April 7, 2003	Monday	Safar 4, 1424

In what seems to be a highly revealing report on corruption in Pakistan, its genesis and the various methods used by any number of players to plunder and loot the country, and the strategy adopted to confront and defeat the malaise, the National Accountability Bureau( NAB) has produced a complete guide book and a ready reckoner on corruption in Pakistan.

The report, however, has a couple of major weaknesses which the reader should keep in mind while drawing his conclusions on the basis of the picture of corruption drawn in the report. First, it has allowed itself to be used once again to malign the politicians without much evidence. And since the NAB is still headed by an army general, the Bureau perhaps felt duty bound to use the report to reinforce the misleading impression the establishment has created over the years that the corruption reached its peak during the 1985-99 period. This kind of sop is perhaps needed by the military rulers in order to justify the 1999 take over and the their continued hold over the political power in this country.

The second weakness of the report is the complete omission of any reference to the goings on in the economic sector managed by the armed services themselves. According to one estimate this economic sector contributes as much as 3.5 per cent to the GDP. How can such a large contributor to the GDP remain a corruption- free island of honesty when all around a thick sea of corruption is in full tide?

Also, the report did not go into the dubious thinking which went into developing the system of land distribution among officers of three services without any rhyme or reason but linked only to their promotions. It did not even bother to find out how this practice has fuelled the real estate-related corruption in the country and the way it had inspired and encouraged all these years the civilian section of our ruling elite to make similar but ad hoc ‘rules’ to distribute government land among themselves whenever they could get an opportunity.

But notwithstanding these grave weaknesses, the report is a good effort and needs to be used by the new parliamentarians rather frequently to unearth and eradicate corrupt practices that infect the civil and military bureaucracy.

Titled National Anti-Corruption Strategy, the report identifies two crises which it says played a major role in the genesis of corruption in Pakistan; the second world war and the mass migration as a result of partition. World war II led to an alarming increase in the procurement-related corruption. Then migration resulted in vacuum in a number of areas creating weaknesses having lasting effects that triggered the initial phase of corruption.

In 1947, Pakistan inherited a weak economy, inexperienced politicians and a professional civil service. Civil servants filled the vacuum created due to the lack of experienced politicians and took over governance of the country, running ministries even assuming the posts of prime minister, governor general and president. The British tradition of pervasive, intrusive, extractive and elitist government was maintained. Here the report deliberately ignored to mention the back door entry of the then commander-in-chief of the army General Ayub Khan into the cabinet and his efforts from then onwards to take over the country.

On independence,the report continues, the evacuee property distribution created several opportunities for corruption and in the following two decades corruption was facilitated by the over-regulated industrialisation policies.

The level of temptation was enhanced by the increased inflow of foreign aid for huge infrastructure projects under military rule from 1958. Dictatorial rule coupled with the Press and Publications Ordinance further diminished the lack of public accountability. This was made worse by the fact that eminent politicians were weeded out through the Elective Bodies (Disqualification) Ordinance 1959. Devaluation and the oil crises eroded purchasing power. All these factors combined to increase incentives for, and opportunities of, corruption.

The remittances from the Gulf and resultant consumption spree had a strong demonstration effect and the desire to become rich overnight spread across the society. However, the worst indulgence was seen in the period 1985-99 when the political elite broke all shackles of law and morality to indulge in rapacious loot and asset-building (As if there were any such shackles when the Junejo government took over in 1985). Five governments were dismissed on charges of corruption during this era with no change in attitudes( Those who played the pied-piper in uniform from behind the scene should have also been recognized here in the NAB report).

The report says that at the individual level, corruption results from need or greed combined with opportunity, when there is low fear of detection and/or punishment. The need or greed element of corruption must be understood in its wider context by which the system fails to provide a viable alternative to corruption. Key factors include:

* Economic: inadequate pay, pensions and public service provision, plus large families;

* Social/cultural: conflict between demands of modern bureaucracy and demands of baradri, family, ethnic and other ties; social pressures for ostentatious demonstration of wealth, dowry and to provide for one’s children;

* Developmental: low rates of literacy, social empowerment and opportunities for self-improvement; inequitable distribution of wealth and economic growth; * political: the feudal power structure at the rural level; low levels of political competition; political instability, and intermittent military rule, have weakened institutions; with poor example set by politicians; * legal and judicial: justice is inaccessible, slow and selective, encouraging contempt for the law and an attitude of “everyone for themselves”.

Going into the details of the causes of corruption the report says that micro level regulations like quotas, subsidies and price ceilings do not lead to direct physical intrusion by the government, but nonetheless induce corruption.The players in this case are the senior level managers rather than the ranks. These regulations lead to excess demand through the control of supply or suppression of prices or both. The incentive to pay a bribe is high, given the differential between market price and the controlled one. As a result, goods can be sold for illegal considerations.

For example, the massive loan default of the 1990s had, among other things, its roots in the capping of the interest rates in earlier years. This capping had created high demand for credit allowing officials of the banks and financial institutions to indulge in rent seeking. Once loans were agreed on considerations other than merit, default was inevitable. Some of the mega corruption cases under NAB’s investigation originate from the award of discretionary quotas in the case of restricted supply, for example Liquid Petroleum Gas (LPG) and textile quotas.

Civil servants find themselves inadequately remunerated but with high levels of discretionary powers. This mismatch lies at the heart of the corruption at lower and middle levels. There is no doubt that there has been erosion of the pubic sector remunerations from 1972 onwards, and that there is no mechanism for linking public sector pay to inflation. The lack of retirement security is often quoted as a major cause of corruption at senior levels.

There are significant differences between the benefits of the same grades in different postings. These differentials create distortions in the transfers and postings of officers, leading to political interference and corruption through influence. Personal contacts then become more important than efficiency and professionalism.

In-kind benefits also provide easy opportunities for officials to misuse state assets, in ways which are difficult to monitor, and reduce the transparency of the level of officials’ own assets. The distinction between state and personal becomes blurred, which could engender an attitude extending into more overt corruption.

Over the last 52 years, Pakistan has received huge sums in foreign aid out of which $ 36 billion are outstanding as foreign debt. Despite the huge influx of foreign funds, the desired results have not been obtained, instead they have provided rich pickings and fuelled corruption.

There is a prioritisation mechanism for development projects, but, at times, this has been undermined by vested interests that play a major role in which development projects have been undertaken, where, when and by whom. Identification of projects became increasingly under the control of politicians ( as if only politicians have ruled this country all these 56 years), as their power over bureaucrats increased. And, obviously, with the mid 1980s came the trend for MPAs to have discretionary development funds ( once again when an army general is ruling this country the same generous allocations have been approved for the MPAs).

Low priority or unwanted projects have been completed at the cost of high priority ones. A school may be established, with development funding in an area which already has adequate provision, while a neighbouring area might have no educational facilities at all. Or, a road might be diverted with no justification. This will be done purely to appease voters ( this was done even during referendums to elect army generals as presidents) or allocate construction contracts to a particular contractor.

Stakeholders believed that donor agencies also need to shoulder a significant part of the responsibility for corruption in development projects, on the basis that their procedures were insufficiently robust to withstand corruption, they rushed funds through to meet aid targets and they turned a blind eye to corruption on development projects.

There are low levels of transparency and public participation in the development process. The Ghazi Barotha Hydropower project provides an example of this.In view of injustices to affected persons of previous mega projects like Tarbela Dam, the donors and the government devised a method for Ghazi Barotha Hydropower Project that allowed stakeholders’ participation in the valuation process. However, this attempt was hijacked by vested interests, in the form of government officials and land dealers, who preempted and purchased land. The valuation committees evaluated high prices and, in collusion with officials, misrepresented the assets on their land to inflate the price. Orchards and cultivated lands were shown where none existed.

The large scale corruption, both in development projects and routine government fund utilisation, has been during procurement and contracting. The worst offenders have been the public sector corporations, particularly the power utilities( these utilities have remained under the management of serving army officers for decades, even when the governments were in the hands of the so-called corrupt politicians), and infrastructural and public works.

Pakistan has no coherent single law-setting standards and no effective legal protection against collusion and corruption in the award of government contracts. Head of procuring agency certifies that procurement process is urgent, thereby avoiding requirement for competitive bidding; projects / contracts split to avoid competitive bidding requirements above a certain cost ceiling; officials take advantage of the year-end (May-June) period, when departments are trying to spend their budget allocations, to rush through procurement which then escape proper procedures and monitoring;

Technical feasibility: improper feasibility studies may be undertaken to overvalue projects, to the benefit of officials; studies may also be undertaken by consultants with links to contractors;

Tender documents: project specifications are prepared to favour particular contractors; registration/pre-qualification and invitations for bids: process is kept bureaucratic (e.g. numerous unnecessary conditions to fulfil) and lengthy to deter competition; advertisements in low circulation publication: published tender notices are followed by a number of short addenda, which if missed by bidders in their tenders would lead to their disqualification; short notice for submission of bids whilst favoured bidder had prior notice and time to prepare; officials will create their own fictitious companies to bid and approve them through this stage of the process;

Preparation of bids: collusion between competitors will lead to inflated pricing; ‘pooling’, whereby one bidder “buys” his competitors’ bids, changing their values, submitting the lowest bid far in excess of the market price; multiple bids by contractor operating under different names;

Bid evaluation: financial envelopes are often opened before technical evaluation; unrealistic and outdated schedules of rates are used to defeat good bids by “outsiders”, delays are created to generate kickbacks.

Negotiations: no rules exist for the negotiation period, but often the period is extended or curtailed when collusion and coercion occur. Prices may be renegotiated and adjusted after contracts have been let.

This manipulation of often quite acceptable rules only allows corruption because of the inherent lack of transparency and public participation in the procurement process. Without this, any set of procurement laws and rules can be manipulated for self-enrichment.

The public are usually denied the opportunity to be informed of, monitor or participate in, aspects of the procurement or development affecting their community and country., There is no other mechanism by which the public may be satisfied about the integrity of the process. An isolated example of where transparency and public participation has had an impact is the Orangi Pilot Project.