KARACHI, June 21: Quite often, good macro-policies fail because of poor implementation at micro-level. It indicates a lack of institutional capacity to manage economic progress at the set pace. This is evident from slower pace of development and social spending in the public sector and complaints from private sector that much remains to be done at the micro-level to improve efficiency. In short, the problem of poor governance in public sector persists.

The monitoring process is as inefficient as the implementation machinery. And efforts are made to cover up inefficiencies by communication skills and superb presentations.

Every year, the government’s development spending falls short of budgeted PSDP. The institutional capacity to absorb funds and execute projects has not improved. In fiscal 2003, the PSDP was budgeted at Rs134 billion but revised estimates put the figure at Rs120 billion against previous year’s Rs124 billion.

Going by the past trends of utilization of funds, the original budget 2004 estimates show an operational shortfall in PSDP of Rs8 billion in the development spending. Finance Minister Shaukat Aziz, however, told Dawn that the government has the resources to implement the Rs160 billion PSDP and is determined to achieve the target.

Any increase in the PSDP has to be viewed both in the context of resource allocation as well as huge institutional capacity issues, which have seriously impaired the effectiveness of public spending. To quote a research report, the development spending is “open to massive misuse and leakage (by some estimates up to 60-70 per cent).” Thus, a strategy that focuses just on increasing outlays rather than a concurrent fundamental improvement in how the funds are spent is bound to produce sub-optimal results,” says the study.

And the Asian Development Bank laments that the implementation of projects funded by it is slow. Only 40 per cent of the budgeted funds have been utilized. It is also to be examined why quite often the foreign funded projects are delayed. “The effectiveness of expenditure, especially relating to development and social spending can be and needs to be improved by better overall governance right through the process, ranging from project identification and need cost-benefit analysis, valuation of estimated expenditure and required time-line for competition, selection of site and contractor and monitoring of project implementation,” says a leading economist at a foreign bank.

The problem facing the private sector in dealing with the government is no different. In a representation sent to the government sometime ago, the Pakistan-Britain Business Advisory Group (PBBAG) listed bureaucratic obstacles to their businesses.

A PBBAG source says the main fault lies in a government structure that attaches scant importance to the implementation of ministerial and cabinet decisions. It blunts the edge of the government’s very laudable de-regulations/liberalization aims.

Hubco chairman Vince Harris, who is also chairman of the PBBAG, told Dawn that the recommendations of the group were being examined by the government. Some procedures have been improved since the report was submitted to the government.

The bureaucratic hassles have driven small business into the informal sector. The SME sector particularly suffers from official neglect. No figures are available for funding of the SMEs. The SME Bank envisages financing of 4,000 units involving an investment of Rs2 billion during 2003, says Pakistan Economic Survey 2002-2003. In case of other institutions, the commitment and disbursement figures are given. The SME Bank is satisfied with stating its intent and so is the Ministry of Finance which publishes the Economic Survey.