop stakeholders from negotiating legal and regulatory mechanisms that check financial leakages if not eradicate it completely. Now that the cat is out of the bag it must be belled properly.
Published in The Express Tribune, December 20th, 2012.
But it is also a fact that the anti-corruption drive in itself is a highly politicised debate which is used against the perceived enemy or the ‘other’ rather than against oneself or in cleaning up the system of malpractices. In South Asia in general, and Pakistan in particular, it is not just the politicians who are corrupt but the state system has been programmed in a manner that anyone in a position of authority tries to influence the resource distribution system to their advantage. While some can legalise it in the form of creating entitlements, others who cannot do so loot and plunder without legal cover. Then there is also the issue of which stakeholder gets more exposed than the other. For instance, there is no doubt about the fact that the political leadership engages in corrupt practices. However, there are others who are equally involved in similar practices. The argument here is not that because everyone else is corrupt, the corruption of politicians should be ignored, but that selective approach never works and is not even sustainable.
It would have been of immense benefit had the NAB chairman also specified the institutions and specific sectors where he found greater incidence of corruption. His calculation was based on adding together some available information regarding wastage of resources such as tax evasion, money lost due to land mafia, wastage pointed out by the Auditor General’s department and a few others. However, some leakages and wastages are inbuilt for the existing system. For instance, tax evasion requires a better definition especially in a system that allows for specific exemptions. For instance, agricultural income is exempt from taxation. Similarly, military personnel are not liable to any property tax, especially in cantonments and military-controlled housing authorities. There are many other categories as well which need to be looked into. But without considering the skewed taxation system, no one can announce a definitive figure regarding the size of the black economy.
However, as mentioned earlier, the corruption debate is highly politicised and the Rs12 billion figure just adds to the politics. Such a heart-wrenching announcement will not help until there is a mechanism to eradicate corruption. The fact of the matter is that all anti-corruption establishments (federal and provincial) are highly politicised and inefficient. These organisations are not independent of external influence and have no capacity to deal with the problem. The National Accountability Bureau itself has had to play an intense game of balancing all sides starting from the day of its inception in 1999. People remember how the first chairman of NAB, Lt Gen Amjad Shoaib, who was committed to his objective, had to cool his heels when business and industry rebelled against him. The present chairman has also, on several occasions, spoken about not ‘rocking the boat’ or scaring away business, perhaps, by not going after what he considers the proverbial small fish. His notion is that the actual big fish are those who waste or loot Rs12 billion per day. But the question is that in this murky pond, how does one distinguish between small and big fish since they are all quite similar? Moreover, how does the public tell the difference between the different categories of fish when all that the accountability body has done thus far is to sit by the riverbank with a fishing rod that does not seem to catch anything or indicate any movement?
The present-day NAB is top heavy, full of all sorts of retired civil but mostly military bureaucrats and lacks expertise to address the grave issue. As a result, it runs into problems even during investigation. For instance, the Supreme Court rejected the organisation’s assessment in the rental power projects case, especially in calculating the money owed by the Turkish company Karkey.
The organisation’s preferred methodology under the current management is to prevent corruption. It is believed that corruption can be stopped by cancelling contracts in their final stage which in itself wastes money because the rebidding process takes time and results in cost escalation that is not factored in while presenting the claim that money was actually saved. Moreover, the Bureau should also keep away from intervening in the bidding process primarily because the cost of stopping corruption has to be efficient as well. Efficiency comes in through strengthening the numerous regulators and strengthening the regulatory framework in general. For example, it is an inherent flaw in the regulatory mechanism of the Securities and Exchange Commission of Pakistan that allows for weak accountability of chartered accountancy firms. Today, it is easy to get a certificate by paying some money to a private auditor. Similarly, there is a need to eradicate problems in the regulatory framework dealing with financial management, especially functioning of the Federal Board of Revenue that allows for tax evasion or other wastages. More important, there is a problem in the NAB’s own regulatory framework that results in the organisation’s inability to catch thieves. Indubitably, the Rs12 billion figure would come down if there were performance audit of all accountability institutions.
Now that everyone in Pakistan is sufficiently scared of huge resources feeding the black economy, it is necessary for the government, accountability institutions and civil society to engage in a dialogue on how to strengthen the mechanism of finding cost-effective methods to stop corruption. While we may all want the thieves to be caught and put behind bars, the fact is that this is not likely to happen any time soon as someone in the system would hate to ‘rock the boat’. Meanwhile, this should not stop stakeholders from negotiating legal and regulatory mechanisms that check financial leakages if not eradicate it completely. Now that the cat is out of the bag it must be belled properly.
Published in The Express Tribune, December 20th, 2012.