Standing on its own feet

Published May 11, 2023
The writer is an advocate of the Supreme Court.
The writer is an advocate of the Supreme Court.

ACCORDING to the Economic Affairs Division (EAD), as of June 30, 2022, the total external public debt of Pakistan stood at $88.8 billion. Out of this, the debt owed to multilateral financial institutions (MFIs) and the IMF was $42.1bn, which came to 48 per cent of Pakistan’s external public debt.

In comparison, expatriate Pakistanis send home remittances of around $31bn annually. The official quantum of our annual exports is around $32bn, even when a large chunk never comes to Pakistan through the use of various stratagems.

Each year, an amount of around $60bn is for Pakistan to keep without any strings attached. Conversely, the financing from the MFIs and other aid agencies is tied and provided mainly for those purposes which their major sponsors find beneficial for themselves. Although the overall quantum of the MFI financing is not large, they exercise disproportionate influence in our decision-making process. Technical assistance (TA) programmes involving local consultants are major door openers for the MFIs; they often lessen domestic opposition to a particular project.

Since the early nineties, when Pakistan started the so-called deregulation of its economy, we have spent billions of dollars on various reform projects conceived and spearheaded by our development partners. After these expensive reforms, are we now in a better position than where we stood in 1991? Is PIA more capable? Are the State Bank of Pakistan, the Securities and Exchange Commission and the Federal Board of Revenue more efficient? Have we seen any improvement in the workings of the ministries and other government departments? What about Pakistan Railways?

Even those ministries which do the most sensitive work do not have proper legal departments.

In the final analysis, the low-interest loans, grants, and capacity-building trips to Europe and North America arranged by development partners turn out to be very expensive. These dole-outs diminish our ability to think critically. We look at each new foreign loan or grant as the solution, rather than the symptom of an underlying disease.

The issue is, what prevents Pakistan from standing on its feet? Instead of foreign loans and grants, why don’t we think in terms of increased exports, more foreign direct investment, and making our businesses more competitive domestically and in the international markets?

A formidable hurdle is our civil service, which wishes to retain its absolute control over the functioning of the government at any cost. The go-getters among the civil servants are highly valued because they deliver — regardless of the price the country may eventually pay for such delivery. The secretaries in the most important ministries of the federal government are DMG/PAS officers, who continue to maintain the deputy commissioner mentality of ‘just do it’. They frequently succumb to political pressure without realising that while the mistake made by a deputy commissioner may cost the country a few million, the mistake of a federal secretary costs the country billions of dollars and international humiliation.

Civil servants are not, and cannot be the experts in every field. Matters with which the federal ministries deal in this day and age are extremely technical and complex. Most ministries deal with foreign governments, international organisations and multinational corporations. The opposing sides are advised and assisted by top-notch experts and lawyers, and all the positions that they take are carefully analysed in advance and have solid legal bases under the applicable law.

Our civil servants, on the other hand, avoid lawyers — perhaps fearing an erosion of their authority. Consequently, we don’t see independent and well-staffed legal departments in our ministries and government departments.

Even those ministries which do the most sensitive work, do not have proper legal departments. The EAD deals with all the MFIs and Pakistan’s external debt. The Finance Division deals with the IMF and the negotiation of financial agreements with international organisations and other countries. The Foreign Affairs Division is responsible for international agreements and treaties, and relations with other countries and organisations. These are all matters that require expert legal advice. A basic international agreement can easily run into thousands of pages; how do these and other ministries negotiate these agreements without their own in-house legal departments?

Instructions for the execution of contracts on behalf of Pakistan are issued by the Law and Justice Division. Does this division possess the required legal expertise in every field? In practice, the Law and Justice Division acts as a gigantic rubber stamp meant to approve everything sent to it so that the relevant ministry is shielded from any liability for negotiating a bad agreement!

The Broadsheet case is one example of the monumental legal blunder made in the negotiation of an international agreement, where Pakistan not only lost $28 million, but the attachment of the bank accounts of its High Commission in London as well. K-Electric is another example, where Abraaj Capital, which had control over K-Electric, went into bankruptcy in 2018, and the control of this utility was allowed to slip to the liquidators!

Every successful governmental organisation in any country has an effective and independent legal department headed by an able general counsel who not only advises on all legal matters, but also ensures compliance with the laws. It is unthinkable for the head of an organisation to ignore the advice of their general counsel. The legal departments of big organisations have hundreds of extremely competent lawyers, and these departments ensure that their organisations stay clear of all legal troubles.

All the countries play by the rules of the game, and the lawyers explain what those rules are, why not to break them, and how to benefit from them. Pakistan needs to open the doors of government ministries and departments to competent and independent lawyers and involve them in the decision-making process. It’s not infrequent for a foreign government or MFI to pay for international lawyers who act for Pakistan. Doesn’t this practice give rise to any conflicts of interest? When would Pakistan develop local expertise in this field and also put it to use? Every successful country has done this and Pakistan cannot remain an exception — we have already paid dearly for this mistake.

The writer is an advocate of the Supreme Court.

@MansoorHassanK3

Published in Dawn, May 11th, 2023

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