I WONDER if the leaders of this country, along with their proxies and mouthpieces, realise how ridiculous they look baying for the blood of their political opponents at a time when a pandemic envelops the land, a giant swarm of locusts is devouring its crops and a massive crisis in the availability of vehicular fuel is knocking at the door. These are challenges of staggering proportions, and their full impact is coming our way in the months ahead.
Let’s clarify one thing first. The economy of Pakistan is indeed infested with rent-seeking behavior — defined as profit-maximising behaviour that pursues its reward by rigging the rules of the game in favour of a small number of players. And not just the sectors under ‘investigation’ by the current regime (sugar, power, wheat and oil refining and marketing). The same is true in cement, textiles, fertiliser, pharmaceuticals, automobiles and financial services among many others. Wherever there is large-scale industry in this country, it survives on government contracts, pricing and tax regimes, subsidies or other handouts. There may be exceptions, but they are few.
Managing this rent-seeking behaviour is not rocket science, but it takes a little skill, a little knowledge about how the markets are structured, a little familiarity with the people who run things and how they build their arguments and present their case, along with some ability to do basic maths. Failure to manage these rent seekers means they will create artificial shortages, manipulate prices, evade taxes and trick the government into passing rules that favour the rentiers and their rents. If one gets too coercive with them, they can simply halt the supply of whatever material they are responsible for, as might be happening in the oil-marketing sector today.
Remember the ‘petrol crisis; of January 2015? That’s what happens when the supply chain breaks. Remember the rampant load-shedding of 2013? That’s what happens when power-sector finances and the fuel supply chain is not kept moving. Each of these requires skilful management by the government.
The truth is that every rent seeker in the country has taken this government for a ride.
If any government wants to change the system to reduce the rents, it will take a little skill to engineer the right reforms. That’s what happened with the pharmaceutical sector after 2011, when after the drug-pricing crisis, the Drug Regulatory Authority of Pakistan was formed as an autonomous body, and hung like an albatross around the pharmaceutical companies’ neck for years as they sought price increases.
So if you are a little confused with all the inquiries and investigations that have been raining down upon us with growing ferocity for a few months — from the sugar inquiry report to wheat and the independent power producers (IPP), and now the oil-marketing companies who are at the receiving end of this ire — let me make it simple for you. Here is what is going on. Whatever these guys don’t get, or cannot control, they call a ‘mafia’ and get all coercive over the industry players.
When the IPP report came out back in April, for example, the president of the country said it was evidence that “the country has been gang raped by a mafia”. The word was used repeatedly by others as well, until suddenly they stopped and you don’t hear much about the IPP report anymore. The hostile fist-waving ended almost as if on cue, and that age-old mechanism for ending things with an amicable whimper was deployed: they formed a ‘committee’. Word among the IPP investors is that one phone call from the Chinese ambassador did the trick.
The wheat inquiry was also gently set aside, perhaps because its findings were not what they were anticipating. They thought the inquiry committee would come back and tell them who all is responsible for hoarding wheat. Instead, it came back and told them that government departments across the board, from Passco to the provincial governments, failed to carry out proper procurement. No fun in pursuing that.
On Monday, the petroleum minister stood in parliament and blamed the ongoing fuel shortages on a ‘mafia’. Watching, I could think of only one question I’d like to ask him: ‘what do you want to be when you grow up?’ The fact that these shortages exist is first and foremost to be blamed on the minister himself, and if he cannot manage the giant companies in his sector, there is no point labelling them all a ‘mafia’.
The truth is that every rent seeker in the country has taken this government for a ride. We saw a drug price spiral early in its term that they have not been able to reverse (nor will they be able to). We saw public money lavished on the textile sector, whether as subsidised fuel or credit, and the only thing they have to show for it after one and a half years is “volumetric increase in exports”. Somebody please explain to them that exports are not measured in kilogrammes. We saw amnesty schemes for property developers. And along the way we saw price spirals from medicines to food.
Even as the information minister with the ‘asset recovery czar’ seated next to him were unveiling their elaborate “penal action plan” for the sugar industry last Sunday, the character who played a starring role in the inquiry report — Jahangir Khan Tareen — was most likely entering UK airspace, safely out of their reach.
The “penal action plan” they announced that day cast its net so widely, and seeks to investigate so much that it doesn’t look much like a plan anymore. The true believers are holding their breath, in desperate anticipation that the transformative moment they have been waiting for since Khan came to power may finally have arrived. The sugar barons are taking some Panadol. ‘Another government, another headache’, they’re telling themselves. The rest of us are reaching for the popcorn. Meanwhile, disease stalks the land and locusts devour the crops and people scuffle for fuel at the pumps. This has to be the grimmest comedy I’ve ever seen.
The writer is a member of staff.
Published in Dawn, June 11th, 2020