BRACING hardships in the face of a crisis after crisis situation, the people yearn for solutions not only to their mounting problems, but also seek explanations for issues like the recent oil imbroglio.

And businessmen-turned-reluctant democrats are losing their patience with the course the economy is taking. However, their critical outlook does little to improve their own management practices. They need to recognise that strong corporate governance, crucial for effective and efficient companies and market, minimises the potential for crises by helping to attain market stability.

Experts view weak regulatory oversight as a key source of failures of management and market. They find the lack of drive to strengthen regulatory institutions alarming. Some leading oil sector professionals blame uncalled for interventions in the market by the government for the confusion and the blame game sparked by the petrol shortage.

“It would be absurd to expect much from the beneficiaries [political leaders, higher ups of civil and military bureaucracy, big business and landed aristocracy, professional elite] of the flawed system of governance entrenched in Pakistan. The ‘structural reforms’ that project the market as the sole saviour may not deliver the optimal results for want of strong institutional oversight to independently and impartially introduce and enforce business rules,” an expert told Dawn.

He gave examples of boards of directors of flagship institutions like PIA, Steel Mills, PSO and regulatory bodies like the SBP, Ogra, Nepra etc, where the members are inducted for reasons other than merit.

“To me, the performance of a sector or a commercial entity does not necessarily depend on the pattern of ownership. A badly managed private company can fail and a well managed public company can outperform others,” a management professional working for the IFC told this scribe over phone from Singapore, where the public sector is big and efficient.

‘Flawed management model cuts across the private public sector divide in the country’

In the absence of credible studies, no one was able to quantify the probable collective cost of mismanagement in public and private spheres, but agreed that it would be in the billions if the opportunity cost is inducted in the equation.

“What we lose to negligence and willful abuse of the norms of good management practices is huge, but the net capital that we fail to generate because of misallocation of resources, flawed policies and ineffective implementation would be humongous,” said a government insider.

The PML-N government, on tenterhooks, needs to make amends in its style of governance to complete its term as the vibrant media, hungry for news, digs out and reports not just the failings but the series of missteps leading to a crisis. This entails a high political cost to the party in power.

The chances of the corporate sector improving its conduct under public pressure anytime soon are slim, though inescapable in the long term. Whatever market-driven adjustments are being made, examples of voluntary improvement in management practices are still few.

“While Pakistan already has more than its fair share of complex issues that are holding its development potential hostage, the cost of making mistakes is too high. The country’s economic mangers ought to be more vigilant,” said an economic commentator.

“The current oil crisis is yet another reflection of the arrogance, callousness, misplaced priorities, centralisation of authority, duplicity of responsibilities and coordination disorder,” said an expert, while stressing the value of essence over form in assessing the performance of a company or a country.

He argued the “flawed management model cuts across the private public sector divide in the country”.

“If you look at the corporate landscape in Pakistan, it is equally, if not more, infected with the tendencies mentioned earlier. The difference is that while the media tears the government apart, the private sector manages to avoid the public spotlight,” he said.

“Try to see through the veneer of the glossy corporate annual reports. Family-dominated boards of directors, abuse of rules, transfer pricing, over/under-invoicing, tax avoidance and other forms of malpractices are rampant. Low product and service quality and the lack of competitiveness in trade owing to long periods of protection and government support for influential sectors is not accidental,” he said in support of his point.

When reached over telephone, management gurus and businessmen expressed disappointment with the current government, which is led by a team they ealier considered comparatively competent.

“The current petroleum crisis does not inspire confidence in our ministries and underscores the need for improved governance and for the removal of bureaucratic inefficiencies. The government must work to create credibility and confidence in our government structures and key institutions,” Arshad Husain, president of the American Business Council, said in an e-mail response.

“The root cause for the crisis is the inefficiency of the self-obsessed crop of politicians who are vested with power. It is not worth it. The time of the democratic project, I believe, would end soon. The sad reality is that no one except a part of the PML-N hierarchy will mind that,” commented a senior manager associated with a World Bank project in Pakistan.

Published in Dawn, Economic & Business, January 26th , 2015

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