Many charitable bodies have a business motive

Govt turns a blind eye to the fake business of different organisations.

LONDON: Success of the model of social enterprise as practiced in Pakistan is hugely exaggerated. While there are some excellent examples of charitable organisations, the real driving force behind almost all of these is a business motive rather than a love for charity and giving.

Furthermore, these organisations are not more efficient than their public sector counterparts (and in most cases than private businesses). The public sector organisation of business activity (eg Pakistan International Airlines, Pakistan Railways, etc) is heavily criticised by media and the general public. Similarly, the profit motive in private sector has also been a subject matter of public debate not only in Pakistan but in other countries as well.

However, the charitable sector is emerging as a sacred cow that seemingly cannot be touched by anyone. There is very little criticism of inefficiencies in the social enterprises that in fact run on the charitable giving, donations and grants from the public sector and multilateral organisations.

A true story must demonstrate the point. Recently, a Pakistani expatriate died in the UAE and his body was brought back to Pakistan. The government of Pakistan has had an excellent service to offer for transportation of the dead. The Overseas Pakistanis Foundation (OPF), a government-funded body, also made arrangements for an ambulance to transport the body from Islamabad airport to Gujranwala.

A couple of so-called charitable organisations quoted prices ranging from Rs10,000 to Rs25,000. Incidentally, the figures quoted by these organisations were almost the same as the market rate. In other words, the services offered by them are pure business, with the only difference that they do not pay taxes and are exempt from a number of other obligations of private businesses.

Many of the charitable organisations in Pakistan are being run by in-service public sector employees or those who took early retirement after building an “empire” while being in a government job. It is interesting to note that many of these government officers happened to be the least efficient in their public sector jobs but are apparently doing well for the so-called charities they set up.

Who is the cheapest?

Comparing the three organisational forms of business, ie, public sector corporations, social enterprises and private businesses, it is not surprising that public sector remains the cheapest and most affordable medium for the poor and the underprivileged, despite having a lot of inefficiencies and wasteful resource allocation.

According to Edbiz Consulting, a London-based consultancy firm, social sector is on average 30% more expensive than the public sector in the provision of general medical treatment to a median user of medical services in Pakistan.

Similarly, the private sector is another 30% more expensive than the social sector in provision of the same services to the median user of medical services.

The charitable organisations are being presented as a sort of panacea for all socio-economic ills. Their founders portray them as the most humane and socially responsible organisations.

Public sector, on the other hand, is the villain of the society, despite being the cheapest and the most favourable for the disadvantaged. Through a systematic and organised effort by a nexus of “philanthrocrats”, public sector resources are being siphoned off to the social sector to enrich the stakeholders at the top of the pyramid, ie, their founders (many of them are in-service government employees and others retired from public service).

In this way, while politicians in Pakistan are enriching themselves by the use of political might at their disposal, the philanthrocrats are enriching themselves by using the inside information of rules and regulations and the favourable use of public sector resources.

Looking the other way

This authenticity paradox is interesting. The premium brands like Louis Vuitton and Versace happily tolerate their replicas in some of the countries that are not considered viable markets for them.

Similarly, the government of Pakistan is also turning a blind eye to the fake business of many charitable organisations because they are offering services that the government would wish to discontinue.

Education and health are the best examples. Who does not know that most of the private schools are in fact pure businesses yet they are being run under so-called trusts?

The writer is an economist and a Phd from Cambridge University

Published in The Express Tribune, February 23^rd,  2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.