ISLAMABAD:
The federal government on Monday approved in principle a $22.5-million project to introduce reforms, which will allow foreign consultants to advise Prime Minister Nawaz Sharif’s government to improve governance in power sector and privatise state-owned entities.
The Public Sector Enterprises Reforms project was approved by the Central Development Working Party (CDWP), which is headed by Minister for Planning, Development and Reforms Ahsan Iqbal. The project was approved in violation of the Rules of Business 1973. Under these rules, the subject of reforms is the domain of the Ministry of Planning and Reforms but the project will be executed by the Ministry of Finance.
The CDWP approved the project in principle with certain observations, said Iqbal while talking to The Express Tribune. He said a committee was constituted to resolve the outstanding issues. Iqbal said that the CDWP asked the finance ministry to share lessons learnt from failures of the Asian Development Bank (ADB) funded $350-million Access to Justice Programme, which was aimed at bringing reforms in judiciary.
Iqbal said the finance ministry was told that the reforms were the planning ministry’s subject and finance should restrict itself to its core areas of expertise. The finance ministry was also directed to share terms of references of consultants that will be hired under the project, he added.
The project will be funded through a $20-million loan from the ADB at an interest rate of 2% in dollar terms. Pakistan will pay back $32.8 million – including $12.8 million in interest – in 25 years.
Leading economists of the country have opposed the government’s move to bring reforms through foreign-funded projects. They argue that the reforms require political will and institutional building.
As much as 75% of the total cost or $16.9 million (Rs1.7 billion) was set aside for paying salaries to consultants, who will be hired for the project. Foreign consultants will be paid Rs65,000 a day and local consultants will be paid up to Rs20,000 a day, official documents revealed.
The entire project will be implemented through consultants – including 175 foreign consultants – according to project documents of the finance ministry. These consultants will be hired in the ministries of finance, water and power, petroleum and natural resources, and the Privatisation Commission.
The officials said the issue of fate of earlier reforms undertook in the power sector was also raised in the meeting, as donor-driven reforms could not yield results.
The planning minister observed that the Ministry of Finance should implement the reforms in an integrated manner and take all other stakeholders on board.
The finance ministry officials said that the ADB was pushing for the project aimed at monitoring progress on a programme loan that was recently approved for the power sector. The ADB also sought some prior work under the reforms project before the lender approved new programme loans.
According to a study carried out by Dr Kaiser Bengali, Pakistan got $28 billion loans from the World Bank and the ADB during last 24 years for introducing reforms in various sectors. But the results remained poor.
The government was struggling to bring structural changes in energy and taxation and privatisation of state-owned entities.
So far, the focus is limited to sell shares of profitable entities while it has shown reluctance to privatise loss-making ones, including Pakistan Steel Mills and Pakistan International Airlines.
The CDWP also cleared projects worth Rs30 billion of Pakistan Railways. Out of four projects, two were approved while the remaining two will be tabled in front of the Executive Committee of National Economic Council for a final approval.
To replace old and obsolete signal gear on the Lodhran-Multan track, a Rs18.5-billion project was cleared by the CDWP, while Rs5.2 billion were approved for rehabilitation of 400 coaches.
Published in The Express Tribune, October 28th, 2014.
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