CCI back to life

WHATEVER else the abortive sale of the Pakistan Steel Mills might or might not have done, one good coming out of it is the revival of the Council of Common Interests as directed by the Supreme Court. The CCI now stands revived more than nine years after its last meeting on May 27, 1997. Apart from being a constitutional requirement under articles 153, 154 and 155 of the Constitution, the CCI is needed as a permanent body in a country where the federation’s constituent units have not yet learnt to live in harmony by sorting out common problems mutually in a spirit of give and take. The functions and rules of procedure of the CCI as defined in Clause 1 of Article 154 include formulating and regulating policies in relation to matters in Part II of the federal legislative list. It specifically refers to electricity, while Article 155 is entirely devoted to the management of disputes over water supply and authorises the federal and provincial governments to approach the CCI for addressing their grievances. This is how it should be in a country where rivers originating in Kashmir flow into Sindh via the NWFP and Punjab, and their waters reach farms and homes through an interlocking system of dams, headworks and canals whose total length extends over thousands of miles. The same is true of electricity generated by dams up in the north and supplied as far south as Karachi and Gwadar.

Such systems under which the provinces are dependent on each other for the regular supply of water and power are both an opportunity and a challenge — opportunity in the sense that a proper relationship among the relevant provincial and federal departments can ensure the availability of the two utilities; challenge in the sense that fluctuations in the supply of water and power must be tackled in a spirit of mutual understanding and accommodation. Other areas too — railways, highways, telecommunication, anti-terrorism operations and crime control — need close coordination between the federal government and the provinces. However, the unending quarrels between Punjab and Sindh over the distribution of the Indus waters emphasise the role of the CCI as a permanent mechanism for the resolution of inter-provincial grievances. The disputes over the flow and distribution of irrigation water often acquire a venomous character because the land-owning feudals do not mind short-changing others and interfering with the flow of water for the benefit of securing uninterrupted and plentiful supplies for their own agricultural estates.

The reason for the absence of harmony among the provinces and the failure to solve common problems is obvious: lack of democracy. Because Bonapartists have their authoritarian way of dealing with national problems, the constituent units never got an opportunity to develop problem-solving mechanisms of their own. When democracy did exist — as during the period between 1988 and 1999 — the federal government and the provinces ruled by rival parties often adopted confrontational policies. Punjab under Nawaz Sharif was virtually on a warpath against the federal government under Benazir Bhutto. During this period, the CCI was dormant, and one of the reasons given by President Ghulam Ishaq Khan for dismissing the Nawaz government was that the CCI was not performing its constitutional functions. Now that the CCI has been revived and reconstituted, one hopes that the federal government and the provinces will make use of it as an effective forum for sorting out inter-provincial problems and differences.

Punjab crime wave

IN a scathing indictment of the Punjab police, the Supreme Court has taken serious notice of the working of the department. Taking action on a number of letters written to him by aggrieved women complaining about non-registration of cases by the police, the Chief Justice of Pakistan summoned the inspector-general of police to depose before the court on Thursday. The IGP was asked point-blank if he was satisfied with the performance of his department; the learned judge then proceeded to warn the district police officers apparently involved in ‘protecting’ the accused: they were told to either improve their performance or face early retirement under court orders. It is common knowledge that deliberate delays often caused by unscrupulous police officers in registering citizens’ complaints lead to long delays in the dispensation of justice. In Punjab, the backlog of cases pending before the courts and those requiring police investigation is enormous. This while crime has been reaching new heights, with the police often seen as protecting the criminals and punishing the complainants, as was observed by the CJ.

A measure of the rising crime wave is the situation obtaining in the Punjab capital. Not a day passes without at least a dozen armed robberies, two to three murders and innumerous hold-ups-at-gunpoint being committed in Lahore. Break-ins at banks, warehouses, factories and offices have also become common occurrences. The so-called ‘minor’ incidents of cellular phone and purse snatching too number no fewer than 200 on a given day. A recent report claims that the city now has the dubious distinction of being on top of the national crime chart. The situation has led the IGP himself to express concern over the rising wave of lawlessness. The regular police, however, are seen harassing and fleecing motorists, setting up surprise pickets but failing to apprehend the real culprits holding the citizens hostage. The state of affairs calls for meaningful action on the part of the top administration, but none has been forthcoming. Under the circumstances, one can only thank the CJ for taking suo motu notice of the dismal law and order situation in the province.

School under police occupation

IT is not unusual for law enforcement agencies to occupy school buildings and convert them into their offices. But it is an altogether different matter when the police get permission from town nazims to ‘temporarily’ set up office in a newly constructed school building in Karachi — as was discovered on Thursday. Parents in the locality of North Nazimabad rightly fear that the police may not vacate in time for the new school session which begins on August 16. In that event, not only will area schoolchildren suffer but those from another locality, who were due to start their classes here while their building is being reconstructed, will likely be left out as well. This must not be allowed to happen. The concerned authorities must ensure that the police vacate the school premises well in time. They must also find out why the town nazim gave the police permission to move in. The police may be pressed for accommodation at times but it is bad practice to allow them to occupy a school building for temporary lodging. It is unclear in the present case whether the police authorities have actively been looking for a suitable location for their offices. If not, they must be told to do so and vacate the school building well before the end of the summer holidays.

This incident only reaffirms the authorities’ utter disregard for education. Rangers have periodically occupied school and college buildings and converted them into their offices for long periods. Efforts to remove them have rarely yielded any results. This kind of arrogant attitude explains why parents are in a state of despair. They fear that the police may prolong their stay on one pretext or another. The education authorities must use whatever clout they have to ensure that the matter is sorted out soon and the school session starts on time.

Privatisation: need for a new approach

DAWN’s June 26 editorial, entitled “Need for a policy re-think”, regarding the Supreme Court decision annulling the privatisation of Pakistan Steel Mills provides a much needed pause, not only for the government to re-think its privatisation policy but also for the legislators, to reflect on the policymaking process itself.

After all, in providing legal protection to the economic reform policies of the government under the Protection of Economic Reforms Act, 1992, the legislature has also placed upon it a financial liability to ensure that the terms and conditions of any transaction are not altered to the disadvantage of the beneficiaries.

The court’s decision is based on sound legal principles, and raises important issues regarding the entire policymaking process, which in my view needs to be urgently reviewed and revamped. In its arguments before the apex court, the government contented that while any illegality in the process of privatisation was open to adjudication, the privatisation policy itself was not.

The Supreme Court has rightly observed that the Constitution does not give unfettered powers to the executive authority and adequate checks and balances must be maintained among the three branches of government in all spheres of their activity. If the court has the power to strike down a law as ultra vires, then there is no reason why it cannot judicially review any governmental policy.

The court has, in this case, has neither struck down the privatisation law nor the privatisation policy; it has only ruled on the legality of the privatisation transaction and in doing so it has forced us to consider the constitutional, legal and institutional framework for the formulation and implementation of privatisation policies.

(i) Constitutional: Under the Constitution, it is the Council of Common Interests that is required to formulate and regulate policies in relation to matters provided in Part II of the Federal Legislative List, which includes all undertakings, projects and schemes of such institutions, establishments, bodies, corporations, and industries, like the Pakistan Steel Mills, owned wholly or partially by the federation — notwithstanding the proposed exclusion of Pakistan Steel Mills from the purview of the Public Investments (Financial Safeguards) Ordinance, 1960 via the Finance Bill, 2000.

Furthermore, the National Economic Council is required, inter alia, to formulate plans in respect of financial, commercial, social and economic policies. Neither of these constitutional requirements have been met in the formulation and implementation of the privatisation policy.

(ii) Legal: The Privatisation Commission was established for the purpose of implementing the privatisation policy of the government. However, even though it’s primary role is that of an implementing agency, its constitutive law, the Privatisation Commission Ordinance, 2000 (Privatisation Ordinance), mandates it to also recommend privatisation policy guidelines to the cabinet. The extent to which the Privatisation Commission recommended privatisation policy guidelines to the cabinet and, more importantly, the extent to which the cabinet took such guidelines into consideration while formulating the privatisation policy remains to be ascertained.

In my view, the process of privatisation and deregulation are not harmonious with each other. What privatisation needs is “re-regulation” that is, more cost-effective and efficient regulation, and not deregulation. Going from one extreme to another, — from a publicly owned and controlled regime to a privately owned and decontrolled environment, is not desirable. Such laissez faire reforms create economic distortions and cannot be sustained in the long run. One wonders whether the government even considered this aspect while formulating the privatisation policy.

(iii) Institutional: In the distribution of business among the various governmental divisions under the government’s Rules of Business, the formulation of privatisation policies falls within the domain of the privatisation and investment division of the ministry of privatisation and investment. What useful administrative role this division has been able to play in the wake of a more specific statutory role for the Privatisation Commission requires analysis. There appears to be no valid reason for establishing and maintaining this administrative unit in the presence of the Privatisation Commission. The raison d’etre for this administrative unit can easily be determined by assessing its value-added role in the formulation and implementation of the privatisation policy.

A policy to be legally effective must be formulated after due process and in accordance with the manner prescribed in the law. Even a cursory examination of the framework for policy formulation and the manner in which the present privatisation policy was formed indicates the somewhat confused state of affairs regarding the entire policymaking process.

While declaration of policy on matters of public interest, giving advice on general administrative policy, and monitoring observance of the constitutionally ordained principles of policy remain within the legislature’s competence, the formulation and execution of general policies falls within the domain of the executive authority which vests in the president. The Constitution mandates the president to make rules for the allocation and transaction of the business of the federal government. Rules of business have consequently been framed for this purpose.

Further confusion surrounding the privatisation policy lies in the division of functions and powers between the finance division and the privatisation and investment division. In terms of the rules of business, the finance division has the overall mandate to advise on economic and financial policies. However, it deals specifically with investment and deregulation policies only, which appear to be more properly within the purview of the privatisation and investment division. On the other hand, this division deals with the privatisation policies. However, it does so independently of the Privatisation Commission.

To further distort matters, the Privatisation Commission falls within the administrative control of the privatisation and investment division rather than the ministry of finance. This considerable overlap in the functions of the administrative divisions is likely to, and does, create confusion in the policies ultimately formulated. There is an apparent issue of capacity in the ministries as well. Who in the ministry is responsible for formulating the draft policy? What research has gone into the development of the policy? How meaningful has the discussion been on the draft? How broad-based has the consultation with the stakeholders been? These are all pertinent questions to be considered in the review of any policy.

There is hardly any expertise at the ministerial level where policies are ordinarily generated, and there are no think-tanks, within or outside the government machinery, to provide the requisite assistance to the ministries in the formulation of policy. Even where specialised agencies like the Privatisation Commission exist, they are encumbered by their subordinate role in policymaking.

In these circumstances, Dawn’s suggestion that “to privatise entities like the PSM ... one could always go to the stock market and divest their shares in reasonable parcels over a period of time” merits serious consideration. In fact, this approach is fully sanctioned by the existing privatisation policy:

In addition to privatising companies by handing over management control to new investors, the government could use privatisation as a means of broadening the ownership of assets, mobilising savings, and helping strengthen capital markets. For this reason, the government plans to sell minority shares via the stock market in selected companies either before or after the transfer of management control. Listing and selling companies in the local stock exchanges is likely to give a much-needed boost to the stock markets and help promote savings.

Simply listing a 100 per cent government-owned company in the stock exchange may also improve corporate governance as the company will be obliged to comply with the stringent reporting requirements of the stock exchange and Securities and Exchange Commission. This policy has, however, been applied sparingly. This is just as well given the present volatility in the market, because of weaknesses in the regulatory framework and the monopolistic stranglehold on the market of some stock brokers who have, in fact, become the “power brokers” in Pakistan’s new political economy.

The strategy for privatisation through the stock market has, therefore, to be thought through and applied carefully. The full and proper implementation of the fundamental reforms by the Securities and Exchange Commission for the protection of investors, promotion of transparency and fairness, and the eradication of volatility in the markets should be a prerequisite for offloading shares of public sector companies in the stock market. This can easily be done with the unrestricted and undiluted support of the government under the watchful eye of the apex court.

The Chief Justice of Pakistan has rightly observed that the court had to examine the case within the context of the Privatisation Ordinance, which places an obligation on the government to sell a state property for achieving the objectives stated therein. The privatisation proceeds paid to the government are required to be utilised by it as follows: (a) ten per cent to be used for poverty alleviation programmes; and (b) the remaining 90 per cent for retirement of the federal government debt.

The writer is an ex-chairman of the Securities and Exchange Commission.